Manufacturer Representation Defined.
What is a Manufacturer Representative? Known by a few names, rep firm, manufacturers rep, and sales agency, these are commission-based, independent contractors working on your behalf under their brand within a geographic area. Typically specializing in a few industries where they’ve developed relationships.
Many industries utilize Manufacturer Representatives as an extension of their direct sales organization.
These agents are relationship-focused salespeople, typically earning between 5% to 10 % commission rates on everything sold within a geographic region (referred to as run-rate) as their income source versus a salary plus commission like a direct salesperson.
How can you tell if a Manufacturer Representative is right for your company?
If you’re an established company wanting to;
- Expand your footprint; since increasing headcount is often not the best way to grow revenue, especially in underdeveloped regions, Manufacturer Representatives can provide the needed ” increased coverage” without necessitating the overhead of bringing on a direct employee.
- Penetrate a new market. Having the resources necessary to focus on a new market will consume a lot of time and energy. Manufacturer Representatives typically have relationships within those markets and can quickly provide an advantage.
If you’re a start-up wanting to;
- Increase exposure, sales, and partnerships. Similarly, hiring salespeople in-house typically results in smaller teams working in larger regions. Therefore, augmenting your direct team with Manufacturer Representatives provides a synergistic pipeline. However, without run-rate, expect to pay a Market Development Fee (MDF) until the territory can sustain itself.
How are Manufacturer Representatives paid?
Payment is probably the most challenging item for most companies looking at hiring Manufacturer Representatives, but here’s how it works and why.
As mentioned earlier, Manufacturer Representatives are commission-based independent contractors, which means they do not receive an employee compensation package, salary, benefits, health insurance, etc.
However, that means that commission is paid on everything sold within the assigned territory (excluding named accounts). Yes, that means if a sale did not originate from your representative, you still pay them a commission.
Many companies struggle with this, but here are some important things to remember;
- Manufacturer Representatives are focused on building overall business to increase run-rate, not tracking individual sales.
- Territory-based selling versus account-based selling allows the salespeople at the agency the confidence needed to introduce relationships to your brand. Requiring your partner to pinpoint every account and opportunity not only slows them down, but inevitably, commissions will be missed, creating friction and prompting them to focus elsewhere.
- As long as your company is committed to a long-term partnership, the agency’s and the region’s growth are intrinsically tied. When revenue grows, the agency can reinvest into increasing headcount, marketing, and sales initiatives that directly benefit you.
While Manufacturer Representation has been around for many years, agencies must adapt to modern sales and marketing paradigms and provide your company with more than a body in a territory.
For example, Wave invested in technology partnerships that make us much more effective at prospecting, tracking projects and keeping our channel partners informed about our client’s products and events.
What are common mistakes when dealing with Manufacturer Representatives?
- Manufacturer Representation is a fractional selling model, meaning your reps will be working with other businesses, so if you want dedicated salespeople, you’ll want to choose Channel Development Representatives.
- Although a manufacturer representative is engaged in many of the same endeavors as your direct hires, they aren’t employees, so avoid requiring activities that can jeopardize their legal status as independent contractors.
- Having accessible online training is a great way to help your rep firm understand your product’s strengths and advantages over competitors.
- When working together, sharing internal sales numbers, challenges, and new product roadmaps are essential to success. You want to equip them with the same level of information as your direct salespeople to be successful.
- Marketing Support. While marketing can be a challenge for start-ups, don’t expect your rep firm to be successful without building your brand awareness within the territory.
- If you’re looking to target end-users versus channel partners, dedicated Sales Development Representatives would be a better choice.
What Is a Manufacturer Representative?
Download this Datasheet to learn more about Manufacturer Representatives and how they can provide your company with a massive boost in new business and help your salespeople address a larger segment of channel partners.
Please contact Wave at 858-252-2880 or connect through our chatbot for more information on our sales and software services. Thank you for your interest in learning more about Manufacturer Representatives!