Whether manufacturers know it or not, their reps are constantly evaluating the profitability of their lines. This can be done formally via a structured line profitability analysis or informally with the rep actually measuring how much time he spends on a line and then asking himself if it’s really worth the effort. Depending upon the analysis of accumulated data, what inevitably can result is a parting of the ways.

Two reps recently reported to us the results of their decisions concerning some of their lines. According to the first rep, “Ours was a fairly simple decision. We contacted two of our principals and thanked them for their support in the past but let them know that economically it was no longer feasible for us to represent them. These were two fairly sizeable lines, one of which represented 20 percent of our agency’s income and the other 10 percent. While they might have brought in quite a bit in commissions, the downside was that each of them commanded about 30 percent of our selling time. It just didn’t make sense for us to continue that way.”

The rep added: “One of them just about blew a gasket. He said to us, ‘Reps don’t quit us, we fire reps.’ Be that as it may, we quit, and we’re better off financially. I’d like to think that we parted ways as business friends, but I’m not so sure about the one who was so upset with us.”

The second rep explained that his agency informed his principals of a change in lines via direct announcement. The rep said that “Based on direct feedback from the industry, effective immediately, the firm was reducing the quantity of lines we represent to a limited number of premier manufacturers.”

In order to facilitate that move, the agency announced they were resigning five lines and explained that the move allowed the agency to reposition its “resources and assets.” The announcement continued: “This will enable us to dramatically increase customer service, end-user activity, specification, and demand creation. With fewer lines to sell our salespeople will have a more focused product expertise, enabling them to effectively drive new product sales, which is crucial to distributor sales growth and profitability.”

Our purpose in communicating these two instances to our manufacturer readers is to emphasize that just as you manufacturers should constantly be evaluating your rep firms — many manufacturers perform this exercise on an annual basis — your rep firms are evaluating the relationships they have with you.

Finding the Right Fit

We recently asked one manufacturer what method he preferred when it comes to having his reps communicate with him and he surprised us with an answer similar to “no one size fits all.”

According to the manufacturer, “It depends upon a number of factors, not the least of which is the rep himself. Here’s my reasoning — not all reps, all territories or customers are the same. As a result, we don’t have to be communicated with in the same manner. Let’s assume for a moment that all of our reps are ones that we want to work with long-term. Now, let’s plug in some variables. For the rep that operates in a thriving market where there is a lot of expected and repeat business, we don’t need the same sort of communication we may desire from someone else. We know what the expected level of business is, and as long as the numbers line up properly at the end of the month, that rep need only check in occasionally or whenever something important needs to be addressed.

“For the rep in another territory, however, where there isn’t the same level of business, we’d like more regular communication. We want the communication to be proactive on his part. If he’s working on something big or unusual or is involved with something that will take a great deal of time to develop, we just want to be kept up to date on how things are progressing. The bottom line is if we rarely hear from the rep, we don’t know what is happening out there in the real world.”

Paying Attention to the Rep

“One of the reasons we get along so well with our reps,” reported one manufacturer, “is that we listen to their suggestions. An example of that happened recently when one of our reps made the suggestion that we get into video conferencing with them instead of always conducting face-to-face meetings.

“Admittedly, this suggestion grew out of the rep’s experience during Covid when he was unable to get out in the field to visit with his customers in person. His reason for suggesting this to us was that even though we weren’t located that far away, whenever we got together we either had to travel there or they came to the factory, and it always involved at least one night on the road. Not all of these meetings really required us to be seated across the desk from each other, but over the years we had developed a high level of comfort by seeing each other and perhaps even reading each other’s body language.

“As an experiment, one rep showed us how he was able to work with a couple of his sub-reps and even some of his customers that were located at a distance from the agency. All it took was the installation of a small camera on top of the agency’s PC and the downloading of some software. The clarity of the picture and the sound were top-notch. The cost was affordable enough that we set ourselves up as an experiment with this rep, and it couldn’t have worked better. We’re expanding this form of video conferencing with some of our other reps and haven’t hit a snag yet. And, over the course of the one year that we’ve been doing this, we’ve already more than recaptured our investment. Everything from now on is a plus.”

Depending on Contracts

One of the most important subjects addressed for years by MANA and Agency Sales is the importance of reps and manufacturers having written agreements between each other. This subject brought to mind something that appeared in this magazine on the same subject years ago.

When manufacturers and reps were advised to get the terms of their relationship in writing, it was emphasized that no one questions the wisdom of doing that, but many continue conducting business in the absence of a contract.

It’s not unheard of for a rep to be told by a manufacturer that “We always operate on a handshake. There’s no reason to put anything down in writing.” When that arrangement unfolds, it may be up to the rep to weigh the relative value of accepting or rejecting the line. However, how about writing something as simple as a “memo of understanding” between the parties? Such a document spells out the terms of the relationship and lets one side know what is expected from the other.

But let’s assume that establishing the relationship with the manufacturer — even without a contract — is worth the effort. There are some things to keep in mind, not the least of which is that a contract would establish the ground rules for the relationship well into the future.

Questioning the Contract

In a follow-up to the previous item, it was interesting to listen and then watch the expression on the face of one manufacturer when the subject of contracts and reps came up in a conversation.

Like so many other manufacturers, this one was quick to note that he had a standard contract for reps. “What amazes me, however, is that some of them actually accept it without any reservations. If we’re going to write a document, naturally it’s going to favor us. Having said that, however, I don’t think we’re entirely out of line. Our goal is to establish long-lasting relationships with our reps because we truly value their contributions. And we wouldn’t be nearly as successful in the market without them. To prove my point, I’d cite the many reps with whom we’ve worked effectively for more than two decades. At the same time, we know that going into the relationship is the time to put in writing what we expect of each other. That’s the time when some reps surprise me. They don’t question certain points in the contract and some don’t even have an attorney review the contract beforehand.”

He added, however, that probably as a result of MANA’s insistence on the importance of not only having contracts but carefully reviewing them prior to signing, “There are a growing number of reps who do their homework ahead of time. Since we’re true believers in reps and in treating them well, if anything, I’d advise everyone to carefully consider what they’re signing on to with a manufacturer. If more reps did this, as a profession they’d be a lot more economically sound.”

Valuing the Superhero

The name Colonel Steve Austin (aka, television’s The Six Million Dollar Man from the 1970s) came up recently when a manufacturer was asked what he looks for when selecting a rep for his territories. According to the manufacturer, “We like someone who is as proficient in a number of areas as Austin was in his job as a superhero.”

Failing in that, however, the manufacturer went on to say he’d be willing to settle for something a little less. “We don’t actually need our reps to execute the intensive sales effort needed by other products. What we’re looking for is someone who is good at servicing the customer and the product.”

MANA welcomes your comments on this article. Write to us at [email protected].