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Whether you are looking to replace a line, expand your line list, or start from scratch and build your agency business, there are many factors to consider when signing on with a new principal.

Let me focus on six:

1. Fit with your agency mission statement.
2. Buy-in to outsourced sales model from principal’s ownership and senior management.
3. Reputation for quality products and services in your geographic territory.
4. Excellent references from agencies in other territories.
5. Financial strength.
6. Commission/compensation plan.

Let’s drill down a bit deeper:

1. Fit With Your Agency Mission Statement

Sounds self-explanatory; but easier said than done in my experience. For example, if your agency is built around selling HVAC equipment to commercial contractors, it might be tempting to add a line that sells directly to the residential market. This would cause a complete shift in your business model. Most often it is better to “Stick to the knitting,” as the expression goes, and focus on adding lines that you can sell to your existing customers.

2. Buy-In to Outsourced Sales Model From Principal’s Ownership and Senior Management

I learned this the hard way many years ago when our agency took on a new line based on a relationship with an industry friend who had recently taken a new position with a highly reputable company in our industry. The contract covered the sales of a specific portion of a relatively large high-technology company. It was an exciting 18 months or so; sales were growing, and we loved having the company on our line card. However, the axe fell when our friend got transferred and his manager canceled our contract because he preferred a direct sales approach.

Lesson: Talk to all the people in the company who could decide on or influence the relationship. If there is not full commitment to establishing and growing a long-term relationship, strongly consider focusing your efforts elsewhere.

3. Reputation for Quality Products and Services

Ideally, in your geographical territory — this would mean existing business to manage and grow and good prospects for new business growth. If the company has little to no market presence in your territory but has a strong track record in other areas, the hill is steeper and longer but can be climbed. If the company is brand new, make sure there is a clear unfair competitive advantage to make your time and energy investment worth the risk.

4. Excellent References From Agencies in Other Territories

Closely related to #3 above. Get references from non-competitive rep agency owners. Listen closely for enthusiasm and commitment. If you don’t hear it, dig deeper.

5. Financial Strength

• Can they pay on time?
• Will they pay on time?
• Do they have the resources to fund their growth plans?

6. Commission/Compensation Plan

Last but certainly not least — what will they pay? Will they pay for (or at least subsidize) new territory development if there is little to no existing business? Will they offer bonus commissions for exceeding expectations? Will they include or exclude existing business (aka house accounts)? There is typically an inverse relationship between existing business and commission rates. And rates tend to vary based on the industry and the typical gross margins.

Good luck finding your next great principal to represent!

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