How to: Select a Sales Agency

Structure Your Selection for Success

By: Justin Lacaillade, Northwestern Kellogg School MBA '18

Looking to accelerate sales of your startup's products? Need to scale back your direct sales team and shift to an indirect sales model? Maybe you need to rapidly scale your sales team to tap into adjacent markets where your team doesn't have industry contacts. You may need to consider hiring a manufacturers' representative firm. But where to begin? What makes a good rep firm, and what should your considerations be?

Over a 14-year career working in the construction materials markets, I’ve had a lot of exposure to manufacturers’ representatives. First as a customer service representative filling their orders and trouble shooting projects, later as a product manager and sales rep training their sales teams and riding along with their sales reps, and eventually as a sales leader working with agency principals to fashion strategies, assess them, fire and hire them. As a sales leader, I’ve fired two manufacturers’ rep agencies, hired six, and managed thirty-five at any given time. With the benefit of experience and reflection, I’ve identified a number of factors that are important to keep in mind when hiring a new manufacturers’ rep agency to represent your company in a new territory. If you’re seeking to augment your existing distribution sales team, seeking to shift strategies from an in-house staff to outside sales agency model, or seeking to scale up your outside sales efforts for a new venture, here are some thoughts to frame your approach as you get started. Do with them what you will.

It is important to approach the process as you would the recruitment of a new sales representative. Once you have hired the agency, you should treat them with the same respect, consideration, and level of communication you would your own employees, but always remember, they are NOT your employees. Independent manufacturers’ representatives are just that, INDEPENDENT. They run their own businesses, have their own overhead, payroll, and work on commission. Rep agencies have a lot of products to sell, and unless your line is paying very rich commissions, is a significant portion of their volume, or is a key line that brings other manufacturers to the line card or a foot in the door on every project, they have a lot of different products they need to sell and are probably not as focused on you as you would have them in a perfect world. The sooner you realize this aspect of your manufacturers’ rep agencies business, the sooner you will understand how rep firms and manufacturers effectively work together in the market and key factors you should keep in mind to select for success.

The first thing to do when selecting an agency for a given geography is to get an understanding of your options. Who are the manufacturers reps in the geography in question? Once you’ve identified who the manufacturers reps are in a given territory you should create a framework to determine who you want to interview to determine if you will hire them. The high-level items you will want to consider are;

• How many outside sales reps does the agent have on staff?

o  What is the quality of their sales staff? Do you want them representing you in the market?

o  Who are they calling on and what is their expertise?

• How many inside sales and customer service representatives do they have on staff?
• What does the agency do annually in revenue?      

o  How relevant will you be to them relative to their other lines?

o  Are they financially sound? Can they take a punch?

• What are the other lines that the agency represents?

o  Are they complementary? Do they help the agent complete a package on projects and make sense to talk about together?

o  Is one of the lines a labor or time intensive line?

o  Can you get a sense of the other brands’ commissions? How much juice for the squeeze do they get from their efforts on other lines vs. yours?

• Are they a stocking agent?

o  Do they have floor space and capabilities for you to maintain in market inventory?

o  Is there foot traffic being driven to their warehouse from distribution partners

• Who do they have strong relationships with in the market?

o  Contractors

o  Distributors

o  Architects and Engineers

o  What is their reputation?

• What specialties to they have or what capabilities set them apart from the competition?

I’ve provided an example chart to populate a one-page decision document below. When you have answers to these questions and all of this information filled out on one or two pages you will get a pretty good high-level view of the puts and takes of each agency and how they compare to each other to prioritize who you wish to interview. 

After compiling your list of the top three or four potential agents, you or your staff should contact the agency and be very up front about your intentions. Inform them that you are evaluating agents in the market and you would like to meet to determine their interest and assess whether or not there is mutual fit. I typically try to schedule and coordinate agency interviews back to back to back for a week that I am in the geography to ensure I’m getting a sense of all the potential candidates while the process is still fresh and as much as possible to limit primacy and recency biases respectively. Once you’ve conducted the interviews with and gotten a sense of each agency’s style and competencies you can reflect on your priorities, strategic imperatives and their responses vis-à-vis your strategy to determine fit with your market objectives. What did you discover about their competencies? Do they have relationships with the market players you are hoping to grow with? Are they especially good at distribution sales? Do they have the skillsets necessary to augment your specification sales strategy? Once, you’ve identified which agency most closely addresses your concerns and checks the majority of your critical to quality boxes, you can begin to structure an offer and the terms and conditions of a contract.

As the man on the c-note so sagely advised, “failing to plan is planning to fail.” (Ben Franklin) Hopefully this article gives you a solid framework to build an A+ plan to identify the manufacturers’ representative agency that augments your team and is capable of executing your strategy in the market place.