Q&As: About Independent Sales Reps

Q: Do I have to pay independent representatives commissions on sales to wholesalers?

A: Independent representatives are traditionally paid a commission on every sale in their territory. In some industries, commissions on wholesale accounts may be less than those on retail accounts. They can be as much as half the retail rate.

Q: Can I keep the established accounts for myself?

A: No! Especially with a relatively new or small firm, an independent representative will almost always insist on having the opportunity to make presentations to and commissions on all of the accounts in his or her territory.

Q: How can I best use a limited budget to support my representatives?

A: The first thing you should spend money on is product samples, a very simple flyer, and an order form. Also have a part of your website reserved for your independent reps listing all the support information they require. I might also include success stories there that other reps are having with the products.

Then fly standby, hitchhike, walk, or crawl to one sales meeting each year in order to make a personal presentation. If the independent representatives in your industry each have sales meetings in different cities at different times of the year, then try to gather them all together during a national convention or trade show for a presentation.

Q: What should I say at the sales meeting?

A: Tell your reps how much you like them and briefly recap recent sales success stories. Make a presentation of the strongest new and current products or services you offer. Most important, develop a one-sentence sell line, or “sales handle,” for your independent reps that will help them interest clients in your product. It should be something simple that features the benefits of your product or service: “the lightest and most portable . . .” or “warrantied to be trouble-free . . .” Remember, the representatives only have a few minutes to present your line to their customers. Give them a sales pitch they can really use, not a long-winded product history!

Q: When should I switch to salaried representatives?

A: I’d be very hesitant about switching to salaried representatives. Don’t just switch because your sales have grown to the point where commissions equal what you would pay in salaries to salaried representatives. There are big hidden costs, such as your time, or the salary of a sales manager to manage an in-house sales force, as well as travel expenses, turnover, and potentially lost sales when one or more territories are left unstaffed, as often happens with newly established sales forces.

About Bob Adams

Bob Adams is a Harvard MBA serial entrepreneur. He has started over a dozen businesses including one that he launched with $1500 and sold for $40 million. He has written 17 books and created 52 online courses for entrepreneurs. Bob also founded BusinessTown, the go-to learning platform for starting and running a business.