© iStock.com | frankpeters

Sometimes it takes a trigger to spur a rep into action. It might be something along the lines of a change in commission rates, new ownership taking over a manufacturer, or dealing with a new sales manager, but whatever the cause, reps report that performing line productivity analysis can be an indispensable tool when these changes occur.

That was the gist of conversations that took place in the course of a MANAchat devoted to the subject of reps carefully analyzing how profitable their lines are.

One rep started off the conversation by stating a fairly common predicament that many reps find themselves in: “As I regularly analyze my line card, I’ve realized that I’ve taken on several lines that had zero revenue at the beginning. I’ve had to take the necessary steps to actually create the market for them. Since these are manufacturers that are new to the market, I really have to struggle as I view them from a profitability standpoint. They’re not mature. It remains a constant struggle. That’s one of the things I have to figure out. At the same time, some of these companies want me to spend a large amount of time for very little revenue in return. I’m in a quandary determining whether it’s worth it or not. What’s the right amount of time to spend before you make a decision whether to keep them or not?”

Keeping those considerations in mind, the conversation continued when a couple of reps described how they put line productivity to use for their agencies.

“We’ve conducted these analyses for the last 7-8 years primarily on the recommendation from MANA. The execution of the analyses has helped us take a close look at our core lines and determine which ones are truly competitive and profitable.”

A second rep noted, “We review our lines on a quarterly basis and what these reviews do is to show us how we’re trending. Are we meeting expectations and what is our return on investment? Our process is relatively simple as we just comb through all of our manufacturers’ lines to make sure that we’re spending our time and resources in the correct areas.”

A third rep conducts a three-day retreat annually and a component of the retreat is the line productivity analysis. “Everyone in our agency participates in a survey and we discuss each of our lines. What we consider is more than just the dollars and cents attached to each line. Other considerations are whether the manufacturer is easy to work with, do they leave us alone and is the quality of their products consistent?”

Another rep explained, “Once a year, we simply stop the clock and let our manufacturers know that while we’re certainly aware of the fact they are constantly evaluating us, so too are we keeping an eye on them. We remind them that what we’re working with is a mutual relationship and what we’re striving to create is an atmosphere where the relationship works for both of us. This is hardly a master/slave relationship. We need them and they need us. We make every effort to work professionally, and we stress the fact that they should appreciate the fact that we’re independent businesspeople.”

The decision to arrive at the point where the agency terminates its relationship with a manufacturer can follow a number of different paths. The decision many times really depends upon one of those triggers cited earlier. Speaking to that point, one rep cautioned, “If you’ve been good in selecting your lines from the beginning and there really hasn’t been any stupendous change on their part, some change that makes them intolerable, don’t automatically make a change. If you start from a good place in your original selection and there remains fairly good alignment with your other products and with your customer base, don’t jump at the chance to terminate a line.” Admitting that his agency has dropped a number of lines on several occasions, he explained that “Sometimes you have to dance with your partner for an extended period of time before you really know if you’re a good fit or not. All I’m saying is be careful before making a decision.”

Echoing that view was another rep who explained, “I’ve been a rep for 45 years and my rule of thumb is that you never want to resign a line unless you absolutely have to. If there’s money coming in the door and there’s not an immediate need to resign, don’t do it, because you don’t know what’s around the corner and you might be making a huge mistake.”

Staying on the subject of whether the rep has started at a good place with his selection of lines, one rep described a situation he finds himself in presently: “I don’t know if it’s just me or not, but I’ve recently been whipsawed by some manufacturers I’ve been considering to take on. One time I was told by a very upscale company that they were going to take me on and then for no apparent reason they backed off. Then, two other companies said they had considerable business in the territory and wanted me to represent them. Thankfully, in the course of conducting due diligence, I determined they had very little — if any — business in the territory. These people have taken me off guard. As a result, I’m glad I didn’t align with them and then have to go through an analysis to determine whether they’re profitable for me. I think the honesty quotient is something important that has to be considered in any type of analysis.”

The importance of making the right decision when you start with a line was emphasized by several reps. An aid in making that right decision was the ability to learn all you can about a company before taking on the line. “Before I make a decision, I’ve made it a habit to speak with other agencies that represent a manufacturer. I can recall one instance where I was skeptical, even though the line looked like an especially good fit. But as it turned out, by talking to other reps I quickly ended my conversation with the manufacturer. And, it wasn’t because of any management, quality or commission reason, it was because the other reps let me know that this manufacturer didn’t really have enough volume for me to move forward.”

If after performing a line productivity analysis the rep firm is inclined to terminate a line, it’s not always a simple process, according to several reps. “Here’s one wrinkle that I’ve run into,” explained one rep. “While our overall analysis determined a specific line wasn’t all that profitable for the firm, one of our guys let us know he had great success with them and was able to collect very sizable commissions.”

Another rep who began his career as a manufacturer pointed to another situation he recalled when a rep made a serious error in terminating a line. “This was a rep who had been repping our company for about 30 years. At the time he was looking out the window at his retirement and he was collecting a huge commission on our line. He didn’t keep us in the loop and just let the business go. I don’t think he had a clear understanding of how much money we were sending him even though he wasn’t really working the territory as he should have.”

When it came to actually putting an analysis together, the group of reps who participated in the MANAchat agreed that there was a wealth of information available from MANA on the process. Specifically referenced was the “Steps to Rep Professionalism” program, which can be found on the MANA website (www.MANAonline.org). Step 7 of that program includes information on analyzing your lines for profitability complete with a workbook, videos and articles on the subject from Agency Sales magazine.

Finally, at the end of the MANAchat devoted to this subject, there was a consensus among the reps who participated that was best stated by one rep who maintained, “Whatever your decision regarding your lines, we’ve all got to keep in mind that whether you’re collecting commissions or not, it’s not ethical to keep a line unless you rep them faithfully.”

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