It’s time to address the elephant in the room: What will we do about sales reps?
Having sales reps in our business—as in all other industries—is not working. Not only that, but the situation is also getting worse. The gap between reps and their principals is so large that it’s hard to believe we can close it.
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 without a retainer. There is something about a rep getting a retainer that flusters the principal so much; they’re angry every time they write that retainer check. The reps, for some reason, don’t seem to perform as well when they get a retainer. In my experience, every time I’ve convinced a client to pay a retainer, something goes wrong.
From the rep’s point of view, things look worse than ever. No matter how hard they work, it can be almost a year before they get paid for their efforts. Think about how long it takes for them to get their principal qualified at a customer—even if it’s a customer that the rep has known for years. There is the qualification process, the plant visit, the survey, and the sample lot. Then there is the first quote, the order, and the lead time it takes to build that order. At minimum, it’s 90 days before the principal gets paid and then at least 30 days later before the rep finally gets paid. From when the rep starts the process to when they get paid can easily be 10 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 must change. Both sides must give a little if this way of doing business will survive to see another day.
For the next few weeks, I will attempt to solve this problem. I will dedicate myself and this column to finding a better and more productive way to make the rep-principal relationship work.
Because I have been working with reps for many years, I want to share a story of my own that I believe demonstrates how a good rep-principal relationship can work and, unfortunately, how it can be destroyed.
In 1977, I was a 27-year-old national sales manager at a division of Rockwell International in Maine. I managed a sales force of both direct and independent sales professionals. My first year was extremely successful. Under my management, the company’s top line grew from about $7 million to more than $12 million. Naturally, I was very proud of this, but I didn’t do it alone. 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 it would be “smarter” to let them go and keep the money.
That was my first exposure to the shortsightedness of corporate accounting. I spent the next few weeks firing all our sales reps, destroying everything we had built, and learning firsthand what not to do for the good of a company.
The next year was an unmitigated disaster. Sales plummeted to under $10 million and our numbers sank. During the year-end report, the accountant admitted that sales had dropped by $2 million. Instead of the profit we made the year before, we had lost money.
Frustrated, I said, “This is terrific, isn’t it?” Looking at me like I had two heads, he asked what the heck I was talking about. I smiled and said, “Just 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.
It’s been more than 40 years, and 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 sides about how to treat each other with respect.
So, stay tuned during the next few weeks as we explore every facet of the rep-principal relationship and find a way to make it work. Fasten your seat belt, it’s going to be a bumpy ride.
It’s only common sense.
Dan Beaulieu is president of D.B. Management Group.