Seems like there’s always a catch. Sales are the lifeblood of your business; not the cream in your coffee, but the coffee itself. But hiring a staff of hard-driving, productive salespeople costs big, especially when you’re targeting far-flung locations. If you could offset that cost, you’d be able to put more of what they bring in back into the business, or right into the bank.
The answer for many firms is to use independent sales reps. These outside salespeople work as independent contractors, generally handling about five to seven similar products for different companies.
Because these sales reps aren’t on your staff, you pay them only a commission, and payroll expenses drop. And there are other advantages. Many reps are highly experienced, already have long-standing relationships with potential buyers, and can even give you feedback on everything from packaging to in-store displays. What’s more, they’re especially useful if you’re branching out into a distant territory.
When Robyn Sessler, CEO of Allykatz, in Kennebunkport, Maine, opened shop in 2003 to sell bath and beauty products for kids ages 8 to 12, she decided the best area to focus on was in the South. But that was a long way from the home office. So she hired a sales rep firm that specialized in selling to that region. “We found a way to sell to parts of the country I would never have had the time or money to travel to myself,” Sessler says. Now, most of her revenues come from rep sales.
Still, finding and hiring independent sales reps is no slam dunk. Here are seven tips to finding and hiring the right sales reps for your startup business.
Know where to look
Sales reps sometimes work on their own, other times as part of an agency. In either case, they tend to specialize. So your first step is to pinpoint where you need them to focus. It can involve anything from product category and geographic region, to specific distribution channels (discount chains vs. high-end retailers, for instance). Once you’ve defined that issue, you can start your search in earnest.
Do some research
Begin by doing research online, looking for sales reps with the right expertise. Also, attend trade shows where you’re likely to meet prospective sales reps or other companies able to provide leads – or both. When you have your list together, be prepared to contact many more prospects than you need. Sessler, for example, got in touch with 50 reps, talked to five and ended up with two.
Now do more digging
Knowing a sales rep’s specialty is merely the starting point. Once you have your list of candidates, you also need to investigate a few other key things, starting with their success record. Then, be sure the reps aren’t overloaded, so they won’t be stretched too thin to do their best for you. Repping more than 10 products is probably too many. Also, your prospective sales rep probably spends a lot of time on the road. Investigate whether he or she has adequate staff at their own home office to fall back on if problems arise. That’s especially important if the rep isn’t part of a larger firm.
Take a close look at commissions
Reps get paid anywhere from 2-25 percent of the wholesale price, according to Jerry Leth, membership manager for the Manufacturers’ Agents National Association, in Lake Forest, Calif. The number generally varies not only from industry to industry, but also according to product cost, length of time to make the sale and volume level. “If you’re selling an inexpensive component to a company buying huge quantities, the commission will be lower than if you have a high-cost piece of capital equipment,” Leth says. The end result: you can try to negotiate the commission, but you probably won’t do much better than the norm for your category.
That may mean inviting the sales reps to your office for a day or three, especially if you’re selling a complicated product. For best results, pay their travel costs. If you can’t, then supply them with plenty of marketing materials and demos.
Be impossible to forget
Simply signing some sales reps to sell your product doesn’t mean they’re going to devote full attention to it. “Your job is to make sure you stay top-of-mind,” says Jayne Smith, a sales consultant and author of Creating Competitive Advantage: Think You Know Your Company’s Competitive Advantage? Think Again. That means staying in touch with your reps monthly, even weekly, and doing such things as assigning in-house staff to provide support. And you might think about tying compensation to volume as an incentive.
The biggest downside to hiring sales reps is that, because they aren’t on staff, they’re probably harder to supervise than regular employees. For that reason, you must stay on top of their performance. That means setting expectations ahead of time, and regularly checking with customers for their reactions.
Follow these guidelines and you’re going to do much better than just hiring sales reps and putting them on the beat. But just in case, put an exit clause in their contract, allowing you to say goodbye with 30 days notice. For them, like you, there’s also always a catch.
Anne Field is a StartupNation contributing writer.