Increase Your Sales by Using Independent Sales Representatives
Increase Your Sales by Using Independent Sales Representatives
Simply put, to achieve more sales, faster, and at lower cost than other methods.
While Independent Sales Representatives are not right for all circumstances, their outstanding advantages could be right for you. Especially, if you need to take your company into new markets or grow existing markets with a lower up-front cost.
What is an Independent Sales Representative?
An Independent Sales Rep, also known as a Manufacturer's Rep, is an independent business composed of sales, marketing and customer service professionals, representing at least two related but non-competing products in a well-defined territory, and primarily compensated through commissions. The Principal can be a manufacturer, distributor, importer, or service provider.
An Independent Sales Rep is not the same as "inside" sales, showroom sales, or telephone sales. An Independent Sales Rep may use showrooms, trade shows or the telephone to interact with customers. But their primary focus is to work face-to-face with customers, often traveling to meet with them to show products and services, close sales, provide training and solve issues. Commonly, Independent Sales Reps carry complementary product lines and cover a territory suited to effective coverage of the account base.
What is a Sales Agency?
A Sales Agency, also known a a Rep Agency, offers a management structure and a team of two or more Independent Sales Representatives. Sales Agencies generally operate regionally. Just as in the case of an Independent Sales Rep acting in a solo fashion, sales agencies sell multiple product lines that do not compete with each other. Sales Agencies sometime have a provide showroom space as part of their services.
What is a National Sales Force?
A National Sales Force is the combination of any inside sales capability plus outside Sales Agencies plus Independent Sales Reps, along with administrative and support personnel who jointly cover a country. It is common to build up to a National Sales Force incrementally, with only one or more regions in the beginning. Expanding coverage to more regions, and eventually to a full National Sales Force depends upon success in the regional markets.
To what extent do manufacturers use Independent Sales Representatives?
According to the Research Institute of America, from 50 to 80 percent of U.S. manufacturers use Independent Sales Representatives, depending upon the industry.
How does using Independent Sales Reps increase sales?
The major reason that Independent Sales Reps can increase sales is because they carry multiple lines. When more than one line is brought to the customer, sales can be made more effectively and at lower cost. The sale of one product can "trigger" sales of other products. With multiple lines, reps see more customers in their territory than inside salespeople. Thus a broader, better-defined customer base is created. The result is more sales and better market penetration.
What are the other advantages of using Independent Sales Reps?
* Principals can enter a new market quickly and cost-effectively. The Rep brings his existing customer base. The Rep knows his territory and has his own established network of both buyers and other Reps. For new companies who are still seeking to create their place in the market this feature is vital.
* One product sale can "trigger" other product sales.
* Reps are paid for results, leading to a highly motivated sales force.
* Sales costs are known.
* Provide better focus in their territory due to familiarity with local preferences. Reps quickly identify new product opportunities, whereas an inside sales force may take months or longer to make that identification.
* Reps have local acceptance. They are familiar to their customers and trusted by them. They often live in their community. So they have a vested interest in their products and customers, whereas inside salespeople may not.
* Provide more objective ideas for product improvement and more objective customer feedback on new products because they do not work for the Principal. Customers feel confident in sharing information with them about changes and opportunities in the market. Customers who would hesitate to bring valuable input directly to inside sales staff will openly share with Independent Reps, including both suggestions and criticism. This openness further motivates the Rep.
* Provide quick response to customer issues because of close physical proximity. Customers may also feel that it is easier reach the local Reps.
* Provide consultative selling, customer service, product demonstrations, product and sales training, sales analysis, credit reporting, market research, market development information, product quoting, and current product improvements, new product development, and participation in sales meetings, trade shows and conventions. Some may also offer showroom displays.
* Alert Principals to new developments in their territory that could affect their lines.
How does an Independent Sales Rep get paid?
The Independent Sales Rep typically is credited for all sales in his territory, and is paid the commission stated in a written contractual agreement, sometimes called a "Sales Representation Agreement." Payment is due only after the sale is closed.
