The most common questions involved with hiring of independent reps relates to their compensation. Here are key elements to determining commissions for independent sales reps. There is no standard flat rate or easy answer. Fortunately, there is a very important guideline to keep in mind:
Nothing motivates sales better than an attractive commission schedule.
“How do we pay our manufacturer’s reps?”
A commission-only compensation plan is the best way to pay sales reps. The best method being a straight percentage of the sales price. There are a few different ways to handle this, however, most sales reps prefer a commission based on a percentage the sales price.
If there are no fixed sales prices involved, a company might go with a percentage of gross margin.It is worth pointing out that independent sales reps are in fact independent. As a non-employee, they don’t have much stake in what the price of a product is. In fact, a higher price may interfere with their goal of selling as many items as quickly as possible.
If they have the flexibility to negotiate the final sales price, it makes sense to base commission on the gross margin. This both encourages your reps to sell at a higher price and discourages them from selling low to close a sale. Provide your independent reps with an incentive for their financial well-being and your products sell the best price.
With any independent contractor, enter into a Sales Representative Agreement which clearly defines the commissions to be paid. Well written agreements eliminate disputes and hard feelings with sales reps.
Four Key Factors that Influence Sales Commissions
Depending on the industry, commissions can vary wildly in range. Other factors can influence commission including:
- How much customer service do your sales reps need to provide to customers? If you expect your sales rep to provide functions beyond simply training, assisting with installation, testing, and so on, you should raise your commission rates.
- Do your sales reps only provide leads, or do they close sales? Plenty of companies only require sales reps to bring in leads, and prefer to close the sale themselves, and act as account managers. This preference should probably reduce the commission rate to reflect the independent rep’s level of involvement in the actual sale.
- Does your product generate repeat business? When a principal’s line is disposable or consumable, meaning that repeat business exists, commission can often be lower unless it takes time to service the account, generally because the customer does not need to be sold on the product every time. You also have the option of offsetting the lower commission by paying a higher percentage or a bonus for the first sale to a new customer.
- What types of expenses tend to occur for new businesses? In many cases, the front end costs of acquiring new customers can be fairly high, and commissions should reflect this to ensure that sales reps receive an appropriate return on their investment.
What is typical commission percentage for sales
One of the top questions we hear is “What is the average commission rate for sales reps?” In general, most manufactured products prompt a commission rate of anywhere from 7% to 15%. For commissions as a percentage of gross margin, (sales price minus direct expenses) a standard range is anywhere from 20% to 40%. To increase the sales incentive, sales managers often use a sliding scale commission rate tied to the volume of business generated by a sales rep.
Be sure to also factor in any support services. If additional sales necessitates the need for additional support services or inventory, that plays a role in the sales rep’s return on investment.
Most service-based products that do not require manufacturing expense tend to have commissions that can run upwards of 50%. Be cautious in calculating the equitable commission in these instances, as it will have a significant business impact! For service-based products, reps can sometimes be under the impression that as there are no manufacturing costs. Or they assume there is very low overhead. Factoring time expenditures into your commission schedule allows your business to reap a good return on investment.
Commission splits are another important consideration. Sometimes territories are divided by geographical location, or by industry type. You need to define:
- Any provisions on commissions that come into effect if the independent rep sells to a customer outside of their territory
- What sort of commission split your independent reps should expect if someone else sells within their territory.
You can’t always anticipate these issues in advance, and it is very important that all independent sales reps always have adequate incentives to continue performing up to the expectations of their employers.
Contact Commission Only Sales Reps
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Hi
I just started repping a friend’s woodwork and we are having a dispute over an issue we did not cover in our contract.
Should i still get a commission on repeat orders even if the customer went directly to him instead of through me? My woodworking friend doesn’t think he should pay me because I did not “do anything” on this order, but my argument is that he would not have gotten that order if I had not secured the account and residual income is what reaping is all about.
Any thoughts on this?
Thanks!
This is a very common question. Some general comments first to put this into perspective, and to guide you in communicating with the principal:
The principal should realize that a good rep can make them a lot of money, if the rep is properly motivated. It is typical for it to take a long time for a rep to create a channel, so that rep could see between 6 months to a year if you are not an already well-established business. What would motivate the rep to put in such a large amount of uncompensated effort? Residual income!
So the continuation of future sales is how the rep is often compensated for his up-front effort. Even if it seems that the rep “did nothing” in connection with repeat business. Just as the principal wants to “earn a living”, so the rep is worthy of his labors.
