Running a manufacturers’ rep agency brings opportunities but at times can generate risks, especially when considering employment matters. This article presents an overview of those risks and suggestions for how to manage such risks.
Misclassifying Workers as “Independent Contractors”
Rep agencies use independent contractors or subreps for myriad reasons — “fit” for a particular situation, coverage for an open territory, flexibility and cost savings, as examples. While using independent contractors can provide significant benefits, misclassifying employees as independent contractors can lead to detrimental outcomes such as having to pay unpaid withholding taxes, back pay, penalties, fees and interest.
The IRS … Read the rest
Based on our significant experience reviewing and managing commission claims with manufacturers’ representative (rep) agreements with their suppliers, the author thought it might be helpful to go through a summary of these provisions and provide some helpful perspectives and best practices.
The value of a manufacturers’ rep is fundamentally tied into relationships they have with customers and with suppliers (principals). It has been said that the assets of an agency “go home at night,” which is a reference to the intangible nature of their relationships. The rep functions as a drummer, facilitator, expediter and solicitor. As a general … Read the rest
Risk management has been a popular topic in business circles for at least 10 years, if not longer. Larger enterprises have full departments dedicated to surfacing and addressing business risk. One way to enhance value for a rep agency, or any business for that matter, is to capture sales or other opportunities. Similarly, managing or reducing risk can also add value through prevented or protected losses.
The following reflects a framework for manufacturers’ reps to assess risk and pass along how suppliers and customers might also be dealing with and managing risk, in an effort to better understand each other’s … Read the rest
Generally, the day-to-day life of a manufacturers’ rep is not filled with product liability risks or other situations where indemnification (reimbursement) of claims are a concern. However, based on the authors’ experiences with both claims management and defending manufacturers’ reps, we thought it important to identify the likely risk management environment within which most reps function. Then a set of strategies for minimizing risk will be described.
Manufacturers’ reps are generally solicitors, drummers and expediters. They do not take title or responsibility for the products they sell. Instead, a manufacturer has designed and engineered the product and, as such, … Read the rest
This article provides the highlights of the MANA special report on valuing your rep firm. You are in the best position to understand the factors impacting the value of your rep firm through your day-to-day management and operation of your agency. Where you and your agency stand on a number of valuation drivers will have a major impact on the cash flow and eventual value of your agency should you ever decide to sell it.
Having good relationships with multiple customers can significantly enhance the value of your agency. A simple phone call may provide you with the … Read the rest
Much has been published and much is still to be published on the impact of the new federal tax law recently made effective generally as of January 1, 2018. Based on our experiences with the operation, management and sale of manufacturers’ rep agencies, here are some thoughts on the new tax laws.
S vs. C Corporation
For a number of years, the S corporation has been the entity of choice for manufacturers’ representatives because S corporations themselves generally are not taxed. Instead, the income or loss of an S corporation rep agency is taxed at the shareholder level. In addition, … Read the rest
With the improving economy and manufacturing activity on the rise, many reps and principals are entering agreements for new lines.
Although much effort is invested in developing relationships and securing new business opportunities, in the initial excitement and optimism, far too often important details of the representation are overlooked, which can cause major trouble down the road.
This article addresses three recurring contract situations and identifies some best practices for reps and principals facing those issues.
Best Practice # 1 — Set the Right Term (Length) for the Agreement
A key consideration is the term — or length — of … Read the rest
Planning for Changes in Control and Welcoming Opportunities With the New Owner
Your best principal was just sold. Hearing those words is generally not welcome news to the established rep. In some cases, new relationships are forged and a mutually rewarding situation continues for the rep and new owner. In other cases, the new owner takes the business in a “different” direction, putting future sales and the rep’s commissions at risk.
In recent years, principal ownership changes have increased consistent with the trend of increased merger and acquisition activity. The purpose of this article is to provide guidelines and a … Read the rest
The purpose of this article is to identify guidelines for enhancing the value of your agency, as well as important items to consider in succession planning for your agency. The guidelines are based on the author’s experiences of being involved in more than 100 agency transitions. First, the stage will be set with a look at valuations, along with important structural elements and historical perspective. Then, we will examine some strategic planning points that might increase the consideration payable to you, if and when you decide to pass along your agency.
Valuation in the rep agency world is elusive. … Read the rest
Recommendations made by a manufacturer’s rep are an issue that arises all too often in the world of reps. It is important to set out a framework before describing how to best manage the issues associated with recommendations by reps.
Successful manufacturers’ reps are frequently degreed professionals with many years of hands-on experience in their respective industries. They can be a wealth of knowledge when it comes to practical applications and performance criteria for products. Their knowledge and information can be invaluable to principals and customers, and is often key to closing a sale.
Rep Theory and Practice… Read the rest