The Independent Sales Rep operates a independent business, with its own sales and administrative staff. This business is responsible for all related operating expenses, including staff compensation, employee benefits, advertising, auto, insurance, office equipment, taxes, technology, travel, and so forth. These costs must be paid out of the gross commission received by the Rep.
Doesn't the Independent Sales Rep add cost?
No. Using Reps can actually save money for the customer. A Principal must have a sales force. Using an Independent Sales Rep is a form of outsourcing the sales function. Just as with the well-known practice by many companies to outsource such functions as manufacturing, information technology, and accounting, using Reps is outsourcing.
To compare the cost of the inside sales force with the outsourced sales force, the overhead "burden" of the inside sales force must be included. For example, what may appear as a yearly cost of $75,000 for a salaried inside Sales Professional has a true cost of 2.0 to 2.5 times that amount, or $150,000 to $188,000 when the overhead "burden" is included. Examples of such costs are administrative support, auto, commission, office space and related costs, employee benefits, holidays, technology, and travel. Another intangible cost that is minimized is the Principal's legal exposure, because Reps handle the cost and liabilities associated with their own employee selection, training, compensation, discipline and termination.
The bottom line is that using Independent Sales Reps reduces fixed costs and spreads those costs over multiple lines. A single sales call for many products saves everyone time. If all Principals had to sell all their products and services via an inside sales force to all territories, the additional cost to the economy would be mind boggling.
Using a channel other than an Independent Sales Reps may however add costs. For example, a dealer or distributor can add costs in exchange for adding some value. These intermediaries take delivery and ownership of the product, mark up the price, and resell it. The market may determine that the added value of such a channel is worth the added cost. But such channels with their added costs should not be confused with the use of an Independent Sales Rep.
Can Independent Sales Reps serve as distributors?
Generally the Independent Sales Rep is not a distributor. However in some cases the Principal may require that the Rep takes ownership of the product and resell to the customer. In this case that Rep would be functioning as a Distributor rather than an Independent Sales Rep.
Why don't all Principals use Independent Sales Reps?
Many Principals who could benefit from using Independent Sales Reps who do not yet sell that way have misconceptions about the method, or about inside sales forces, or both. Another reason could be that they prefer to have complete control over the sales force.
How many lines should an Independent Sales Rep carry?
Reps handle as many lines as necessary to present a sufficient portfolio of products and services for their customer base and to provide sufficient profits for themselves. By carrying multiple lines the Principal shares in the costs of a unified sales organization, as described in detail above. When the Rep is selling the line of another Principal, a positive relationship for the lines of all represented Principals is being established.
Will my Rep help build my business -- or just be an order taker?
If sales could be successfully made via promotion and advertising by themselves, neither an inside nor independent sales force would be needed. However, because Reps are only paid by commissions, they cannot depend only on the sales support efforts of the Principals. They have to go beyond the Principal's efforts to develop and implement their own incentive programs which are tailored to their own territories and customer base.
How much commission is the Independent Sales Rep customarily paid?
Commission rates vary by industry over a wide range, with the majority between 5 - 20% of gross sales.
How much commission dollar does the Sales Agency actually keep?
The Sales Agency keeps approximately 40% of commissions received. The remaining 60% is paid as compensation.
Do Independent Sales Reps make too much money?
The earnings of Independent Sales Reps vary widely. Since commissions are based on sales, it happens that a successful Rep can make more than the Sales Manager who hired them. As entrepreneurs, they take risks in order to attain rewards. They have professional pride. But their success makes their Principals successful too.
----
This article is inspired by the work of United Sales Association, 6740 East Hampden Avenue, Suite 306, Denver, CO 80224.
Copyright 2004-2008 RepHunter, Inc.
Increase Your Sales by Using Independent Sales Representatives - To learn more about this author, visit Jeff Simon's Website.