It many cases the rep continues to be more involved than the principal thinks in building a relationship with the customer. If the rep is cut off from residual income, why should this happen?
Hello!
I’m looking for sales reps for a new line of organic hair products … Any idea how much is the commissions to be pay … Where can I get a sample of rep. contracts ?
Thank u!
Most reps on our database receive a commission between 5-15%. However, since we deal with every market available, it is best if you communicate with others in your specialty to understand what the acceptable commission is in the market that you are going into, so that you are not only fair to the rep or rep agency, but also to yourself.
You can get a sample representation agreement from our parent site at https://www.rephunter.net. Here is how:
1. Create a free profile.
2. Go to the training page.
3. There is a sample agreement there in PDF and Word formats.
*Jas
*2000 units
Hi Jay! I have an agency where I help young designers and start up companies to get their story out there. Basically, get their products onto the shelves of the retailers in their area.
One of my partners is a company that sell accessible priced designer lighting. My role in the company is commercial director and I drive all the sales.
It is a new product, and we have them available since March. YTD we have sold 2000 units.
Im in the middle of negotiations at this point. The percentage they grant me is 10% for first and 6% for recurring orders.
In regards to the effort it takes to get the product onto shelf, the fairly low value ($50NSV) of the product, the time I had invested into these 1700 units (many hours), the market situation and the season, and the fact that a young start up takes al lot of time being established is making it really hard.
The whole point is that I find the percentage way to low in terms of ROI. Can you please advise, because I want to make a decision if and how to proceed with this party. Without losing all of my investments that I have done in the past 15 months building up the 37 sales accounts, 20 hot prospects, 30 warm prospects and around 400 other contacts that got in touch with this brand through my effort.
Thx in advance!
First the general answer: most reps on our database receive a commission between 5-15%. For retail, that range would be move upwards to 10 – 15%, and even up to 25% in some cases. However, since we deal with every market available, it is best if you communicate with others in your specialty to understand what the acceptable commission is in the market that you are going into, so that you are not only fair to your principal but to yourself.
Having said that, it is important to note that there is a big exception to the usual guideline. That exception occurs when the company or its product are so new to the market that the rep has to in effect “create the business”, or at least “create the channel.” In such a case, the start up phase could result in a long, slow ramp up period in which the rep receives very low or even no compensation at all.
So both you and your principal need to answer the question of how the rep can survive during such a phase. The two obvious approaches are either a significantly higher commission rate or a retainer or expense allowance. Otherwise, you have to assume the risk of putting in a lot of up-front work with the hope of the back end compensation to make up for it. It looks like you are presently in that position of assuming that risk.
If the principal is unsophisticated, they may need to be educated about the “investment” in the rep that will pay off in future lucrative income streams.
Given what can be worked out in these alternate approaches, you need to decide how much risk you can assume with this company if any of your compensation is deferred.
Advice on Sales Rep commission structure
Looking to hire a sales rep for advertising, web dev. and graphic design work. I have a candidate lined up but need to make an offer that is fair to both sides. They have offered to work straight commission – what is generally accepted in our industry as a baseline on % of net sales?
Most reps on our database receive a commission between 5-15%. However, since we deal with every market available, it is best if you communicate with others in your specialty to understand what the acceptable commission is in the market that you are going into, so that you are not only fair to the rep or rep agency, but also to yourself.
One way that might help your thinking: what commission will allow the rep to make a decent income? Naturally this depends upon what percentage of his volume is from your line as compared to other lines. If you are below that level, then you are not being fair.
We are creating an agreement with an educational consultant, who is already connected to therapeutic and other boarding schools because of his current business. We are asking him to promote our ReTribe and Social Pathways (anti-bullying) programming to these schools. I have 3 questions:
1. If one gig brings in 10,000, what percent would make sense to pay him.
2. Percent of WHAT? The 10,000 that the school is paying us? Or are we talking about Gross minus the expenses we accrue?
3. If we pay him 20% (what he is asking) of the first gig, is it considered usual to continue to pay him for future gigs if he is not involved after making the original sale? Or do people do some sort of 2% of all ongoing sales sort of arrangement?
Some general comments first: you should realize that a good rep can make you a lot of money, if the rep is properly motivated. It is typical for it to take a long time for a rep to create a channel for your product, so that rep could see between 6 months to a year if you are not an already well-established business. What would motivate the rep to put in such a large amount of uncompensated effort? Residual income!
