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To answer that question, let’s begin with an analogy. For the purposes of our discussion, starting (or even maintaining) a successful rep business is a little like taking a trip. On the face of it, completing the trip ought to be easy, but a couple of things have to be done prior to embarkation. Chief among those preparatory steps is the need to muster supplies and then have a clear destination in mind.

So too is it with a rep business. From day one, the independent manufacturers’ rep ought to have plenty of supplies (funds) and resources coupled with a clear idea of where he or she wants to be in the future.

That’s just part of the message that Joe Miller, MANA’s former President and CEO, has been preaching for years and continues to preach to this day.

Miller, who conducted the first sessions of MANA’s mentoring program for new reps, maintains that “In my experience, one of the most common occurrences with small business people going into business for themselves — and that includes reps — is that they overestimate the amount of revenue they see coming in. At the same time, they tend to underestimate the expenses they’re going to encounter and, therefore, start out undercapitalized.”

Strategic Actions/Tactical Plans

Here’s where the importance of the business plan comes into play, he says: “A well-thought-out and detailed plan includes both a set of strategic objectives that the rep wants to accomplish as well as tactical action plans to make those objectives come true. One of the many benefits of such an approach is that you can ‘cost out’ actions that you must take. You can anticipate what it’s going to cost to operate the business for a year. You can cost what it will take to bring on the next salesperson. You can cost what it will take to cover the territory. At the same time, you must make an accurate estimate of revenues and what actions you must take to generate that revenue. Then an accurate breakeven analysis can be done.

“A key here is to make the best effort to estimate revenue and expenses accurately. And it’s the business plan that serves as a roadmap to see to it that you don’t lose your way.”

It’s unfortunate, Miller contends, that many business people today approach their businesses in a less than formal manner and do so without the benefit of a business plan. “I immediately call to mind one business person who opened his business without ever forecasting revenues or expenses. One of the first things he did was to get office space and open the doors for business. The last time I had lunch with him he complained that he was barely covering his expenses. This is someone who is a great marketer who immediately started selling himself and his business and got a presence for himself on social media. On the downside, however, he never looked ahead to forecast revenues and expenses, and he never considered the competitive landscape.”

Follow-Through is Critical

After years of advocating that reps create and follow business plans, Miller observes that while his message is mostly politely received, not everyone follows through. “I’ve found that people generally listen to me and admit that what I’m telling them is a good idea. Then unfortunately, most of them go away and don’t put a plan together; or if they do, it may be some sort of a halfhearted effort. One of the problems here is that there are a large number of individuals who go into the rep profession who have been successful in the corporate world, but they haven’t necessarily had management, budgetary and profit and loss responsibility. On the other hand, there are those who have had that experience and for them it’s not necessarily a daunting task.”

Miller continues that it’s really not all that difficult. “We’re not talking rocket science here. What you need are some basics in your plan that provide you with a reality check of where you are today and where you want to be in the future. Your mission statement, for example, can be just a couple of statements describing why the rep is in business. For instance, consider: ‘My mission is to provide first-class field sales and service to a group of manufacturers of complementary products to a customer base in the California market.’

“Then there’s the vision statement. If the rep knows where he is today (e.g., presently with no lines and no revenue, but with x amount of money put away to cover living and business expenses for x number of years), in three years: ‘I want to have seven complementary lines, be generating $350,000 per year in commission and have added a second salesperson to my agency.’”

Once again, “The business plan is a reality check. It provides the rep with the key strategies and actions he’s identified that he’ll need in order to be successful. His plan should be firmly based on the rep’s competitive advantage, and, if in the course of preparing his plan, the rep determines he has no competitive advantage, he’d better reconsider his course of action.”

Put It in Writing

Another key to a successful business plan, according to Miller, is that it be in writing. “Not only that, but if possible the rep should keep it firmly positioned on the corner of his desk and he should consult it often — monthly is ideal. It should never be a document that is created and then put on a shelf never to be seen again.”

If the argument in favor of a business plan for reps is accepted, what remains for the nascent rep is to go somewhere to get input for his business plan. But, where does he go to do that?

Perhaps owing partly to the fact he’s served as MANA’s CEO, but more probably because a dozen years of his career have been spent as an independent rep, Miller is quick to answer that question. “One of the main reasons MANA is in business is to educate reps to be more successful. The association boasts of a wealth of information on everything a rep needs to know, including how to find rep-friendly manufacturers and operate a successful business. This includes a template for an example of a rep’s business plan.”

If having, consulting and following a business plan are important for reps, it’s just as important that manufacturers make a concerted effort to conduct business with reps that have business plans. “Even those manufacturers who don’t outright ask to see the rep’s business plan will probably get around to it during the interview process,” Miller says. “At that point, it’s important that the rep stress that he has such a plan and not only that, but he’s interested in sitting down with the manufacturer at least once a year to go over the portion of the plan that relates to that manufacturer’s products. This ensures that both parties will agree on mutual actions and will be on the same page as to what’s expected of the other.”

Another point that Miller emphasizes for the manufacturer is that the existence of a rep business plan is indicative of the fact the rep is a true businessman. At the same time, he says it might be wise for the rep to have more than one version of his business plan for each of three different audiences — manufacturers, bankers and yourself. “I’m not saying there’s anything devious here. The point is that the rep should emphasize different points in each of his versions. For instance, financial viability for the banker; a grasp of what it takes to be effective for the manufacturer; and finally, to provide a concrete action plan for the rep himself. Once again, the emphasis here is to have a plan and to update and consult it regularly.”