Like this article? Share it with your friends
Why would I be interested in using Independent Sales Representatives?
Simply put, to achieve more sales, faster, and at lower cost than other methods.
While Independent Sales Representatives are not right for all circumstances, their outstanding advantages could be right for you. Especially, if you need to take your company into new markets or grow existing markets with a lower up-front cost.
What is an Independent Sales Representative?
An Independent Sales Rep, also known as a Manufacturer's Rep, is an independent business composed of sales, marketing and customer service professionals, representing at least two related but non-competing products in a well-defined territory, and primarily compensated through commissions. The Principal can be a manufacturer, distributor, importer, or service provider.
An Independent Sales Rep is not the same as "inside" sales, showroom sales, or telephone sales. An Independent Sales Rep may use showrooms, trade shows or the telephone to interact with customers. But their primary focus is to work face-to-face with customers, often traveling to meet with them to show products and services, close sales, provide training and solve issues. Commonly, Independent Sales Reps carry complementary product lines and cover a territory suited to effective coverage of the account base.
What is a Sales Agency?
A Sales Agency, also known a a Rep Agency, offers a management structure and a team of two or more Independent Sales Representatives. Sales Agencies generally operate regionally. Just as in the case of an Independent Sales Rep acting in a solo fashion, sales agencies sell multiple product lines that do not compete with each other. Sales Agencies sometime have a provide showroom space as part of their services.
What is a National Sales Force?
A National Sales Force is the combination of any inside sales capability plus outside Sales Agencies plus Independent Sales Reps, along with administrative and support personnel who jointly cover a country. It is common to build up to a National Sales Force incrementally, with only one or more regions in the beginning. Expanding coverage to more regions, and eventually to a full National Sales Force depends upon success in the regional markets.
To what extent do manufacturers use Independent Sales Representatives?
According to the Research Institute of America, from 50 to 80 percent of U.S. manufacturers use Independent Sales Representatives, depending upon the industry.
How does using Independent Sales Reps increase sales?
The major reason that Independent Sales Reps can increase sales is because they carry multiple lines. When more than one line is brought to the customer, sales can be made more effectively and at lower cost. The sale of one product can "trigger" sales of other products. With multiple lines, reps see more customers in their territory than inside salespeople. Thus a broader, better-defined customer base is created. The result is more sales and better market penetration.
What are the other advantages of using Independent Sales Reps?
* Principals can enter a new market quickly and cost-effectively. The Rep brings his existing customer base. The Rep knows his territory and has his own established network of both buyers and other Reps. For new companies who are still seeking to create their place in the market this feature is vital.
* One product sale can "trigger" other product sales.
* Reps are paid for results, leading to a highly motivated sales force.
* Sales costs are known.
* Provide better focus in their territory due to familiarity with local preferences. Reps quickly identify new product opportunities, whereas an inside sales force may take months or longer to make that identification.
* Reps have local acceptance. They are familiar to their customers and trusted by them. They often live in their community. So they have a vested interest in their products and customers, whereas inside salespeople may not.
* Provide more objective ideas for product improvement and more objective customer feedback on new products because they do not work for the Principal. Customers feel confident in sharing information with them about changes and opportunities in the market. Customers who would hesitate to bring valuable input directly to inside sales staff will openly share with Independent Reps, including both suggestions and criticism. This openness further motivates the Rep.
* Provide quick response to customer issues because of close physical proximity. Customers may also feel that it is easier reach the local Reps.
* Provide consultative selling, customer service, product demonstrations, product and sales training, sales analysis, credit reporting, market research, market development information, product quoting, and current product improvements, new product development, and participation in sales meetings, trade shows and conventions. Some may also offer showroom displays.
* Alert Principals to new developments in their territory that could affect their lines.
How does an Independent Sales Rep get paid?
The Independent Sales Rep typically is credited for all sales in his territory, and is paid the commission stated in a written contractual agreement, sometimes called a "Sales Representation Agreement." Payment is due only after the sale is closed.