So the continuation of future sales is how the rep is often compensated for his up-front effort. Just as you would like to “earn a living”, so the rep is worthy of his labors.
We often quote the 10 – 15% rule of thumb, but that is very generic and depends on the industry. A rep recently told me his favorite commission rate is 1%, because it is on an account generating sales in 8 figures. So your mileage may vary. 20% is not out of line in a start up situation, or one where the volumes would be low.
Commission is based on your invoice price in most cases.
It many cases the rep continues to be more involved than you think in building a relationship with your customer. This you have to judge.
I am a startup marketing services firm with a very focused niche segment (high tech firms that want to sell to public sector agencies). It’s B2B, and our services range from $750 to $65,000. I want to set our prices with her, and not allow her discounting options without signoff. Our “sweetspot” sell is around $15k. I am looking at bringing on a part-time sales rep. A few questions here: 1) Would you recommend tiering the commission % according to the price of the products/services? 2) % of gross or % of topline sales price: which has greater incentive to upsell? 3) Would you keep the % rate flat from deal to deal (even if it’s within the same customer) or would you lessen the rate for recurring business within a specific customer?
I am assuming that when you say “her”, you mean your sales rep. Or maybe that’s not what you mean. However, your questions don’t seem to depend on clarifying what you mean and I’ll take a stab.
1. While commission rates can sometimes be sensibly be made flexible depending upon conditions, I would not use the price of the product that much in this case. Think for a moment about the rep. The rep has to earn a target income for the year, and has to expend an anticipated level of effort over the long haul. If you make the rules to favor certain efforts of the rep, then the rational rep is going to work accordingly. You really want the rep to make you money over that long haul, and the incentive has to be appropriate so the rep can share in the success they create for you.
2. While you can engineer your price structure from the top or from the bottom, it is common to pay on the invoice price. After all, that is “real”.
Incentive to upsell — what does the rep get? Not so much how it is calculated. If I understand your question.
3. Reducing the rate may seem like a good idea from your perspective, but really works against the rep’s motivation. How would you like it if the customer decided you needed to cut your margin over time? Again, perspective helps to judge the issue.
I own a liquor importing company and as such act as a Supplier of a vodka brand that we market. Since the alcohol industry in the US is structured in three tiers (Supplier sells only to Distributors and Distributors sell only to Liquor stores/bars/restaurants), we are obligated to use a Distributor (also referred to as a wholesaler sometimes) who purchase from us in bulk. However, since distributors typically have other brands in their portfolio that may compete with ours or we might not be very high on their priority list, we feel that we need to have our own reps who would go visit stores/bars trying to sell our product. When the sale is done, we notify the distributor to deliver the product and so on.
Do you know what the typical commission plan might be for this scenario/industry? A lot of times that initial sale is hard and when the product is on a shelf, distributor keeps an eye on it and takes reorders, so we were thinking of offering a signup bonus or bigger percentage of initial sale, plus give smaller commission on reorders for maybe 3-4 month. This way the rep would have greater stimulus to get into new accounts and with some “commission attrition” would not be just sitting around when they accumulate a wide number of accounts.
We do not have specific insight into your case. Therefore I am responding with generalities. In general 10 – 15% commission is typical.
However he is another way of thinking about it that may be helpful: put yourself in the rep’s shoes. What would motivate you? As a rep, you not only need to earn a living, but you are going to create business and profit for the principal. If you have a front-loaded plan with diminishing returns “because it seems to make sense”, will that be sufficient motivation for the rep to give your line attention, or will you just be an afterthought?
I own a boot camp service oriented gym and I am looking for a sales rep to bring in clients. What do you think of this structure?:
25% of membership for first 4 months
20% for 2 months
10% for lifetime of client.
Can you give me feed back on this?
Generally when we discuss sales reps on this blog we are referring to an independent sales rep that takes a product or service of the principal, and sells that into another business. That is, we are normally thinking B2B. And in fact the sales rep is yet another business operation. In addition, that word “independent” also refers to a non-employee position. It is not clear from your post whether you are talking about employees or independent reps.
Therefore my general impression is that rather than an independent sales rep you are talking about a sales person who is selling directly to the end customer who is compensated on a commission basis.
