So should “pioneering” costs be shared?
Should we as independent representatives expect compensation for developing a territory that has no income or in other words receive payment in some form other than commission (retainer, market development fee)? For the most part I am in favor of some form of compensation to develop a territory from scratch (also known as pioneering).
My explanation to manufacturers is often like this:
If I spend time on your line to make no income, then I am taking away time from another manufacturer that is already paying me. I suspect that other manufacturer does not necessarily want to pay for the development of your line, and I am sure you would not either.
Every time we dial the phone or turn the keys on in the car, there is a cost, so asking us to bear all the costs associated with getting your product started seems unfair.
We actually prefer to be on a commission program, as we think it is better for both parties. So part of our discussions on covering start-up costs should include a discussion on when we both feel it is reasonable to go on to a
commission program — this can be time-related or sales-result-related.
So for the most part, sharing in some of the start-up costs makes sense for all parties as the intent should certainly be for all to reap the benefit down the road. Does it ever make sense to start with a product line where there is no compensation — rarely in my opinion but never say “never.” A preferred method is “Pioneering Partners” for the territory in addition to being able to explain (aka — sell) why this is important for both parties. This is the key to a good, healthy and long relationship. Better than “Buddies in Bankruptcy”!
Exceptions are likely few and far between, but I guess when going into business, we should all understand there are inherent risks and reward opportunities. This holds true for both independent manufacturers’ reps and for the manufacturers. A team approach with your manufacturer right from the beginning will bond both parties for a long time!
