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April 2003
Establishing a Rep Firm — Start-up Costs
Part 4
by Robert Blanding, N.E. “Mac” MacGregor and Brad Starr, CPMR
Some Advice and Recommendations
The best advice is to run lean and mean! Minimize expenses, but don’t run so leanly that you fail to appear (and be) professional. To survive, you must watch your expenses and keep fixed costs low. Here
are some start-up ideas to consider:
- Use a shared office facility with good secretarial services and an available conference room ... or ... consider establishing a virtual office. (Remember the advice from a previous article about the problems to
be avoided in a home office.) With today’s technology, you may find you can run your business and keep up with all types of communications from almost anywhere.
- Keep up-to-date on new technology, and use it to improve your communications capabilities and lower your costs. Invest in sales automation software that includes an opportunity tracking function. Use the
Internet and the information available on web sites (your principals’ and others) to operate more efficiently and to continually update your knowledge.
- Whenever possible, lease high-priced equipment, and ask your accountant about the pros and cons of leasing your car(s).
- Give a part of the business to your employees. It will motivate them to help the business grow, and you may help keep salaries lower. Another caution: If you pay poorly, you will have to resort to hiring either
poor people or rookies. Young, enthusiastic people can be a plus, but adding at least one “gray hair” with experience to the staff can provide you with in-house coaching for other employees.
- Before you establish compensation plans for your employees, review the various options available so you select the plan(s) that will serve your firm best.
- Make expeditious use of the telephone and e-mail. Many reps are giving up their land lines and now using cellular phones exclusively.
- Plan your territory travel wisely. Don’t criss-cross the countryside just to be responsive. If you ask, a day or two delay is often satisfactory to the customer or prospect.
- Invest in a time management course and use what you learn.
- Plan your work and work your plan.
- Use entertainment wisely. If you wish, you can arrange meetings so that you won’t be obligated to buy meals. When your business grows and becomes profitable, you can use this selling tool more extensively.
Start-Up Expense Items
Your minimum start-up cost categories, excluding salaries, benefits and other items related to employees, will include expenditures for office and administration; company image; automobile; legal and
accounting; plus dues and fees.
Office and administration
expense items can include: furniture; telephone(s) purchase and installation; voice mail service; personal computer hardware and software; a facsimile machine (or a fax card for your computer) and a copier (or a combination unit with a scanner and computer printer included); filing cabinets (do it — be organized); shelving for product literature, etc.; test equipment (industry-dependent); a postage meter; post office box rental (if you choose this option); and a bulk mailing permit (depending on anticipated volume). Other options to consider include a personal digital assistant (PDA) and compact disk (CD) burner. Don’t forget to figure in the cost of any training needed for you (and your employees) to use your new equipment and software.
To establish your company image, you should also budget for graphic arts design services and production of letterhead and envelopes, business cards, line cards, stickers (for principals’ brochures),
company resumes/brochures and folders for literature. With current computer printers, you can produce many or most of these items in-house, but you elect to have some items produced by a printing company. Your
purchase or lease of an automobile for business use should be an example of moderation — in price and size.
In seeking legal and accounting
services, ask other representatives and/or your trade association for referrals. Look for professionals who know and understand the representative business as well as the complexities of establishing one. Make it clear that you are a start-up and do not have significant resources. Some accountants and lawyers will take the chance that you will bring them future business and so will not charge major fees for business start-up requirements.
Your planned expenses for dues and fees
should include banking fees (checking, loan interest, etc.), insurance, trade association dues, local business organization dues, publication subscriptions and local trade show expenses (ask your principals to supply equipment and even share booth rental costs).
This article, the last of a four-part series, is reprinted from the MANA/MRERF (Manufacturers’ Representatives Educational Research Foundation) Operations Manual for Manufacturers’ Representative Firms,
which will be made available for purchase on CD-ROM in spring 2003.
Click here for information on a great deal on the Research Bulletin and Special Report series.
