Issue: November 2011

House Accounts are the Pre-Nuptial Agreements of Rep-Principal Relationships

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House accounts are the pre-nuptial agreements of rep-principal relationships. To a rep, the announcement that a proposed rep relationship is contingent upon the rep accepting house accounts is just as welcome as the announcement to a prospective spouse that a proposal of marriage is contingent on a pre-nuptial agreement.

What the rep hears: “All or part of what was mine before our relationship began stays mine — I will only share freely what comes to us jointly after our relationship begins.”

What the rep thinks: “It’s not fair that a principal can hold back assets from our relationship when I cannot. After all, once I introduce my customers to the principal and the principal’s products, those customer relationships become a shared asset, an asset likely to continue to be shared even if our rep-principal relationship were to end. When I’m asked to sign a rep agreement with house accounts, the principal gets access to all of my customers, but I don’t get access to all of the principal’s customers. How is that fair?

When a rep-principal relationship begins with the principal withholding customers it is only natural for the rep to reciprocate by withholding as much customer information as possible. From such an inauspicious, arm’s-length beginning, such rep-principal relationships face a real uphill struggle to become trusting, collaborative and productive.

Before encumbering a new rep relationship with that kind of relationship baggage, the principal really needs to ask:

  • Am I withholding these house accounts because some of my accounts are just too big to turn over? Then work with the new rep to find a mutually agreeable, less-than-full-commission win-win arrangement to service those accounts economically but fairly.
  • Am I withholding these house accounts because low margins simply leave no room for a rep? Then have a candid conversation with the rep about those margins. Perhaps the rep can assume some of the cost-creating activities associated with the account and settle on a fixed-fee agreement instead of a percentage of sales.
  • Am I withholding these house accounts because I am taking a flyer on a rep company that I don’t know enough about to trust with my existing accounts? If you don’t know enough about a rep to entrust that rep with existing customers, then pause the hiring process while you conduct your due diligence and only hire this rep after you are confident that he or she is worthy of your trust.

To principals who complain about the high cost of performing thorough due diligence, I agree that hiring the right rep is time-consuming and expensive. In fact, the only thing more time-consuming and expensive than conducting the due diligence to hire the right rep is failing to complete the due diligence and hiring the wrong rep over and over and over again.

Successfully Dealing with House Accounts

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Don’t have house accounts unless there are genuine and compelling reasons for them. Have this understood up front.

Those sound like words to live by and, in fact, many reps and principals have lived by them since they first appeared in Agency Sales close to 30 years ago. That doesn’t mean house accounts have gone away or that reps have successfully discovered some sort of magic formula instructing them how to live happily with them.

What is clear, however, is that the presence of communication, trust and a well-crafted contract between principal and rep would appear to diminish concerns with … Read the rest

“We Have House Accounts”

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That dreaded phrase you hear on the initial contact with a prospective principal. How do you handle it? What do you say? Do you go on with the negotiations or end the conversation? What questions should you ask? How persistent should you be? Do you try to sell the prospective principal on how a manufacturers’ representative can benefit his company at this account?

These are just a few of the many questions that go through your mind when this potentially negative phrase “We have house accounts” comes up in the negotiations with a prospective principal. Reps have as many answers … Read the rest

New York Rep Commission Statute Stands the Test

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Kudos are in order for an Upstate New York rep, his attorney and MANA for their combined efforts to protect reps’ commissions in that state.

The scenario in this case began unfolding in 2005 when the prin- cipal’s (a high-end plastic injection molder) ownership put in place new management.

“The new management decided they were going to do things differently,” explains Mike Charland, president, Liebel & Merle Sales, Inc., Rochester, New York. “We had been on board with this company for about 2½ years. From the beginning this company had turned over a little bit of business to us but … Read the rest

That Middle Position… When in Doubt Blame the Rep!

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We aren’t paranoid, we just know they are out to get us.

While out on the road with a very good rep who is building a new business, a great example jumped up and hit us in the face. During the day an irate distributor customer contacted the salesman. He was furious because of the way the rep had handled a problem with one of the distributor’s customers.

According to the distributor, the salesman had committed an unforgivable sin by sending the distributor’s customer to a competing wholesale source to meet an urgent need.
What happened? The end-user customer had … Read the rest

What We Learn from the Best Salespeople

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Do great B2B salespeople, regardless of what they sell, have any practices in common? In other words, do the best salespeople all sell the same way?

A number of years ago, a professional association attempted to answer that question. They studied superstar salespeople from a wide variety of industries and concluded: Yes!

