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Key Factors for Valuing a Sales Rep Agency

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As the rep industry begins to age, it is important to have a succession plan for the benefit of the next generation of employees, as well as the agency’s principals and customers. A well thought out and crafted succession plan will provide for continuity of the agency and will benefit all parties in the event of death, disability or retirement of the owners.

Arrangements for buying or selling a rep agency require an evaluation of the business. Both buyers and sellers should require the use of a reasoned evaluation for determining how much the agency is worth and thus, how … Read the rest

Reps Should Not Always Turn the Other Cheek

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Every experienced rep has stories like this to tell, most often from a relationship with a manufacturer who is not a MANA member.

Two and a half years invested in developing an account while receiving zero compensation, a rep meets with the first stirrings of success. The customer finally agrees to receive samples, and the rep happily reports this development to his partner, the manufacturer. The response is swift: termination. The samples, meanwhile, are on their way directly, and the deal with the customer closes soon after.

After enduring an uncertain relationship for years with a principal who pays late, … Read the rest

Major Publisher Mounts Defense to Rep Case

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Some manufacturers will initially consider a sales rep’s commission claim with sympathy, others with reasonableness, and perhaps most with nervous skepticism. Then there is The McGraw Hill Companies, Inc. (now known as McGraw Hill Financial, Inc.), a leading publisher of elementary school textbooks.

McGraw’s former educational division emptied the litigation arsenal in response to a claim brought by longtime independent sales rep, Shawn Kelly & Associates, for unpaid commissions (filed by this article’s author). It took the rep’s gritty determination to stand up for himself against a better funded, give-no-quarter defendant, for whom Kelly had netted millions in sales, to … Read the rest

Sound Agreement Allows Telecommunications Agent to Avoid Getting Disconnected From Commissions

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Most agents properly focus on generating sales after signing with a new principal. Even as corporations constantly merge or get “restructured,” consideration of the potential impact on the agent is rare. Yet several important questions are usually presented:

  • Is the independent representative’s commission stream adequately protected?
  • What happens if the acquiring party purchases only some of the principal’s assets?
  • And could the principal and the new purchaser orchestrate a sale enabling the purchaser to avoid paying commissions due?

These issues were front and center in a case recently decided by a Kentucky federal court after certain assets of a principal … Read the rest

Protecting Your Hard-Earned Assets From Creditors

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This is not our usual article dealing with rep issues, but is important to all manufacturers, reps and distributors and others who may accumulate wealth.

While many individuals place substantial emphasis on maximizing their earnings and accumulating wealth, many fewer individuals focus their attention on protecting their assets from creditors. Because of our increasingly litigious society, greater emphasis should be given to using available strategies to protect assets from creditors. While few — if any — asset protection strategies are ironclad, proper planning can make it more difficult for a creditor to attach assets of an individual. Some of the … Read the rest

Avoiding the “Blue” Between Employee Privacy and Electronic Communications

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Conducting business effectively today often requires employees to have the ability to communicate and research quickly and efficiently, sometimes on a 24-hour, seven-day-a-week basis. Employers, therefore, often provide employees with a wide variety of electronic technologies, such as computers, laptops, Internet access, e-mail, personal digital assistants (PDAs) and smart phones. In addition, employers often allow, and sometimes encourage, employees to use business and social networking Internet sites in connection with their jobs. While such technology and access provide greater efficiency, they also increasingly result in blurring the distinction between personal and professional use. Because zero-tolerance policy on personal use would

… Read the rest

When and How a Sales Rep Should Retire

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Sales reps, especially after many years in the business, often start to think from time to time about retiring. Much to the surprise of many, they have trouble focusing on the decision. As the younger generation would say “What’s up with that?” Many sales reps always thought they would want to retire at some time in the future, but now they are beginning to wonder if maybe they really don’t, shouldn’t, or won’t be able to let go of the business they have known for most of their lives.

When considering these questions, remember that what you are facing is

… Read the rest

Independent Contractor or Employee: Are Your Workers Properly Classified?

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As state and Federal governments are more strapped for cash and in need of greater tax revenues, they are paying more careful attention to whether employers have properly classified their workers either as independent contractors or as employees. As important as the question is, often there is no simple answer. In fact, the IRS’ training manual on the subject, which it uses to educate its examiners, comprises over 160 pages of materials.

Misclassification can occur for a variety of reasons. Often it is a lack of knowledge of how to properly classify workers. Many times it is intentional

… Read the rest

Master Broker Entitled To Triple Damages Under California Sales Representative Act

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A major issue in the case was whether the California Independent Wholesale Sales Representative Contractual Relations Act (the “Act”) applied to Prestidge because it was a master rep or wholesaler with many sub-reps.

