Curious to know if anyone has experience in creating an outside sales agreement. We're a very highend architectural millwork/cabinetry company. We want to pay an independent contractor 5% of sales he brings to us. He thinks this agreement should be for life. That is, he wants to be paid 5% of all the business we get from the client he brings us FOREVER, whether or not he has any actual involvement on the individual sale. This seems crazy to me. Does anyone know what is standard out there for this kind of thing? Our potential salesman's contact list is very impressive but don't think it's very realistic to have a contract with no time limits. Any opinions?
Craig,
Don't do it. The contract can be whatever the two parties agree upon. What you are saying is that you don't agree with the terms. These terms seem like a good way for a salesman to set themselves up for a nice paycheck after seting up a few major costomer relationships regardless of what their involvement is after the initial sale. I would sugest an evaluation of the existing sales force, impliment training to improve what you have, and making changes as needed. Let this guy go his own way.
First! If you plan to employ independent reps, consider joining MANA. A well balanced, even handed organisation that promotes strong business relationships.
Next; and the law may prevail and support, a sales agreement may be terminated by either party on 30 days writen notice. There are those that preach that longer relationships require longer severence notices but these are usually industry specific and may be negotiated away.
House accounts and non excluse territories are counter productive. This should peak your interest and enforce a visit with a MANA representative.
Whether you enter into an agreement like this is definitely a T&C question. If the rep is offering to do initial sales groundwork, then the terms end at the sale to the customer that meets predefined criteria (price, volume, manufacturability, contract negotiation, etc). There are two forms of sales rep, and they don't behave the same way: The "Hunter" and the "Gardener". The hunter finds new business and convinces a customer to buy something. The Gardener cultivates relationships and builds a future channel of activity. How you partner with a marketing/sales firm depends on the outsourcing model you choose (either, or both). If you have an internal account management team, and are looking to use an external firm for creating, tracking, qualifying, and closing new business, then your contract should be explicit about defining the end of a sale. (How pricing is set, how leads are qualified, and how the vendor is rewarded will determine the level of quality you get from the sales cycle). In either case, the terms define the relationship and expectations so a partnership can work. If the rep is a hunter/gardener firm, then they would be expected to maintain a high level of customer satisfaction and grow the business in exchange for part of on-going revenue. Terms should reflect and compensate for services according to the return (hunters may make more on closing new business, while gardeners get a continuous stream for keeping and growing volume from good customers).
Some examples: Car Sales: Rep is a hunter (sale is viewed as a one-time event, gardening is picked up by service team) Insurance Sales: Rep is a Hunter/Gardener (usually) Mfg Rep: Rep usually represents a line, and acts as hunter and gardener (manufacturer outsources sales function) Lead firms: These are hunters, but usually end at qualification, someone else closes and maintains.
It seems crazy to me that you would not protect the salesman. It is the salesmen that brought in the account he should be compensated always. This is called an exclusive contract. Why to you object to paying 5% to a salesman when his account is bringing in more business?
This is business that you did not have, business you were not able to get on your own.
Perhaps you have not been in our industry that l
ong, we have always used independent reps and as far as compensation goes 5% is a little cheap, 10% is our rate.
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