Having said all the above, my opinion is that your concept is not a bad plan. Can you make money on the deal? Can the rep? Will it provide the necessary motivation to the rep? The 10% lifetime commission does seem to do that. So it looks like it could work for everyone.
Hi and thanks in advance or your advice and input. I want to work with a small country winery that wants to expand into the NYC market. I’ve done some wine tastings for them on my own without any compensation at first because I am a huge fan of their products but then I wanted to see how the city market would respond. Well The response has been overwhelming!!!!!!! This winery has a unique niche because they do meads, ciders and all other kinds of great fruit based wines that are not really represented in this or any market I’ve seen. I know I’m sitting on a great opportunity/product and I can see the bigger picture. They/I want me to represent the winery and products as well as start marketing campaigns and getting product into stores. They’ve also mentioned getting trucking companies to bring the product and possibly getting warehouse space to store the product. So my question(s), where/how do I start? How do I get compensation for this? I am currently working full time so i need to be able to cover my living expenses if I leave my job. Do I do base pay and expenses with commissions? How do I become the sole person to represent them and possibly set it up where I am the one to help them continue to expand into other cities/markets. How can I build myself or business around these ideas?
Sounds like a golden opportunity for everyone! You really have a blank slate upon which to create something wonderful and valuable. I will share some thoughts.
Your last words “… build myself or business” is the key. You have to decide if long-term you want to go into your own business as an independent rep, or whether you would be better off continuing as an employee for this winery. I am thinking the reason you posted here is because in fact you do have the fire in the belly to make this happen.
Because in effect you are creating the business from scratch, you should definitely get an appropriate reward for that effort. Let’s say you take the winery far from its present position and create real wealth for the owners. Then you need to be able to share in that wealth, as you would be instrumental in creating it. Long term this is best with a straight commission.
But during the “creation of the business” phase, likely a commission will not be adequate and you would need some kind of base. The owners should realize that they are investing in channel creation, whether they hire inside staff, outside consultants, or you, or even a combination. If you feel you can handle it all, then you should go for it.
Given your success, you could then decide whether you have the capacity to take on additional lines. But that would probably come later. It looks like a full time position, and you should be compensated your living expenses until it gets off the ground. This could be a combination of base, expenses, and commission as you say. It is very common when creating the channel to have the owners put in this kind of investment.
I have been with a company that offers a wide variety of products to both OEM’s and retailers for 3 years as a manufacture’s rep. I cover about eight states and I am the only one in the company that sells to both wholesale and retail accounts($1.5 mil). I am on the same contract as when I started which is 30k base, 2% comm, $500 car allowance, health, and cell phone. I am in hotels over half the year and putting 60k miles per yr on my car. I feel as though I am highly underpaid and would like your advise on how much commission I should ask for the next time they ask me to keep hitting harder. Thanks
You have to compare the rates for straight commission against rates with a base plus expenses. And then you need to look at what you feel you should be getting. Which I am sure you have been putting a lot of thought into already.
As a generality, 10% commission might be typical, but that is for representation agreements that have no base or expenses. So you have to look at how that would compare to what you get now. If the $1.5 mil refers to your sales, then 2% of that is $30k. With base, that gives $60k. What is your target? Let’s say you are wanting $90k but will absorb all expenses. So that gives a commission rate of 6%, again with no base or expenses. Or do the math for your actual target.
You have a proven track record. That is huge compared to trying to replace you. And perhaps gives you the willingness to go to straight commission.
These are just some thoughts about things to take into account; I am not trying to tell you how to negotiate. But I hope this helps.
No contract signed, paid an initial wage for 10 weeks then stops
This was commission only the company is now going ahead with larger contracts. Bottom line. Can a verbal agreement regarding renumeration stand up in court , should I pursue this
We cannot give you legal advice. You should consult an attorney to determine if you have a case.
Hi, You made a comment that if you can give a protected territory. So my question is how do you allocate commissions when another rep sells in someone else’s territory? If you are giving 10% for the sale how would that be split or is it?
Thanks
The very concept of “protected” territory should answer that question. It is either protected or it is not. However, in the real world, “gray areas” can arise. To handle these situations, it is best if you have a Sales Representation Agreement in place ahead of time that specifies exactly what happens in such cases.
For example, in our Sample Representation Agreement there is language to cover how exclusive territories will be handled. When your reps have agreed to such an Agreement, then all parties understand ahead of time exactly what is going to happen.