The Plaintiff, G.H. Prestidge (“Prestidge”), owned and operated a wholesale broker business and served as a Master Broker with a national sales force consisting of 14 rep organizations with approximately 45 individual sales representatives. The reps marketed goods and services to retailers of a variety of companies. Defendant, Oscar Home Care, Inc. (“Oscar”), was a supplier/distributor of air fresheners and related products in the retail industry. Both … Read the rest

Principal Lacking Good Faith Commits A Breach of The Peace (Bridge)

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Ameron International produces fabricated steel products. Its sales rep in Western New York, West Empire Associates, learned that the Buffalo and Fort Erie Peace Bridge Authority, operator of the famed Peace Bridge (connecting the United States and Canada), was considering re-coating the entire bridge. West Empire quickly arranged a meeting between Ameron and the Authority.

West Empire then worked the phones for a few months with the Authority and Ameron, but did not otherwise assist in the preparation of Ameron’s proposal for the Peace Bridge project. Shortly after participating in the initial testing of Ameron’s bridge coating, Ameron terminated West … Read the rest

Sweating Out the Pursuit of a Cool Commission

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Though this court case seemed like an easy win for the principal, this rep firm managed to get reimbursed for lost commission.

Consider these brutal but undisputed facts in the case of an independent rep seeking to recover, in court, a commission on the sale of a product (a cooling tower used in the beverage processing industry):

  • The rep, MAK Automation, Inc., had an oral contract with its principal, GC Evans Sales and Manufacturing Co., Inc., that was non-exclusive, and did not furnish a specific geographical territory. The only undisputed contract term was that MAK had to generate or procure
… Read the rest

Unique Opportunity in an Untapped Market

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Licensing intellectual property presents a new opportunity for reps in today’s digital age, but this emerging market requires the fine-tuning of contracts to reflect a new way of selling.

We live in an economy that is, more than ever, driven by technology. As a result, there are a growing number of companies that are in the business of developing, owning and marketing patents, trademarks and other intellectual property. as with traditional manufacturers of goods and providers of services, these companies may occasionally turn to independent sales representatives for their sales and marketing.

This offers sales reps in a variety of … Read the rest

Legal Aspects of Buying or Selling a Rep Firm — Part Two

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This second part of a two-part series is intended to provide a summary of the issues, steps, and mechanics involved in the purchase and sale of a sales representative agency. Last month, in the first segment, we discussed the letter of intent, confidentiality, due diligence, structuring a transaction and valuing the business. This second segment deals with the preparation of written agreements, covenants not to compete, consulting arrangements, third-party consents, the closing, and some final tips.

Preparing Written Agreements

Once the business deal has been made, someone has to put it in writing. The sophisticated buyer will usually insist that … Read the rest

Legal Aspects of Buying or Selling a Rep Firm — Part One

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This article, presented in a two-part series, is intended to provide a summary roadmap of the issues, steps and mechanics involved in the purchase or sale of a sales representative agency. Its purpose is to assist the reader in recognizing and addressing the areas of concern which arise in almost every transaction.

Letter of Intent

Most transactions begin with a so-called “letter of intent.” The purpose of the letter of intent is to set out the basic business terms of the deal, such as whether it will be a sale of stock or assets, the purchase price, and how and … Read the rest

Working Without a Contract

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Reps often provide their valuable professional services without the benefit of a formal written contract, or even a less formal, but equally enforceable, oral contract.

In such situations, the rep is often told by the principal that they are not going to be paid despite the fact that the rep has just brought in significant business. The principal contends that the sale was “outside” of an existing contract, or that no contract exists between the parties. Typically, with a great deal of resignation, the rep wonders whether or not they will ever be paid. But alas, all is not lost. … Read the rest

Effectively Negotiating Rep Contracts and Other Agreements

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The process of entering into an effective rep agreement, or any other type of important contract or understanding, appears to be made more difficult each day.

Whether entering into a formal written contract or merely setting the time for a meeting, business requires constant negotiating. In fact, we have been negotiating since birth. As a wet or hungry newborn, we simply cried. Crying brought attention, and usually the desired result. Eventually (as we approached age 35 or so), crying grew unacceptable, and it became necessary to develop alternative negotiating skills.

Many have come away from a negotiation reluctantly admiring the … Read the rest

The Risks and Rewards of Stocking Reps

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From time to time sales representatives deem it desirable to maintain an inventory of a manufacturer’s products for resale.

These representatives are often referred to as “stocking reps” or “buy-sell reps.” Far from repping pantyhose, a “stocking rep” buys inventory from a manufacturer and resells it to a customer, with the spread between the purchase price and the selling price as its gross profit. From a legal point of view, however, they are more like distributors than sales representatives. As such, there is a different set of risks and rewards to being a “stocking rep.”

Inventory Risks

A stocking rep … Read the rest

A Rep’s “Expectation” Is Met, but Disappointment Follows

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The Facts

Working from an oral agreement made in 1999, Steinke & Assocs., a Michigan sales rep firm, began repping Loudon Steel, Inc., a metal products manufacturer. By October 2002, the relationship was starting to tarnish, and Steinke exercised its undisputed right to resign.

In its somewhat hasty letter of resignation, Steinke stated that its “only expectation” as to commissions is for payment of “commissions on the jobs that have been awarded to Loudon to date.” Although no written or oral agreement had been reached on post-termination commissions, Steinke crossed its fingers and specifically identified two contracts with Ford Motor … Read the rest