Has a Principal Recently Terminated Your Agreement?

by Jerry Leth, Vice-President and General Manager, MANA

It’s not uncommon for me to get phone calls from MANA manufacturers’ representative members who start the conversation by telling me a long-term principal they’ve worked with just notified them they were terminating the relationship.

When they tell me that, I then ask, “So, how long has the new guy been working there?” In 100 percent of these calls, the answer is, “There has been a change in management.”

If the new owners have experience with manufacturers’ representatives and understand the value manufacturers’ representatives provide, they would not have canceled the agreement. If they are new to working with manufacturers’ representatives but want to maintain the relationships, the reps can guide them on what they need to do to create high-trust relationships with each other. The agreement remains in place. If they don’t understand the value the manufacturers’ representatives provide and don’t care to learn about it, it’s over.

If the principal in the last group terminates the relationship according to the terms of the agreement, there is nothing you can do to change that. Furthermore, while the name of the company remains the same, it’s no longer the same one you worked with previously. It will not work out well for the manufacturers’ representative. Accept that and move on.

In many cases, the previous owner, who was a great partner to work with, sold the business to a venture capitalist. Venture capitalists focus on financials and fail to understand what it takes to be successful in sales. To be successful in sales, you need to have a strong sense of purpose. You are there to help your customers solve the issues they face. You are not there to get orders. If you are good at helping your customers, they trust you and buy from you. To continue getting orders, you must maintain that trust. Trust is hard to come by but easy to lose.

My recommendation to the member is to find a replacement company to represent. I offer to help them do that and we go to the LineFinder® directory in the member area of the website. In going through the results, it’s not uncommon to hear the member say, “Oh my gosh, here’s a competitor!” My next question is “Do you have a non-compete clause in your agreement?” In most cases, the answer I get is “No!” I suggest to the member they contact the manufacturer and see if they are looking for a manufacturers’ representative in their territory.

Some of these members contact me months later to tell me they did reach out to the manufacturer and that the manufacturer was looking for a manufacturers’ representative in their territory. They negotiated and signed an agreement. They also tell me that they have managed to switch many of their customers over to the new principal. They expect that over a longer period of time, they will get all their customers to make the switch. This validates the concept that we like to buy from those we know and trust.

One final comment: Because what I just described happens, as a manufacturers’ representative, you want to ensure you have a well-written agreement that protects you if it does happen. When you first create a relationship with a brand-new principal, at that time there’s no money involved. Fifteen years later, or whenever, the financial impact may be significant, depending on the way the agreement is written. Make sure there is a solid post-termination clause. Get help finalizing the agreement by contacting one of the “rep‑savvy” MANA member attorneys.

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.

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