Sales, sles reps copensation policies, strategies.
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    Default Sales, sles reps copensation policies, strategies.

    What type of arrangement can one expect for an (independent) sales rep ?

    Hourly rate, while selling?
    Percentage of sales? ( 3%, 5%, 7% ... ) ?
    Percentage of profits? ( 25% -> 15% -> 0 ) ?
    Percentage increase of profits ?

    All of the above ?
    None of the above ?

    Actual / hypothetical examples?

    Thanks!

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    3t3d,
    Years ago a rep approached me as my home shop was beginning
    to get off the ground. Seemed like a nice deal, he'd get a
    straight 10% off the top and do all the leg work of selling
    my services to large companies. He had a lot of contacts and
    was the dad of a friend of mine. I was young and new to self
    employment. I signed a contract in good faith that he would
    represent me, follow up with the customer and be involved in
    helping me get the best dollar for the machining I could do.
    At first it was great. Some nice work came along and a flood
    of stuff to quote. A couple years latter I stopped by another
    local shop and saw a job I had quoted but didn't get. We talked
    and found out this guy went into plants with the idea of getting
    his cut no matter who got the job. There were several other
    shops in the area and we compared notes to find out we were
    competing with each other via our own sales rep. Needless to
    say this didn't set well. One guy told him he wanted out of the
    contract only to have a lawsuit filed against him. Two guys
    made money on this deal...the rep and his attorney. I quit
    doing all work for any of his contacts. He filed suit against
    me three times under different pretense. It was ugly and pretty
    stressful. Only advice I can offer is BE Careful Be Very
    Careful. I'm sure there a lot of really solid reps out there
    who do a great job and that can benefit both parties. But
    the wolf often shows up looking like a sheep.
    spaeth

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    IDK 3t ....

    I had one guy 20 yrs ago, and he skimmed 10% off the top, but even that is a sliding rule. If he brings you in 1sey/2sey work, he's gunna be needing that 10%. But if he brings in an RFQ for high volume production, neither of you will benefit from it if he tacks on that kind of overhead. That stuff is likely more in the 3% area.

    I haven't had a paid rep in 15 (?) yrs now.

    That whole prospect is a real quagmire... Does he get credit for your existing customers if he calls on them with regularity and deals with any "aw Shiite's"? Will he doo more good than damage? What does the exit wound look like when it's no longer conducive to at least one of you?

    I gave my guy a yrs average severance pay.

    GOOD LUCK finding a working arrangement on this!


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    I am Ox and I approve this h'yah post!

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    And keep in mind (depending on the arrangements, legally binding contract, etc) that if your rep guy decides he's found greener pastures with a different shop, you'd better be protected legally to prevent him from pulling all "his" customers from your place and riding off into the sunset. Maybe even taking some of "your" customers you had before he came along.

    As far as a "right fit" rep person that suits all your requirements, you'll have an easier time finding a woman friend that's smart as a whip, can cook, chop wood, run machines and likes to, welds as a hobby, has her own tools and muscle cars, not high maintenance, and looks like your favorite centerfold model .....all wrapped up in one.

    Best of luck!

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    I am with DK all the way! (Even the lady friend part!)
    Get a pic of the car first tho!

    I have seen exactly what he just said happen near here.
    ... To a shop larger than both of ours together.
    (ok - well - more employees than (all three of) us together, prolly not more shtuff....)


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    I am Ox and I approve this h'yah post!

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    Quote Originally Posted by Ox View Post
    (ok - well - more employees than (all three of) us together, prolly not more shtuff....)
    I am prolly pullin my fair share of weight in the sthuff category....

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    These are often referred to as a Manufacturer's Sales Representative Agreement or that sort of thing. It's a little more intended for someone who is hawking your product out on the road, but a boilerplate MSR agreement could be a good start. This is also important to clearly define the rep as a 1099 contractor rather than an employee.

    The biggest thing is to decide what you really want this guy doing. Is he out there calling on all your accounts, slapping backs and sniffing around for ways to make the client happier, or is he a pure hunter-killer looking to bring completely-new work in the door? That will determine how you want to structure the pay.

