Why Negotiate a Good Contract?

by Greg Bruno, President, Midlantic Enterprises, Inc.

Sales agencies and principals rely on each other, and our mutual growth is intertwined.

Our mutual dependence is obvious for some but not so for others. There cannot be one winner and one loser when it comes to our contracts. The whole purpose of the agency principal relationship is for both parties to succeed and grow in a mutually profitable manner while servicing our mutual customers’ needs. Getting to a win-win contract takes an open mind, a willingness to learn from each other, the ability to accept and understand each other’s needs and then turn all that into a mutually profitable relationship. It’s not easy but it is worth the effort.

Success is more than mere bookings, shipments, invoices and commissions. Success is growth and longevity for both parties. To get there, however, both parties need to recognize the responsibilities that they have to the other. This includes the requirement for the agent and the principal to perform. Both parties are required to perform, but to what level or capability? This and other questions must be discussed and settled before a fair contact can be negotiated. Both sides must work to understand the other. It is a lack of understanding that often leads to messy and early separations.

I believe that a series of initial conversations must take place ahead of any contract negotiation in order to develop a win-win contract. These conversations enable each party the opportunity to better understand the other. During these discussions, the parties should express their own respective expectations, needs and capabilities. The conversations will ultimately provide for either a path for consensus and a win-win contract or a quick parting.

Often we neither push for nor allow these initial conversations to take place. This leaves the parties with little or no understanding of the other and makes win-win contracts difficult to obtain. Once each party knows the expectations and capabilities of the other, progress in negotiations can begin and will lead to the development of a win-win contract and a mutually profitable, long-term relationship.

In many ways both the agency and principal are alike, but we rarely discuss this. Manufacturers and sales agencies are always at risk. Both parties have a right and a need to survive, and a win-win contract will provide for this.

When you leave your office and head out onto the road, you buckle your seatbelt. Why? You might say that the answer is obvious. If that were true, then why did we implement seatbelt laws? Essentially, seatbelts protect us from the unexpected impact. Look at a win-win contact as your agency’s seatbelt.

Sales agents were born to negotiate, and there may not be anything more important to negotiate then your agency’s contracts. I like to think of negotiation as a sport. I take it seriously but slowly and I try different styles to determine what works for my agency and for my principals. Remember that both agencies and principals need each other’s cooperation to survive, and that cooperation starts with a win-win contract.

Change is inevitable. A well-written contract will not provide for every change, but it can help to buffer most changes and enable both parties to remain whole. Good contracts help to smooth out changes when principal ownership or management evolves. A good contract will help to insure that changes, when they arrive, neither put an agency out of business nor cause severe damage that would otherwise take years for the agency to offset.

Greg Bruno is the founder and president of Midlantic Enterprises, Inc., a multi-person sales agency selling custom and standard engineered components to OEMs and large industrial companies in the NY to DC corridor. Midlantic Enterprises began its 33rd year this past August. Bruno has been a rep for 38 years and is active with the NJ/NY chapter of MANA, participated in the development of the current MANA Agency-Principal Contract and has served on the MANA Board of Directors of MANA.