The Independent Sales Rep operates a independent business, with its own sales and administrative staff. This business is responsible for all related operating expenses, including staff compensation, employee benefits, advertising, auto, insurance, office equipment, taxes, technology, travel, and so forth. These costs must be paid out of the gross commission received by the Rep.
Doesn't the Independent Sales Rep add cost?
No. Using Reps can actually save money for the customer. A Principal must have a sales force. Using an Independent Sales Rep is a form of outsourcing the sales function. Just as with the well-known practice by many companies to outsource such functions as manufacturing, information technology, and accounting, using Reps is outsourcing.
To compare the cost of the inside sales force with the outsourced sales force, the overhead "burden" of the inside sales force must be included. For example, what may appear as a yearly cost of $75,000 for a salaried inside Sales Professional has a true cost of 2.0 to 2.5 times that amount, or $150,000 to $188,000 when the overhead "burden" is included. Examples of such costs are administrative support, auto, commission, office space and related costs, employee benefits, holidays, technology, and travel. Another intangible cost that is minimized is the Principal's legal exposure, because Reps handle the cost and liabilities associated with their own employee selection, training, compensation, discipline and termination.
The bottom line is that using Independent Sales Reps reduces fixed costs and spreads those costs over multiple lines. A single sales call for many products saves everyone time. If all Principals had to sell all their products and services via an inside sales force to all territories, the additional cost to the economy would be mind boggling.
Using a channel other than an Independent Sales Reps may however add costs. For example, a dealer or distributor can add costs in exchange for adding some value. These intermediaries take delivery and ownership of the product, mark up the price, and resell it. The market may determine that the added value of such a channel is worth the added cost. But such channels with their added costs should not be confused with the use of an Independent Sales Rep.
Can Independent Sales Reps serve as distributors?
Generally the Independent Sales Rep is not a distributor. However in some cases the Principal may require that the Rep takes ownership of the product and resell to the customer. In this case that Rep would be functioning as a Distributor rather than an Independent Sales Rep.
Why don't all Principals use Independent Sales Reps?
Many Principals who could benefit from using Independent Sales Reps who do not yet sell that way have misconceptions about the method, or about inside sales forces, or both. Another reason could be that they prefer to have complete control over the sales force.
How many lines should an Independent Sales Rep carry?
Reps handle as many lines as necessary to present a sufficient portfolio of products and services for their customer base and to provide sufficient profits for themselves. By carrying multiple lines the Principal shares in the costs of a unified sales organization, as described in detail above. When the Rep is selling the line of another Principal, a positive relationship for the lines of all represented Principals is being established.
Will my Rep help build my business -- or just be an order taker?
If sales could be successfully made via promotion and advertising by themselves, neither an inside nor independent sales force would be needed. However, because Reps are only paid by commissions, they cannot depend only on the sales support efforts of the Principals. They have to go beyond the Principal's efforts to develop and implement their own incentive programs which are tailored to their own territories and customer base.
How much commission is the Independent Sales Rep customarily paid?
Commission rates vary by industry over a wide range, with the majority between 5 - 20% of gross sales.
How much commission dollar does the Sales Agency actually keep?
The Sales Agency keeps approximately 40% of commissions received. The remaining 60% is paid as compensation.
Do Independent Sales Reps make too much money?
The earnings of Independent Sales Reps vary widely. Since commissions are based on sales, it happens that a successful Rep can make more than the Sales Manager who hired them. As entrepreneurs, they take risks in order to attain rewards. They have professional pride. But their success makes their Principals successful too.
----
This article is inspired by the work of United Sales Association, 6740 East Hampden Avenue, Suite 306, Denver, CO 80224.
Copyright 2004-2008 RepHunter, Inc.
Increase Your Sales by Using Independent Sales Representatives - To learn more about this author, visit Jeff Simon's Website.
Like this article? Share it with your friends
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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