    I would also definitely look to include a non-compete agreement of some sort as well as NDA. I agree with the posters above who talked about clearly defining which sales would be eligible for commission. The easiest thing to do would be to include a list of companies (e.g. current clients) who the rep is not permitted to call on, though you may actually want him to work some existing accounts for new/expanded orders.

    Last I would be sure to cover how to sever the agreement and exactly what he gets paid after either side ends it.

    In my experience it is easy to overpay a bad salesperson but the good ones are almost always worth their price. They live deal to deal and want nothing more than to find an account they can count on to put commissions in their pocket month after month and an employer who will deliver what they sell.

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    Quote Originally Posted by dkmc View Post
    And keep in mind (depending on the arrangements, legally binding contract, etc) that if your rep guy decides he's found greener pastures with a different shop, you'd better be protected legally to prevent him from pulling all "his" customers from your place and riding off into the sunset. Maybe even taking some of "your" customers you had before he came along.

    As far as a "right fit" rep person that suits all your requirements, you'll have an easier time finding a woman friend that's smart as a whip, can cook, chop wood, run machines and likes to, welds as a hobby, has her own tools and muscle cars, not high maintenance, and looks like your favorite centerfold model .....all wrapped up in one.

    Best of luck!
    I worked at a place a while back this happened. The sales guy was a full time employee however, not contracted in any way. Well, apparently he started at a certain salary and after about a year the owner decided he wasn't pulling his weight. The owner cut his salary (don't know specifics) and decided he would get some percent commission so if he didn't sell he didn't get paid that much. You can imagine how a guy going from a (I presume) good/fair salary to being commissioned took that. I think he lasted another 6 months or so. When he left he deleted all his files on pc with all the contact info, which included things like who was purchasing, who was engineer, etc at which places. I guess the owner tried to sue him but it got dropped. I'm not sure if he actually filed a suit, or if he had a lawyer send some threatening letters or whatnot. I believe the whole ordeal ended up not only costing us a few customers, but lots of legwork from the owner to visit all these places and try to re-assure them we (the shop) would still provide service, quality, on time deliveries and so forth.

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    Well,
    He was looking for ALL of the Above.
    Had a contact stating such..
    I would not sign it, and told him I would get back. to him.

    Yesterday I showed it to my lawyer.
    She said Never sign something like that.

    My comment to her was contracts were signed under enthusiasm and broken under disillusionment.

    Any good contract needs the escape clauses clearly laid out. Up front.
    Any contract will be ran through the lawyer.
    She also mentioned some other problems that could crop up.

    I am thinking about suggesting a percentage, paid After the customer pays.
    One percentage for the first year, and a lower percentage the second year.
    Per part number or product class...
    Also, something up front for setting up a formal presentation. Didn't have too much trouble with that.

    The sales rep gets the order in the door. But the manufacturer Keeps it in the house.
    Also, I don't get paid a dime unless and Until I get the order, and build a perfect part.
    I don't see a dime for "Effort"

    That line of thinking might be as palatable for someone who sees them self as a "Professional"
    Who expects to be paid for every minute of their time, and someone else to pay for any extra effort.
    Results are never part of the equation.

    OOPS... Just got back from the lawyer... Sorry..

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    Bottom line is: A sales rep usually has a stranglehold on the organization they represent. They are privy to so much information, that they can hold the keys to make or break you.

    Years ago I ran the tooling dept of a small mfg co, with owners 700 miles away. When they bought the existing co, part of the deal was that the former manager would be a 7% commish sales rep. He did very little, except draw commissions on the ongoing production. We had lots of potential customers contacting us, but since he had an exclusive agreement, we had to refer them to him. He seldom even followed up on a lead. Plant was finally closed for lack of work. Lots of good workers became unemployed. I am not a fan of sales reps.

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    No one reading this is or has been a sales rep?
    There must be another side to this besides "reps are blood sucking leaches".
    Bob

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    Quote Originally Posted by CarbideBob View Post
    No one reading this is or has been a sales rep?
    There must be another side to this besides "reps are blood sucking leaches".
    Bob
    I doubt that many reps are actually interested in the machine/manufacturing business. Most I have known simply use us as a way to finance a high lifestyle... If selling cars/boats/real estate, etc offered more $$$, they would jump ship...

