by Tommy Garnett, CPMR, CSP, Garnett Component Sales, Inc.
Long-lasting relationships between manufacturers and representatives are beneficial to each party and the customer as well. This relationship begins when the manufacturer reaches out to the representative and solicits professional representation in a specific area or on an account-by-account basis.
The information exchanged in this initial dialogue will help both sides develop an enduring foundation that can be built upon as each company grows. In this phase, representatives will decide whether to engage with the manufacturer or not. There are several things a manufacturer can do to prepare for this initial communication to ensure they find the representative best suited for their needs.
The manufacturer should be willing to have an open, honest and transparent dialogue with the prospective representative. A well-crafted summary email/letter should be submitted that contains the following topics:
1. Territory Geography Under Review
The representative needs to understand if the manufacturer’s needs are geographically based or an account-by-account arrangement. Once this is established, the representative will need to know if there are any protected accounts or “House Accounts.” If there are no active accounts in the stated territory, will the manufacturer entertain “Shared Market Development Fees” to assist the representative in underwriting the significant expenses associated with bringing the manufacturer to market? Will this be an “exclusive” territory, or will the manufacturer have other representatives in the region?
2. Previous Representation
The representative would want to understand if any previous representation existed in the territory. If so, what is the desire to change representation? Can the manufacturer share any lessons learned that might assist the new representative? If there is active representation, have they been notified of the intended change?
3. Territory Sales and Commission Structure
The representative needs sales history, previous quotations, and any key accounts the manufacturer would like focus on. This will help them understand the manufacturer’s expectations and if they will be able to meet them or not.
4. Business Structure
The representative will need to know how the business is set up. Is it a public or private corporation? Sole Proprietor? LLC? Private equity is also a key piece of information to a representative. Does the manufacturer conduct business both domestically and internationally? What year was the company established?
5. Sales Support and Training
These details offer a representative insight to the type of support they can come to expect. Will the manufacturer make available a plant visit to meet key personnel, understand workflow, and see how the plant will present itself to future customers? It is also important for the manufacturer to have an ongoing training program.
6. Marketing and Advertising
A clear, concise, business strategy set forth by the manufacturer will help the representative understand their current strategies and what goals they hope to achieve. This can also include an understanding of whether the manufacturer is set up to accept intranet orders.
Last, and likely the most important, is the use of a well-designed, mutually beneficial manufacturer-representative contract. The contract will set the foundation for the relationship and define terms such as termination policy, commission, reporting (both on behalf of the rep and manufacturer), and many other important topics. The representative may present their own version, or, most likely, the manufacturer will have a version they prefer if they are used to working with representatives.
Although there are several things to consider when a manufacturer decides to approach a representative, the most important thing is an open, honest dialogue. Transparency plays a vital role in determining the right fit. With the right communication, a mutually beneficial relationship can evolve that will last for years to come.
Tommy Garnett, CPMR, CSP, is president/CEO of Garnett Component Sales, Inc. GCS, headquartered in Wake Forest, NC, serves the OEM community by providing engineered mechanical component solutions. Garnett is a 27-year veteran of the manufacturers’ representative business and small business owner.