The idea of sales reps is not working. Not only is it not working, the situation is getting worse. The gap between reps and their principals is growing to the point where it’s hard to see if we can ever find a way of closing it in the future.
I have been on both sides of this issue.
From the principal’s point of view it’s difficult to find a rep who will sell for them without a retainer. And there is something about a rep getting a retainer that so flusters the principal that he gets angry every time he writes that retainer check. And the reps for some reason don’t seem to perform as well when they do get a retainer. Don’t ask me why, but in my experience every time I’ve managed to convince one of my clients to pay a retainer to a rep something goes wrong.
From the reps point of view things look worse than ever. No matter how hard they work it can be almost a year now before they get paid for their efforts. Think about that. Think about how long it takes for them to get their principal qualified at a customer. Even if it is a customer that the rep has known for years. There is the qualification process, the plant visit, the survey, the sample lot. Then there is the first quote, then there is the order and the lead time it takes to build that order, then it is the minimum of ninety days it takes the principal to get paid and then at least thirty days after that before the rep finally gets paid. The time from when the rep starts the process to when she gets paid can easily be ten months or more. Ten months of covering expenses without seeing a dime. Yikes! That is just plain horrible
This elephant in the room, the rep-principal relationship is one that needs to be addressed. Something has to change. Both sides are going to have to give a little if this way of doing business is going to survive.
For the next few weeks I am going to take it upon myself to work on solving this problem. I am going to dedicate myself and this column to finding a better and more productive way to make the rep-principal relationship work
I have been working with reps for many years now, so I thought I would share this story from my own past to demonstrate how a good rep-principal relationship can work…and unfortunately how it can be destroyed.
Check this out.
In 1977 I was a 27-year-old national sales manager at a Division of Rockwell International in Maine. I was in charge of managing a sales force made up of both direct and independent sales professionals. My first year was extremely successful. Under my management the company’s top line grew from just over $7 million to more than $12 million. Naturally, I was very proud of this, but I didn’t do it alone by any means. It happened by standing on the shoulders of four very good, very aggressive independent sales rep firms.
Once the year was over we all slapped each other on the back. Then a bright accountant was put in charge of our division. He was a “smart young man”, a legend in his own mind. After he saw what we were spending on our reps he quickly decided that the smart thing to do would be to let them all go and keep the money.
That was my first exposure to the shortsightedness of corporate accounting. I spent the next few weeks firing all of our sales reps, destroying everything we had built, and learning firsthand what not to do for the good of a company.
Needless to say the next year was an unmitigated disaster. Sales plummeted to under $10 million. In the year end report, the accountant admitted that sales had dropped by two million dollars. Instead of the profit we made the year before, we had lost money.
Frustrated, I spoke up and said, “this is terrific isn’t it?” Looking at me like I had two heads, he asked me what the heck I was talking about. I smiled and said, “all you have to do is go to your desk, pull out all that money that we saved by getting rid of the sales reps, and we’ll make our money back, right?”
That’s when I learned that controllers and other financial people have no business being involved with sales. It also showed me why sales reps are so paranoid. After all, I had just fired the reps that had helped my company score a record breaking year. These reps were my friends and partners and I was told to let them go.
Over forty years later this lesson about independent sales reps hasn’t been forgotten. I have since dedicated a considerable amount of time and energy to rep/principal relationships. This has meant long hours educating both reps and principals about how to treat each other with respect.
So stay tuned during the next few weeks we are going to explore every facet of the rep-principal relationship and find a way to make it work. Fasten your seatbelt, it’s going to be a bumpy ride. It’s only common sense.