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January 2002
So You’re Thinking of Becoming an Agent!
by Bert Holtje
The Future of the Agency Business
The question most people have, but few ask, is that of the future. What is the future of the agency business? Given the problems we have seen with some companies cutting the agent out and looking for commission
rebates, and the new things that are happening with the Internet and e-commerce, is there a future for the independent sales agent? The answer to this question is a resounding, but qualified, yes. Those who have
been in the business longest will be quick to tell you that no matter what happens in the field of electronic communications, a sale must be made face-to-face. This is true, but there are fields where the role of
the agent may diminish as a result of the communications advance. However, there are areas where the role of the agent will be much stronger than it is today. In the current economy, as manufacturers strive to
reduce costs, more and more are turning to outsourced field sales professionals.
More than likely, commodity products that are sold exclusively on the basis of price will be sold to a lesser extent by agents. After all, a buyer can simply contact a dozen suppliers by fax, phone or over the
Internet and take the best offer. However, given the fundamental change in manufacturing, it seems that those selling anything but price-sensitive products are going to do very well.
This is the nature of change. Change never satisfies everyone. Remember the buggy whip manufacturers — and remember those who were selling to them who switched to selling parts to be used in automobiles. In general,
we feel that the agency business will continue to play a major role in the marketing of goods and services. However, we do think that agents will have a far better chance in the industries where the agent provides
real added value. This, of course, means that agents in the years to come are going to have to be more than just good sales and marketing people. They may have to be able to help both customers and principals plan
and coordinate more closely. They may have to provide more technical services than they now provide. This, of course, means that the typical agent may be a little different from the successful agent today.
Remember that many of the agencies that were launched in the forties, fifties and sixties were headed by technical people who switched to marketing in their corporate jobs. When they started their agencies, they
brought with them both technical and marketing skills. Many of the agencies started in the years that followed were started by people who spent most of their working lives in sales and marketing. Now, however,
technology is on the rise again, and it’s not inconceivable that the agents of the future may more closely resemble those who started in the fifties than those who got a later start.
Of course, not all agents sell technical products to industry. Many MANA members sell products into the consumer markets. There, too, there are bound to be significant changes. We have already seen the poor judgment
of some manufacturers who want to sell direct and whose customers want the agent’s commission deducted from the price. Apart from the legal implications of this and other questionable practices, there are major
changes taking place in the consumer products field, too.
The small retailer seems to be an endangered species. Those who did well selling to a large number of independent retailers now face the problem of extreme competition in selling to the retail giants. The
implications of this are tremendous. It’s probably the ultimate test of the competitive model of economics that is the backbone of our economy. But can an agent succeed in this milieu? The answer, of course, is yes,
but it’s going to be a different world of selling.
Before too much longer, we think that the antitrust implications of some of the retail practices we have seen will be resolved and that selling to retailers probably will change, but not all that much. In the
meantime, there are problems. But, when have things like this ever discouraged a good agent?
In general? Change is inevitable. Some will benefit from it, some won’t. Some will adapt, some won’t. Some will see the opportunities and do even better than ever before. But, isn’t this the way it has always been?
This concludes the series entitled, “So You’re Thinking of Becoming an Agent!” Next month, we’ll feature a word of advice from a successful manufacturers’ agent in the southeastern United States.
Money
by Ken Benjamin
Let’s assume you are still highly motivated and want to continue your quest to become a commissioned manufacturers’ representative. You’ll need to review the matter of primary concern — how much money does it take to
get started and survive for two to three years?
I’m not sure anyone but you can adequately answer that question. The fact is that each of us has a different life style and it is as varied financially as there are individuals around us. I can safely say that you
can’t have too much money in hand!
If you will permit me to digress a moment, I established my sales agency in the mid-1960s with $1200 in savings. I went to my local bank to establish a line of credit and outlined for them on paper a detailed
business plan, what I wanted to do, how I planned to do it and the estimated start up cost. I basically sold myself to them relative to my confidence and chances of survival and success. After their careful
evaluation the bank agreed with my plan and I had my requested $10,000 line of credit. I vowed never to use it, and I never did, but it gave me enormous peace of mind and security to know it was there if things
didn’t go exactly as I had planned! (Update those numbers to current dollar values.)
Before you make a firm commitment, quit your job and plunge full steam into this new career, you must sit down and analyze your financial obligations as they exist today and into the foreseeable future.
What is the picture for the next two or three years relative to your personal financial obligations?
What have you committed yourself to for the next 36 months? Do you have an automobile that will require major repairs in the next 18 months? Is your wardrobe sufficient or will it require major additions? Are you
expecting a new member to your family? Are there insurance obligations that will be coming up on a semi-annual basis that you’ve forgotten about? Are there student loans to be paid off? Will the house have to be
painted in the next few months? Will the hot water tank have to be replaced, the driveway repaired, the apartment painted or the roof fixed, etc., etc.
All these expenses, plus a generous cushion for the unexpected should be programmed into your financial study, put down on paper as if you were making up a budget, and, for heaven’s sake — be realistic.
You need to be honest with yourself now, while it’s only a paper exercise. Later, after you’ve made the career commitment, sloppy financial thinking can result in a curse called failure.
Do it right, take all the necessary time to do it thoroughly and write it down with as much honesty to yourself as possible. This exercise will be a character building experience!
Next month, read about the discipline required in starting a manufacturers’ agency.
This article is excerpted from Make Your Future Happen, Ken Benjamin’s definitive guide to starting an agency. To order your copy, call MANA toll-free at (877) 626-2776 today!
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