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    I'll jump on the band wagon of most sales reps suck. The company I work for has one outside rep and the information that he provides on a new order is hit or miss depending on the day. More than half the orders that he brings in need additional information from the customer that he didn't take the time to collect initially. When it's brought to his attention we (engineering) almost always have to force his hand because he doesn't want to look bad to the customer by asking additional questions. He's also very quick to blame other people for his mistakes or just flat out try to cover them up. Now I don't want to just single this particular person out because we've had several over the past six or seven years with the same or similar issues. From my experience it really seems to be a character trait/flaw with most of them.

    JustAbout

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    I had an independent rep for about 5 yrs. He was a real nice guy. He rep'd for a few different kinds of shops.

    He would get RFQ's from his customers and forward them to the shop that was the best fit for the work.

    If a RFQ came to me, I would quote back to my sales rep. He would submit it to his customer.
    If it became an order, the customer would order directly from me. I would forward a copy of the PO to the sales rep. for his records.

    When the job was done, I'd ship direct to the customer and send a copy of the invoice to the rep.
    When they paid, I paid the rep. His cut was 5%.

    This account became "his" account, so any further work for that customer he got his cut.
    When he retired a few years ago those customers became house accounts. I don't do much work for any of them anymore.

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    Quote Originally Posted by Booze Daily View Post
    I had an independent rep for about 5 yrs. He was a real nice guy. He rep'd for a few different kinds of shops.

    He would get RFQ's from his customers and forward them to the shop that was the best fit for the work.

    If a RFQ came to me, I would quote back to my sales rep. He would submit it to his customer.
    If it became an order, the customer would order directly from me. I would forward a copy of the PO to the sales rep. for his records.

    When the job was done, I'd ship direct to the customer and send a copy of the invoice to the rep.
    When they paid, I paid the rep. His cut was 5%.

    This account became "his" account, so any further work for that customer he got his cut.
    When he retired a few years ago those customers became house accounts. I don't do much work for any of them anymore.
    My shop used to have a couple reps that were similar to this, 5% of the sales from the customers they found, on a repeating basis. They were reps for us on the east coast, from prior to me starting work here full time,
    Then they went quiet, no contact from the rep, customers started paying later and later, rep would not follow up with it. For some reason, no one thought to cut their payments out, or even call and ask them what the deal was, even though they stopped doing work. We ended up paying them several thousand bucks a year for 5 years, and I never even spoke to them. Well.. I put a stop to that!, if they want their paycheck, they should do some work. The rep's haven't seemed to notice, I didn't get any sad emails from them asking where their commission checks were.

    Good riddance.

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    I guess I should also tell about a really good sales rep that works for our packaging provider. This guy is top notch. He's been our rep even though he's switched companies a couple times. He comes in weekly takes an inventory of whats been used and gets with our purchasing agent to issue a PO for replenishment. We're never out of material but we're also not swimming in overstock either. One of the few honest reps that I've personally met and dealt with. So there is a few good ones out there. Just few and far between.

    JustAbout

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    Quote Originally Posted by Mr.Bronze View Post
    My shop used to have a couple reps that were similar to this, 5% of the sales from the customers they found, on a repeating basis. .........
    I do not begin to understand this.
    No way in hell's half acre I rep you for 5% and I would never expect performance from my reps on this tiny slice.
    It makes sense in the big many million automation worlds but not on most stuff.
    10 is entry if you have something special. Job shops need more than this.
    Reps sell what makes them money and have expenses.
    An in house sales force will eat 15% or more of your money easy.
    A rep at 10% who does nothing but bring in lots of quotes is worth it.
    Quoting time, order processing, chasing payments is your job and why you get paid. The rep is your low cost face in front of the customer.
    The rep is a bad guy....piss on that, be a rep and a manufacture.
    Now who do you tell to go take a shit in the woods?

