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March 2003
Establishing a Rep Firm — Start-up Costs
Part 3
by Robert Blanding, N.E. “Mac” MacGregor and Brad Starr, CPMR
Cost Factor: Geography
Geographical variances to be considered include facilities and services, travel costs and time.
The costs of many items vary from state to to state and city to city. Even within a given territory, costs can vary by as much as 25 percent. Do your homework and compare facilities and services
costs for: office and storage space, travel, secretarial help, utilities, legal and accounting services, graphic arts and printing services.
The cost of travel
is a function of the size, population and available market density of a specific area. For example, to cover the Rocky Mountain states adequately, a representative must either have multiple offices, have access to good transportation, plan his time extremely well, be very proficient in the use of the telephone, or perhaps have access to or own a plane.
The low-cost alternatives are to start out with a smaller territory or be inefficient and drive to remote locations. In a highly concentrated territory, such as New England, one or two offices can serve
the region well. In other highly concentrated areas, such as southern or northern California, it can be impractical to operate from a single office because of the long travel times. In seeking economies to attain
adequate geographic coverage, beware of locating an office in a home (yours or a salesperson’s) unless the conditions are just right. For instance, there must be a dedicated business telephone and Internet lines,
but there must not be any crying children or barking dogs.
Cost Factor: Industry Differences
Start-up costs will vary from industry to industry and product to product. For example, commissions on components are generally lower as a percentage, but the selling effort may be less and the sell cycle
shorter. At the other extreme is selling to the government. The sell cycle may be years, but once selected, the vendor has a very solid order. Another important consideration here is the use of distributors. In some
industries, it is taken for granted, but in others it is dependent upon the strategy of individual principals.
Cost Factor: Connectivity (or Lack of It)
Simply put, if you are “connected” in your industry and your territory — through prior business relationships, local networking and trade associations — your start-up experience will be easier and your
income will grow faster than if you are starting out as an unknown. Many reps enter this business from manufacturing, distribution or another related field, and they bring with them valuable prior experience with
the customers they want to serve as reps. Another source of insight and information may be your competitors. It is common for reps who are “connected” through local and national trade associations to freely and
gladly share tips, information and advice about everything from the best cell phone program in your area to what’s happening with one of the territory’s biggest customers. Do not discount the importance of your
connectivity! The absence of it can be a barrier to your initial and long-term success.
This article, the third 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 2
Satisfying a Financial Need
Michael Sackett started his agency last year after several years in outside sales for a distributorship. His agency, Aero Manufacturers Corp., Yorktown Heights, New York, serves the aerospace industry, a
market he worked in for 16 years. “My major interest in going out on my own,” he explains, “was financial. Now with a little less than a year under my belt, I’d identify the major concerns I have as:
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“Doing everything needed to get the business off the ground. The logistics of setting up the business have been challenging. Doing all the work of setting up bank accounts, getting insurance, and accounting service have presented different challenges from what I had been doing previously.”
- “Getting the word out to customers and following up by visiting them. Certainly a help in getting this done is the fact my career had been established in the aerospace industry, and I’ve built up numerous
contacts over the years. I do a lot of cold calling and networking to get the word out that I’m a rep.”
- “And finally, meeting with principals and prospective principals. Presently I represent four product lines. In the near future I’d like to add two to three more lines that would complement the products I already
represent.”
Hitting the Ground Running
Just as many reps before him, Thomas Gondi, Southern Market Share, Inc., Greenville, South Carolina, began his professional career on the manufacturer’s side of the desk. “I was the director of marketing
for a manufacturer of scissor lifts. When they made the decision to move largely from a direct sales force to manufacturers’ reps, I spoke with them and was able to hit the ground running with their line. They are
my main principal presently, although I do have four additional lines.”
He continues that a major benefit to him starting as a rep by representing his former employer resides in the fact, “since I worked for them, I knew them, knew the culture, customers and many of the other
reps in the field. As a result, I was able to get several good customer leads from them.”
From the outset, Gondi says he has recognized the value of promoting his agency, but so far that promotion has been limited primarily to wordofmouth contact and networking efforts with fellow reps. “We’ve
tried to maximize our time in front of customers rather than undertaking other methods to get our name out there,” he explains. One thing he has done to get the agency name in front of customers and principals,
however, is the creation of a web site www. southernmarketshare.com. Prospective principals and customers can learn that: “Southern Market Share is an independent representative agency providing a
communication gateway for material handling manufacturers and distributors. Covering the Southeastern United States, Southern Market Share represents small to mediumsized companies. We provide a practical method for
organizations to effectively market their products. Some of the companies currently affiliated with us include Presto Lifts, RolLift, ErgotecH, AGF Equipment, Allied Modular, and Ergomat. With access to over 3000
distributors, Southern Market Share is setting new standards for the industry. To obtain additional information on our services, please do not hesitate to contact us.”
He adds that the web site accomplished a couple of goals including communication and marketing, and it allows him and his wife to take advantage of their expertise with computers. “It also allows us to
project an image of an organization that is bigger than we really are.”
This article is the second in a three-part series on start-up advice from actual successful rep firm founders.
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