In fact, the best salespeople excel at the same things. Here are the top practices of the very best salespeople:

  • They see the situation from the customer’s point of view.
  • They ask better questions.
  • They listen more constructively.
  • They are obsessed with time management.
  • They conclude bigger deals.
… Read the rest

Avoiding Merger Pitfalls

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Mergers are attempts to pool strengths and eventually drive costs down to improve competitive positioning. Normally envisioned as a way to ensure survival, mergers often lead to demise. Failure rates for mergers and acquisitions run from 50 percent to 80 percent, depending upon the author and the criteria used to define “success.” Given the huge financial risks involved in mergers and acquisitions, it is important to find ways to improve the odds. One root cause of failed mergers is top leaders focusing too much energy on the mechanical and financial aspects of the consolidation and not enough on the cultural … Read the rest

Resources for Learning About Your Customers and Competitors

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Whether you’re starting a business, introducing new products or services, or adding locations, it’s always a good idea to first do your research. Informed decisions make the best decisions, and — especially when credit is tight — we often need to show that we have a solid understanding of our target markets.

Unfortunately, neither your customers nor your competitors make up one homogeneous group. What motivates people and businesses can vary depending upon the places where they operate, live, or work. That’s why it’s a good idea to incorporate into your research some business and market information about places, including … Read the rest

Success Can Be Found in Waging Peace

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Before my next meeting with the chairman, I asked and received permission to speak with some of his company presidents and top sales managers.  It was important for me to hear what they thought was the gap between the customer satisfaction rating of “7”and “10.”

The phone calls were lengthy—some lasted two hours.  I spoke with five top-performing presidents and three sales managers where the customer satisfaction scores were at least a “7.”  All interviews revealed the same answer.  Everyone believed that it was unrealistic to ever close the gap between “7” and “10.”  In their minds there would always … Read the rest

Accountability Increases Ability

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“Are you working hard or hardly working?”

This question often gets a chuckle. Unfortunately, it’s less humorous as it has become increasingly more difficult to find hard-working help. Many employers are challenged daily by the frustration of lackadaisical attitudes of their personnel, which is seemingly contagious and complicated by the expense of constant turnover.

One corporation in particular was crippled with what could be called a stress-leave epidemic. It began when one sales executive complained to their human resources department that they were under too much pressure to reach their sales goals and consequently their doctor recommended they take … Read the rest

Getting Reps To Respond

A principal presented the following dilemma:

“After trade shows we often send out an Excel spreadsheet requesting that the rep fill in certain fields (date and a few notes) to keep us aware of lead follow-up. Sometimes the reps respond; often they do not. We’re now planning to ask reps to also keep us aware of follow-up of non-trade show leads via a separate spreadsheet that we’ll format and send. What can we do better to encourage our reps to complete these items?”

As presented, this was a subject for discussion that reps warmed to immediately. For instance:

• “I … Read the rest

Social Media as a Negotiating Tool

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Social media has blown onto the scene the last couple of years with the popular websites of Facebook, Linkedin, Twitter and many others. Nobody can tell for sure what social media will look like five years from now, but what everyone can agree upon is that the concept of using the Internet to socially communicate is not going away.

For salespeople, an important question is: “Can social media help in negotiating?”

My answer is, “Yes, it can.” I’m not saying you should directly negotiate with another person by way of a social media (although I suppose there might be exceptions … Read the rest

Know Your Rights: And Obligations

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The playing field between manufacturers and their independent sales representatives has been — and continues to be in many cases — patently uneven. In order to level the playing field, many states have passed specific laws protecting sales representatives from heavy-handed manufacturers. As of 2007, 38 of the 50 United States had laws on the books providing special rules for a non-salaried independent sales representative doing business with manufacturers (condolences to Alaska, Delaware, Hawaii, Idaho, Montana, Nevada, North Dakota, Rhode Island, South Dakota, Vermont, West Virginia and Wyoming).

Not surprisingly, each state’s laws are different and specific to the actions

… Read the rest

Recent Budget Crisis Creating Economic Anxiety

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This year’s budget crisis catapulted us into stock market turmoil and reaffirms the consequences of ignoring Sir Francis Bacon’s 400-year old words, “The only thing we have to fear is fear itself.” Those sage words were echoed during FDR’s inaugural speech and still ring true today. We clearly see how the fear of future failures and potential losses drives down expectations so we operate from a place of weakness instead of strength. It’s the proverbial bogeyman in the closet.  The more we focus on him, the bigger and more ferocious he gets!

So how can we as individuals move beyond … Read the rest

Protect Your Pension

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The Pension Protection Act of 2006 (PPA) turns five years old this year.  As companies rush to shore up pensions or cancel underfunded plans, you need to protect yourself from common pension mistakes. PPA was designed to close loopholes in the pension system and addresses problems for the roughly 34 million Americans covered by traditional pensions known as defined-benefit plans.

PPA requires pensions be fully funded by 2015. It also prevents companies with big pension deficits to skip annual contributions and still pronounce their plans healthy. Another major goal of the bill was to shore up the health of the … Read the rest