Manufacturer's reps (a.k.a sales reps or, simply reps) offer manufacturers an efficient and cost-effective way to sell their products. Reps are independent salespeople who work on commission, i.e., the manufacturer pays them a percentage of what they sell. Contrast this with direct selling in which the manufacturer must carry sales employees' full costs, labor and expenses -- regardless of sales level.

There are sales reps servicing virtually every market in every region of the world. Reps service a specific market in a specific region (e.g., machine shops in southeastern MI, retail gift stores in the Midwest, clothing manufacturers in Europe, etc.).

Their "value-added" is their knowledge of that regional market (typically because they worked it for some time as a sales employee for a manufacturer or another rep firm, before spinning out on their own). They know the buyers in that regional market, call on them regularly, and have built up credibility, or at least a working relationship, with them over time.

Reps represent multiple manufacturers of related product lines. If they're selling to auto repair shops, they'll carry a range of products that those shops buy. Their cost effectiveness arises from (and depends on) their ability to sell multiple products with each sales call.

Reps would like to carry all the best-selling brands that the buyers they call on buy. But they have competition -- other reps calling on the same buyers. So they aggressively pursue all the top brands they can get, and then fill out their lines with the #2, #3, etc., sellers.

At first blush, it would appear that the more lines they carry, the more sales per call they'd make. However, they quickly run into a practical problem -- buyers' limited attention span. The first line pitched will have the buyer's attention, the 2nd a little less, and by the 4th or 5th, it's likely the buyer's eyes will start glassing over. Consequently, most reps carry a limited number of lines -- 10 as a rough rule of thumb.

The Rep and Startups

What does this mean to you as an entrepreneur with a product? First, it means that reps should probably be your first choice for selling -- after you yourself have done, or are doing, everything you can do. Their cost is limited to a percentage of what they sell and, hopefully, you've built that percentage into your price.

Second, you have a difficult selling job to do to convince reps to carry your product. Reps can practically carry only a limited number of lines -- and their first choice is the top-selling lines. Your's isn't -- at least currently.

Worse, yours is typically a one-product line -- the top-sellers are multi-product. As a rep selling toys to toy stores, would you rather represent a manufacturer producing one toy or a complete line of them?

However, reps have a couple of problems that give you an opening. First, competition. If a regional market is under-represented, direct salespeople working that market quickly recognize they can make more money repping it, and do so.

Consequently, there are always new reps trying to get a start -- and they're good candidates for new products.

Second, top-sellers -- to reps' continuing consternation -- have a tendency to go direct. When a manufacturer is paying a rep enough in commissions to afford to replace him with a direct salesperson, they often do.

Consequently, reps can't count on keeping their top-sellers -- they have to continually be on the lookout for lines that may be tomorrow's top-sellers. If you can convince them that your product will become a line, and that that line will become a top-seller, you can get their attention.

Throughout, you can help your own cause with your own selling efforts. It's tough to sell salespeople with sales arguments. They've heard them all -- and used them all. The way to sell salespeople is with results.

Build up sales in your local region to get the attention of a local rep. Then help that rep build them up even more. Then have the rep introduce you to a rep in an adjoining region, and show that rep what the first rep's done locally. And just continue -- the network builds itself.

How do you find that first rep? If you can build sales on your own, he'll find you. Alternatively, ask potential buyers of your product -- who calls on them and who do they like dealing with?

Another source is the rep associations (e.g., the Manufacturers Agents National Association, the Electronics Representatives Association, the North American Industrial Representives Association, etc.).

Another source is the trade associations, typically containing manufacturers, buyers, reps. And the associations' trade shows. Reps attend these shows religiously. They go to meet manufacturers -- to get caught up to date on new and planned developments in existing lines -- and to find new lines.

Yet another source is the trade journals. Reps often place classifieds in these journals looking for lines. Or you can place a classified looking for reps.

The Rep Agreement

Business with reps is done under an agreement. The agreement specifies that the rep is an independent contractor, and not an agent or employee of the company. Reps don't take title in the goods -- that's the basic difference between a "rep" and a "distributor".

The other essentials of the agreement are the commission rate, the territory and the termination provisions. These terms vary widely by market -- less by region. For a given market, they tend to follow prevailing practice -- which you can learn by talking with several reps.

The agreement will typically specify that the rep receives commission on sales into the territory, whether or not the order came through them, e.g., even if a customer justs sees your ad and calls you with an order. It's considered too difficult -- and unproductive -- to try to analyze the source of each order -- plus the rep is expected to thence service that customer.

If different parts of the sales can occur in different territories -- prevalent in industrial sales, i.e., the order may be placed in one territory, the goods shipped to another, and payment made from a third -- the agreement should specify how the commission should be split among those territories.

The most important section of the agreement -- and true of most agreements -- is the termination provision. The difficulty of negotiating an agreement increases exponentially with the difficulty of terminating it. No one wants to be locked into an agreement that isn't working. Fortunately, a thirty-day termination provision is not unusual in rep agreements, i.e., either party can terminate the agreement (without cause) with 30 days notice.

For markets that have a long incubation period, e.g., OEM sales to automotive manufacturers, the rep will want protection against cancellation just before sales from his efforts result. This may take the form of an extended termination -- but it may also take the form of reserving his commission on those sales after termination.

This applies also to startups. If there are no current sales in the territory, and the rep is expected to develop them, the rep will want some protection for commission resulting from his early bird-dogging efforts.