    I hate some of my reps because they make more money than I do. I love them because they make money for me.
    Bob

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    Quote Originally Posted by Mr.Bronze View Post
    My shop used to have a couple reps that were similar to this, 5% of the sales from the customers they found, on a repeating basis. They were reps for us on the east coast, from prior to me starting work here full time,
    Then they went quiet, no contact from the rep, customers started paying later and later, rep would not follow up with it. For some reason, no one thought to cut their payments out, or even call and ask them what the deal was, even though they stopped doing work. We ended up paying them several thousand bucks a year for 5 years, and I never even spoke to them. Well.. I put a stop to that!, if they want their paycheck, they should do some work. The rep's haven't seemed to notice, I didn't get any sad emails from them asking where their commission checks were.

    Good riddance.
    You have to be careful just stopping payments like that, you and them have a legal agreement after all.
    In NYS they could file an Unpaid Wages claim with the labor department in Albany, and you'd be liable for their back wages plus fines and fees from the state.
    I know a guy that found that out the hard way with a rep that did nothing for several months, but filed a claim and was "awarded" $1200 plus several hundred in fines to NYS.
    Nasty shit and no negotiating or telling your (the employers) side of the story. And no telling NYS that the rep is not an employee either.

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    Quote Originally Posted by CarbideBob View Post
    I do not begin to understand this.
    No way in hell's half acre I rep you for 5% and I would never expect performance from my reps on this tiny slice.
    It makes sense in the big many million automation worlds but not on most stuff.
    10 is entry if you have something special. Job shops need more than this.
    Reps sell what makes them money and have expenses.
    An in house sales force will eat 15% or more of your money easy.
    A rep at 10% who does nothing but bring in lots of quotes is worth it.
    Quoting time, order processing, chasing payments is your job and why you get paid. The rep is your low cost face in front of the customer.
    The rep is a bad guy....piss on that, be a rep and a manufacture.
    Now who do you tell to go take a shit in the woods?

    I hate some of my reps because they make more money than I do. I love them because they make money for me.
    Bob
    They were relics from before the internet, where the only way to find out about foundries was through reps like that. They took 5% but they didn't actually do any real "representing" - i.e. active solicitation of the goods we do to new customers. It was more like a 5% finder's fee, because that rep had us in their Rolodex, and a suitable customer asked for a matching service.

    Agreed, if someone was contracted to actually go out and cold call customers, 10% would be a more appropriate fee.
    But these guys did not bring in any new work for 5+ years. In 3 years I never had a single conversation with them prior to cutting them out.


    Quote Originally Posted by dkmc View Post
    You have to be careful just stopping payments like that, you and them have a legal agreement after all.
    In NYS they could file an Unpaid Wages claim with the labor department in Albany, and you'd be liable for their back wages plus fines and fees from the state.
    I know a guy that found that out the hard way with a rep that did nothing for several months, but filed a claim and was "awarded" $1200 plus several hundred in fines to NYS.
    Nasty shit and no negotiating or telling your (the employers) side of the story. And no telling NYS that the rep is not an employee either.
    Going from how there is exactly zero paperwork to confirm that they were actually "contracted" I don't think that this is going to be an issue here. If they have an issue with it, they can bring it to my attention.

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    Quote Originally Posted by Mr.Bronze View Post
    Going from how there is exactly zero paperwork to confirm that they were actually "contracted" I don't think that this is going to be an issue here. If they have an issue with it, they can bring it to my attention.
    Not having ANY paperwork can indeed be an issue.
    In NYS the 'law' is that if there is no paperwork or a signed agreement between rep/employee and employer.....the state sides with the Employee (yes they call them an Employee and you can't argue that). Whatever the "employee" puts down on the Unpaid Wages complaint form.....the state unequivocally believes as fact with NO recourse from the "Employer" to argue otherwise.
    State law in the lawbooks......I saw a copy from the page, as it was sent with the letter from the state labor dept.

    YMMV in your particular state.

    And yes, as far as I can see, I could go to any machine shop in NYS, tell them I am going to represent them as a sales agent for $15/hr and a 40 hour week.
    Does not matter if they agree or not, in several weeks I file the Unpaid Wages claim. There is no paperwork, so the state must believe my story and side with me. If it works differently, I would love to hear the details.


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