Sales Compensation, simply overhead or a good solid investment? This is a subject that has been discussed and written about for as long as there have been products or people who sell them. There is one irrefutable fact, if there is a product, and it has to be sold, somebody has to sell it!
This seems like a relatively simple subject, but actually it is quite complex. There are many very compelling reasons why a principal company would choose to use An Independent Manufacturers’ Representative rather than a company paid sales force, let’s review what a Rep does for a living.
An Independent Manufacturers’ Representative Firm’s responsibility is to professionally represent their principal companies as the sales force for the company. This is an obvious benefit to the principal company for it eliminates the fixed overhead of a sales force, and takes advantage of the synergy available with a Multi Line Representative Organization. A knowledgeable representative knows their architectural community and the specific products that are appropriate for each account. This results in a rapid promotional impact in the field with very little wasted effort.
It is important for a Rep firm to conduct business in a professional manner, keep up with technology, and be creative. Some of the Reps responsibilities include:
- Locating projects in the conceptual or early design phases, utilizing Dodge Reports, CMD or referrals. and contacting the architectural firm for an appointment
- Presenting the principal company’s appropriate products and concepts to the project architect and owner during the preliminary design phase. Listening to them.
- Assisting the project architect in the selection, modification and detailing of the products during the preliminary design and working drawing phase.
- Assisting the specification writer in specification preparation and technical research during the final working drawing and pre bid phase.
- Securing samples and details, coordinating all product modifications, and working with the manufacturer to create solutions for the project. Provide coordination with other project consultants.
- Furnishing the manufacturer with appropriate bid documents, assisting in preparation of material quotations and furnishing all bidders with quotations and required details.
- Engaging in price negotiations with contractors and securing purchase orders.
- Submitting samples and literature for approval.
- Coordinating the placing of orders with the manufacturer and the contractor.
- Following up on shipments.
- Troubleshooting throughout construction, attending job meetings.
- Assisting in collection of invoices.
- If and when the invoices are paid, receiving a commission.
The elapsed time of this process is often two to four years, with all Rep expenses and overhead paid by the representative company.
Independent manufacturer’s representatives often have a very large investment in their business, a fact that is not commonly acknowledged in our industry. Offices, salaries, automobiles, insurance, workmen’s compensation, communication, computers, to name a few. Commissions received are not “profit”, but a contribution to overhead. It takes years of investment to create a successful enterprise.
In order for Independent Manufacturers’ Representative Firms to be successful, the manufacturer also has a tremendous responsibility. The first and foremost responsibility is to produce a high quality product, at a reasonable price and provide on time delivery. That is only the beginning! In speaking with a number of manufacturers who have a very long and successful history utilizing Independent Reps as their sales force, a number of important factors appear again and again.
- Excellent communication at all levels within both organizations.
- Professional literature, CD’s, Web Sites and technical specifications, keeping pace with technology.
- High quality sample programs.
- Well thought out advertising programs.
- Development of new innovative products.
- Outstanding in house technical capabilities at all levels.
- Dependable, accessible and friendly Customer Service.
- Rapid product problem resolution.
- Prompt payment of commissions and a desire for maximum revenue and profits for the principal company and the rep firm.
In preparation for this column, I spoke with many manufacturers and Reps. It was very interesting to note that most high quality manufacturers and high quality Reps have very long standing relationships. It was also interesting to note that in most successful relationships the Manufacturer and Rep viewed their relationship as a team effort, collaboration, partnership.
One particularly notable quote from the President of a long time CISCA Member Manufacturer stands out, “My favorite checks to write each month are the commission checks”, this company is one of the most profitable and highly regarded companies in our industry! They are excited when commission checks are high, high commissions equal high sales! This individual continued, “We understand that reps work hard for us, with no guaranteed compensation, pay all of their own expenses, with no assurance of success. We appreciate their dedication and celebrate with them when they secure a large order. We know when times are tough we don’t share their overhead but when the economy is booming, we share the fruits of their success!”
Independent Manufacturers’ Representatives receive calls, faxes and Emails on a regular basis to represent new product lines.� It never ceases to amaze me how many of the firms contacting a rep have virtually none of the key elements required for a successful representation of their product. It is very common to be told, “we are working on it, will have it next month, next year”. Usually the promises are not fulfilled and the company is puzzled why they have not had an impact in the market, and why they have a constantly changing Rep Sales force.
Mutual respect, teamwork, honesty, and hard work. Familiar words but as important today as they were 100 years ago.
William L. Shannon CSI, CISCA
President of Shannon Corporation
Recipient of the 2004 De Gelleke Award