Learning From Agency Beginnings
Part 3
Making an Impact on the Market
When Jonathan Ward, Jonathan Ward Associates, Atlanta, Georgia, opened his doors last year, his initial thoughts zeroed in on the typical business marketing considerations. “By that, I mean conducting the
sniperlike pursuit of market objectives,” he explains. “In order to achieve that objective, I have to answer the question ‘How do I allocate my time and ability in the marketplace to achieve the most synergistic
effect allowing me to make the most money over the next 20 years?’”
Sounds simple enough, doesn’t it? As a matter of fact, those few words probably represent the plans and dreams of most reps today.
To achieve his goal, Ward explains that he’s networking, contacting past and present business friends and acquaintances — and he’s joined MANA. On the latter point, he emphasizes that through a business
acquaintance he learned about the association “which was the obvious organization for me to join. Almost immediately I received word of an Atlanta Networking Chapter meeting. I attended, and that was an extremely
positive experience.”
Ward adds that since he’s just opened his rep doors, he’s yet to sign on with his first principal, but he’s been persuaded that becoming a rep is a good move. “I had been doing marketing consulting and
communication work for a variety of companies for more than 20 years. Finally it dawned on me that I didn’t feel like there was a closed loop to what I was doing. You work just as hard getting new clients and
customers and you follow that with hard work on their projects and you get paid. But it seemed to me that there was more I could provide to customers. Hence, since I view myself as an entrepreneur, the move to
becoming a rep was a natural.”
In addition to networking and keeping in touch with business contacts, Ward also uses his web site (www.jonathanward.com) to attract “suspects and prospects” and communicate the products and services he
works on.
Beginning Again
Jim Cotton, Atlanta, Georgia, has a bit of a different story to tell as he relates how he “reopened” or began his rep career again. According to Cotton, “I had been working as rep since 1983. However, in
1996, I foolishly allowed myself to be hired by a Fortune 100 company. What I didn’t realize when I took that position was that you weren’t supposed to do your best to do your job. In the course of two years, I
increased sales by 40%.” After those two years, Cotton went back to rep life and reconstituted his agency under a different name in 1998. Cotton’s original agency name was James Cotton Assocs. As reconstituted, it
is named PanAmerican Resource Group, Ltd., to more aptly represent Cotton’s interest in international business.
Although his beginning-again task had some similarities to a startup, it was also different. “When you close your agency after working with principals for 15 years or more, you make sure you let all of
them know well in advance when closing your doors. The problem occurred when I went back to being a rep. I did so with absolutely no principals, and no leads on principals, and naturally no customers.” That’s the
position he finds himself in today. “Bottom line, I’m new at it again.”
One of the first hurdles Cotton identified was that of getting lines. “I’m working in the area of industrial equipment/construction. So far I’ve been working closely with MANA* and an independent placement
outfit that locates principals for reps.”
Finding principals and obviously customers remain the biggest concerns for Cotton. “To locate qualified manufacturers — manufacturers you want to do business with — first you’ve got to find them, and then
make your qualifications known to them. There are always any number of manufacturers that want you to conduct pioneering work (at no cost) for them. One thing I keep in mind, however, is that the pioneers were the
guys who generally wound up with arrows in their backs. Manufacturers and certainly reps have to keep in mind that there’s a cost associated with any kind of activity. It’s important for the rep to be compensated
for the work he conducts.”
This is the final article in a three-part series on start-up advice from actual successful rep firm founders.
* Editor’s Note: There are several ways for MANA member reps to work with MANA to find lines. One often overlooked way is to use the MANA Directory “in reverse,” that is to use the Directory to look up
manufacturers in your area that make the type of products you sell. Another is by reading and placing classified ads in MANA’s monthly flagship publication, Agency Sales. These ads are also available online. MANA
members receive a 20 percent discount on ad placement.
Yet another way is by responding to every line lead you receive via MANA’s Premium Web Ad Service. The way this service works is that when a manufacturer places a premium ad, every MANA member agent in
the product category he advertises under receives an e-mail stating that he is looking for reps for his product line. Many agents say they are too busy to respond to every line lead, but when you consider that
though this line may not fit in your line card, perhaps someday this company will approach you with another line that does. If that turns out to be the case, you don’t want to turn them off by being unresponsive the
first time around. Common courtesy goes a long way toward establishing your professional reputation in your territory.
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