by Jerry Leth, Vice-President and General Manager, MANA
As a manufacturer who partners with manufacturers’ representatives, we hope you create relationships with your manufacturers’ representatives that work well for both of you and last a long time. Your manufacturers’ representatives create high‑trust relationships with customers who then purchase what you supply because of that trust, and as a result, your business becomes profitable. A win‑win for both.
History indicates that not an insignificant number of those who purchase manufacturing businesses who outsource the sales function to independent manufacturers’ representatives terminate the manufacturers’ representative agreement following the completion of the sale.
Why might they do this?
They look at the financial statements and see a significant amount of commissions paid out as expenses. By eliminating the manufacturers’ representative relationships, they envision their profits going up by that amount.
Unfortunately for them, that is not what happens. Since the person the customer trusts is no longer involved in the decision-making process, they buy from their second-most favorite manufacturers’ representative or direct salesperson. Or they may buy from the same manufacturers’ representative who now represents a competitor. Sales decrease, which is not a desirable outcome.
They make the decision to terminate the agreement based on a lack of knowledge of how the sales process works.
If you plan to sell your manufacturing business, please help the new owners by educating them on the value of outsourcing the sales function to independent manufacturers’ representatives. Even though you are no longer the owner, you should still want the business you owned to continue successfully and so should they.
Explain to the buyer that manufacturers’ representatives make a significant contribution to the company’s profits because of the high-trust relationships they create with customers. Look at the commission being paid as an investment that brings a huge return, not as an expense that can be easily eliminated with no consequences. Terminate the relationships and sales and profits will drop significantly.
Help them make the correct decision.
Jerry Leth, MANA’s vice-president and general manager, started as membership manager in August 2000. Previously, he owned and operated Letco Tech Sales, Inc., a MANA member, multi-line professional outsourced sales agency he founded in 1989. Before starting his own agency, he managed a network of manufacturers’ reps as vice-president of sales and marketing for torque and tension equipment. Leth graduated from Stanford with a mechanical engineering degree. He started his career at Hills Brothers Coffee in San Francisco in engineering and production before embarking on a sales career.