Manufacturer's representative, broker and agent are terms used to describe independent sales agents who work on commission. You don't pay them a salary, just a percentage of what they sell. Manufacturer's reps offer a practical, cost-effective alternative to a direct sales force for many growing companies. There are more than a half-million reps in North America, most selling to targeted markets in select geographic regions. Reps know their markets because they call on local buyers regularly and have established working relationships.
Using reps can provide you with many of the benefits of having a satellite office in the location--including knowledge of local markets and rapid access to large accounts--without your incurring large fixed costs. With reps, sales costs are always a fixed percentage of sales. The downside is that reps typically handle many different products. Some may be complementary to yours, while others may compete. A typical manufacturer's rep earns a 5 percent commission on sales, although that amount varies widely depending on the product, market and sales volume.
Telemarketers who contact your customers by phone can provide customer service, answer questions and follow up on previous shipments as well as take orders. One of telemarketers' most useful jobs is generating qualified leads. Because you contact customers using phone numbers, it's easy to track results from a telemarketing effort. You can build your own telemarketing operation in-house or contract with a third-party call center.
Of course, you need not decide to go with only one form of sales force. Many entrepreneurs effectively deploy a mix of inside and outside sales forces, sales reps and telemarketers. The challenge is managing conflicts, including turf wars and cannibalism.
It's never easy to hand over responsibility for an important management job to someone else, but delegating accounts to your sales manager may be the toughest thing you will ever have to do. After all, you've won over these customers. How can you be expected to happily shift the responsibility for servicing them to somebody else? But hiring a sales manager is an important part of your business's growth. It's unreasonable to expect to be able to make a dozen sales calls a day, direct other salespeople and run the company at the same time. Once you hire a sales manager, you'll be able to greatly reduce your sales calls and eliminate managing salespeople, and devote the balance of your time to the jobs you're uniquely qualified to handle, like devising the company's strategy.
A good sales manager has to be able to:
- Oversee salespeople
- Develop sales strategies and plans
- Set targets for the sales team
- Monitor sales performance
- Personally handle key customers
- Prepare sales reports and other reports
- Report directly to you or a superior in marketing
Typically, you'll want a sales manager with experience both selling and managing. Sales managers should be well-versed in the computer or other technical skills required to manage your department and demonstrate your products. He or she should have good leadership and communication skills and have a proven record of growing sales in past positions. If you have a specific problem you want your sales manager to address, such as difficulty reaching larger corporate customers, you will want someone with expertise in that area.
In-House or Outsource?
In these days of outsourcing everything, many companies continue to keep their sales forces in-house. There are plenty of opportunities for having outside salespeople hawk your product, but there are many advantages to keeping the sales function internal.
Inside salespeople work for you as employees so you can expect their full attention and dedication to calling on customers, answering queries and handling problems. Because they work for your company, they should know a good deal about opportunities for cross-selling additional products and services to existing customers when they are placing orders. Since they're on staff for the long haul, you can afford to train them to be knowledgeable and courteous when dealing with customers. Inside salespeople can be shaped the way you want them--to go after large sales or focus on after-sales service--as you and your strategy dictate.
Outside salespeople, such as manufacturer's reps, have one shining quality that distinguishes them from in-house people: They're cheaper. Because you don't have to pay a salary and benefits to third-party salespeople, you can afford more of them. This may allow you to reach more markets and customers than if you were relying solely on the salespeople you can afford to hire as permanent, full-time employees. The problem with outside salespeople is they may be selling similar and even competing products, so you could lose sales.
Dividing Up Territories
A sales territory is a segment of your market that you've assigned to a salesperson or a group of salespeople. While a sales territory is usually described as a geographic area--states west of the Rockies, for instance--it should be thought of as a group of customers and should be serviced with close attention to customer type. Some territories aren't geographical areas--customers over $1 million in annual sales, for example. These "territories" may be assigned to product or account specialists, such as those focusing on large accounts, rather than to the people who would otherwise own them because of their geographical territories.
Few things are as loaded as the assignment and division of sales territories. Salespeople tend to think all the good prospects are in others' territories, while all their best customers have been gerrymandered into someone else's territory. When dividing up territories, you want everyone to feel they got a fair shake, but at the same time, you have to be realistic. You want to match salespeople with territories based on things other than strict equity. For instance, if your salespeople vary widely in talent and energy level, you don't want to give everyone comparable sales territories. It makes sense to divide territories to make the most of everyone's abilities. If a salesperson is great at dealing with midsized accounts, save big prospects for someone who'll do well there. Therefore, the key to good sales territory design is appropriate balance.
As your business grows, so will your need for additional sales personnel. Remember: The more salespeople you have, the more sales you will generate. So don't make the mistake of thinking you can grow your business without growing your sales force--one way or another--right along with it.
Excerpted from Growing Your Business .