Sales Rep Agreement

Hiring an Independent Sales RepThe job of a sales rep is basically to "represent" the manufacturer's, distributor's, or importer's line of products to prospective buyers, and make sales. Those buyers are typically retailers, but may include wholesalers, distributors, or service businesses as well, depending upon the industry and/or product line.

As part of their service, reps call on prospect businesses and present the client's products in a positive light (as a way to solve the buyer's marketing needs). Effective reps must answer product questions intelligently; offer promotional materials, terms and other information; and ask for orders and re-orders in person, or by phone, fax, or email.

Sales reps exist (somewhere) to target virtually every size of retailer from small mom-and-pop stores to large "big box" retailers, including chains. And of course, reps usually specialize in either the product lines they sell, and/or retailer categories they call upon.

In the gift industry, reps want to show profitable standbys, PLUS they need some of the newest, and most attractive or innovative products on the market. (Which benefits you, if your line is new to the market.) When hiring a rep, you become part of a sales machine that was created decades ago, and continues to evolve. Reps maintain the face-to-face contact with retailers, and make it easier for retailers to trust you and try your line (and harder for them to dump your line).

1. Territory: List the geography: regions, states, counties, cities, etc. the rep will service for you.

2. Type (s) of accounts the reps plans, offers, or agrees to call on, such as gift stores, mass market outlets, discount stores, jewelry stores, convenience stores, etc. BE SPECIFIC. Territories can overlap geographically, if there is no or little retailer overlap.

3. EXCLUSIVE Territory: List clearly if you are willing to give your rep an exclusive territory, designated in item 1, above (most reps will require this). Exclusive representation bars you from contracting with any other sales rep to sell in that territory, for those types of accounts listed in item 2, above. If you are honest, you will honor that agreement. Where there is partial overlap with a rep in another territory, you must address this issue. Exclusive might also apply to types of stores, or even specific accounts.

4. House Accounts: Outline how "house accounts" (i.e. your existing customers in their territory), will be treated. Most reps require that you give them up, and pay a commission on all sales to those and all other accounts in the designated territory. Alternatives include:

**You keep some house accounts, and provide a list of those to the rep.
**You give up all the house accounts, also providing a list and a letter of introductions, with the expectation that the rep will call on those accounts within the next 30 to 60 days.
** You offer to give up any house accounts (list provided), once the rep calls on that account, with your enthusiastic letter of introduction, and takes an order. (My recommended option.)

5. Commissions: Agreed upon commission percentages are listed as another line item in the agreement, with specifications as to when and how they are paid. You normally pay the month after the sale, or the month after payment is received. Some areas you need to address, when you make the offer to the rep, include:

**Whether you pay on sales, or when the invoice is paid in full. Payment on sales is often simpler, less bookwork; but upon collection is the industry standard, better for cash flow, and allows for changes to the order or invoice (e.g. stock-outs or damage).
**Commission rates, and any exceptions; bonus rates by category, volume, or promotional; rates for channel partner, e.g. wholesale, distributor, etc.
**How or if commissions are paid when an account is turned over to a collection process. (If you pay on sales, any uncollected accounts are backed out of future commissions.) And do you pay a commission at all on any collected portion.
**What time during the following month, you send a check. Earlier is better of course, to keep the rep motivated%u2026 my best producers usually get me a check by the 5th of the month, 10th at the latest.

6. Terms of sale. You need a section clearly stating the terms that you offer to buyers, so the rep will not offer the retailers alternate terms, and create an awkward situation. This is covered at length in my E-Guide, "The Complete E-Guide for Selling Wholesale to Gift Shops".

7. Samples. What samples you are going to supply to reps (and customers at the request of reps), costs to the rep or buyer, if any, and who retains ownership of the samples if the agreement ends. Usually, rep samples should be returned for up to a year if the agreement is terminated for any reason. After that, samples become the property of the rep, to do with whatever they want. Rarely is it helpful to get samples returned, as they are usually dog-eared and not resalable.

8. Product literature. Clearly spell out what types and volume of sales materials and/or catalogs you are supplying for the rep's sales presentations, and who pays for copies given to prospects. Usually all those are your responsibility. Make sure to allow space for the rep to put their own contact information on your sales literature.

9. Expenses. Independent sales reps are self-employed, so must pay their own expenses for gas, lodging, meals, taxes, and so on. Make sure to say that, so they cannot come back later and claim to be an employee. However, some marketing expenses may be shared, such as trade show expenses or special advertising. Add a line item to your sales agreement to address these potential extra expenses and how costs will be split, if at all.

10. Default or dissolution. Be sure to include a section listing what happens when you no longer wish to retain a sales rep, or they no longer wish to sell for you. Generally, a minimum notice for a period, e.g. 30, 60, or 90 days, is required, or at least a good idea.

11. Changes to the agreement. Make sure to note that the agreement may be altered ONLY by written notification from either party. This stipulation will avoid any confusion over verbal comments or agreements. You can designate specific written formats, e.g. fax, snail mail, or email. If email is OK, make sure to specify that at confirmation is received.

12. Signatures and dates. Designate a spot at the bottom of the agreement for both you and the rep to sign and date the agreement. Be sure to include the effective date of the agreement, if different than the signing date.

NOTE: The sales rep agreement is slightly more complicated when dealing with a rep group, instead of a sole proprietor, because you might need or want to address sub-reps, but the principles are still the same.

Formulating an Independent Sales Rep AgreementA written sales rep agreement is highly recommended. With everything in writing, the parameters of the relationship are clear. Often just talking about what you will do and what they will do is just not enough as important point can be left out or forgotten.

"Good fences make good neighbors" also applies here. With a written agreement, everyone knows where they stand and what is expected of them. If there are any questions, it is all in writing.

Unfortunately, some reps can be notorious for selective hearing, making up their own rules and requiring that you live by them. (Actually, I found that to be true of producers as well!!)

We offered a greatly reduced version of this resource many months ago, but the NEW version is HOT, and now includes:

1. FIVE SAMPLE SALES REP AGREEMENTs!
2. A complete list of US Gift Marts - making it much easier to find reps by geography!
3. Even MORE ways to find sales reps in YOUR industry!
4. A lengthy article on how to manage your independent reps, and help them to help YOU expand your business in 2012!

Here are some of the other informational topics and features of this eGuide:
**What do "sales reps" offer to a producer (like you)?
**What are "rep groups" and "gift marts" and why you should care!
**In-house or "company" vs. "independent" sales reps!
**The nine main ways to find sales reps (and which ONE is absolutely the best)!
**Ten questions to ask EVERY sales rep BEFORE you sign on the dotted line!
**Four personality types of sales reps - a bit humorous! (And which ones to avoid...)
**12 key components of a sales rep agreement!
**Who supplies and/or pays for sales flyers and samples to reps and buyers?
**Developing a good policy on "free samples"!
**What are standard rep commission rates in your industry?
**Terms for canceling a rep agreement!
**Do you pay commissions based on sales or paid invoices?
**What is a typical rep payment schedule?
**How to handle commissions on un-collectable accounts!
**11 big tips on managing reps, from my personal experience!
**Bonus: How to work with DISTRIBUTORS!