Some businesses have a sales force composed of employees who work for the company as employees. Other businesses have a network of independent reps, known as "manufacturers' reps", "manufacturers' representatives" or "manufacturers' agents. And some businesses have a hybrid sales force composed of both. What sales force structure is best for your business? There are many factors to consider.
Benefits of Manufacturers' Reps: Many industries, especially those that sell industrial products, almost exclusively use manufacturers' reps because of the many benefits they offer the companies they represent.
- Selling Costs Are Fixed at a Flat Percent of Sales. When sales are down, selling costs are also down, and selling costs only go up after sales have increased.
- Selling Costs Are Back Loaded: You can hire a salesperson, pay him thousands in salary or draw and expenses, and he might generate little or no sales. Reps are only paid after they make a sale, and often only after the invoice has been paid. If your plan is to dramatically grow your sales, it is attractive to have that cost back loaded and not on the front end when cash is tight.
- Manufacturers' Rep Know Where the Bodies Are: The whole idea behind recruiting a manufacturers' rep is that he already has a customer base to which he is selling the products of his other principals. Reps do not have to prospect or develop relationships with customers and prospects. They already have an established customer base, and they should be able to look at your product and immediately determine who among their account base are the best prospects.
- They Can Integrate Your Products with Sympathetic Products from Other Manufacturers: The really sophisticated manufacturers' reps will actually create integrated solutions for their customers, bringing them a package of parts or products to meet their needs.
Businesses That Are Well Suited to Selling through Manufacturers' Reps: There are many businesses for which a network of manufacturers' reps makes a lot of sense.
- Your Competitors All Sell through Reps: If ALL of your competitors are using manufacturers' reps, that tells you something!
- You Sell Parts and Components That Are Integrated with Other Parts and Components: This is the type of selling for which manufacturers' rep offer the most value and get the best results.
- You Need a National Sales Force, and Right Now: If you simply cannot afford to hire the 15 to 20 salespeople it will take to give you national sales coverage, a manufacturers' rep network is a very attractive and affordable alternative!
- The Selling Cycle Is Relatively Short: If selling your products requires identifying a need, getting out a sample, specs and/or a quote, and then going back and closing the sale, that is what manufacturers' reps do, and they do it very well.
- There Isn't Enough Business in a Sales Territory to Support a Full-Time Salesperson: A manufacturers' rep will take on a product line that only produces $40,000 or $50,000 in commissions.
Businesses That Should Consider a Hybrid Direct-and-Rep Sales Force: There are still other businesses for which a hybrid of both company salespeople and manufacturers' reps makes a lot of sense.
- Selling to Totally Different Markets: We have a client that sells to power plants, paper mills, refineries and food processors. We recommended they use manufacturers' reps to sell to the power plants and paper mills, but a direct sales force to call on the refineries and food plants, and the structure has been very successful for them.
- You Need to Test Both Sales Forces: If you cannot really determine which is best, you can recruit manufacturers' reps to cover part of the country or to call on one or more vertical markets, then hire a direct sales force for a different geography or industry, and the see how the two concepts work.