Hi – My apologies up front for all of the questions, but i am totally in the dark about sales reps. I am an artisan skincare manufacturer. I am thinking about hiring a sales rep on a straight commission basis. I know I am probably being a bit obtuse, but when you say that commission is based upon the sale price, do you mean the suggested retail price or the wholesale price? Is the commission paid always the same rate or is it acceptable to pay a slighly higher commission rate, i.e 12% for a new customer and then drop it to a lesser amount, i.e. 10% for maintaining the account? If I sell a bar of soap wholesale for $3.00 for under 100 bars and then drop the wholesale price for larger orders to $2.80 how does that get accounted for with the commission rate. And how do I price my items to allow for a sales rep. Never having had one before, I did not include that in my pricing. None of my items is a high dollar amount retail, ranging from $6.00 to $30.00 a piece, so quantity will be what makes the money. Again, sorry for all of the ?’s and thanks in advance for any help. Deb
In my experience, it is based on the invoice price which would be the wholesale price. However, in certain industries the customary practices could vary. From the manufacturer’s viewpoint, the invoice price is “real” whereas the retail price is hypothetical, as it varies as sales, clearances, loss leaders, and other factors come into play that are outside the manufacturer’s control.
There is a lot flexibility as people come up with all manner of ideas. However, you have to “think like a rep” to understand. They need to be able to make a living so at the end of the day (or more to the point) at the end of the year, was your line a valuable contribution to their living?
Regarding pricing, it is common for the inexperience to underprice. There are many business school case studies and business articles where underpricing and not overpricing is the problem. When you price, the approach of determining you price based upon you costs has to start with your direct costs, plus indirect costs. Then on top of that factory overhead. Then “General and Administrative”. Then marketing and selling, including commissions. So with all these costs, it is easy for something that starts out at $1 dollar for your materials to end up making you have to charge $5 to cover the true cost, with all the things I mentioned. There are entire courses of study that look into pricing, and I have written more extensively about this elsewhere.
But the commission rate in almost all cases is based on the invoice price, which is the price your customer is paying you. But if your cost including everything listed above except the rep’s commission on the $1 of materials ends up being $4.50, then 10% commission to the rep can only be paid by making your price $5. Think of the rep as all those sales people on the floor of your favorite department store.
Hello. I am venturing into sales, because I am very familiar with the product to be sold and it is innovative technology to be introduced to the US from Korea. I have never done sales. This is a service that needs to be renewed yearly. How much commission do you think I should take?
I will be the only one (so far) selling in America.
Any advice?
@Julia – generally commissions run 10-15% but it depends on the industry, margins, and dynamics of the business. This is the most common question, and you might get insight from previous comments on the topic.
If the sales rep is selling a service that will be managed on a monthly basis, does the rep receive a one-time commission or receive a monthly commission for the length of the contract?
@Kio – Arrangements vary. However, it is our position that since both parties are in business to make money, there has to be incentive for both. If the rep does not have residual income, there is little motivation to build the business, and he is more like a hired hand.
You should convince yourself that the best results can be obtained by rather having a partner who is motivated to build the business.
We are a start up company selling a patented product that covers a wide range of markets including gift shops,pet shops,coffee shops and florist. We will be looking for reps and my question is are the commission rates the same for all these markets and if so should we try and find reps that can sell to muti markets.
Our general guidelines would cover all of these markets. Regarding differences in commission rates, I am wondering what makes one of the named markets so different that a commission structure would be different? In fact I would think of them as all the same market “retail”. So why would different types of retail affect the commission? If there is no good answer, such as “coffee shops are so much more difficult to sell to for the rep”, then I would not see why rates should differ either.
If any experienced reps would like to give a counterexample, that would be great!
From looking at this article and others, it seems that the standard commission paid to sales reps is around 10% would this be true if the product you were selling was worth millions of dollars? Is it really that simple to earn large amounts of money as a sales rep for a company producing expensive products, such as heavy machinery?
You have to consider reality. In general, when total prices go up, commission rates go down.
Also, bear in mind that large ticket items take longer to sell. What is the sales cycle? Maybe you could be working on a deal over a several year period, and the “large commission” needs to cover that long period. Some common sense reflections of this sort will help you to understand.
Hi there, I am looking to become an independent sales rep, working with various companies to generate leads and close sales if necessary. From research, I have found that my commission would, as you say, be within 5 and 15%. However, I have no idea about how to go about contacting these companies to offer my services. Does it boil down to a simple phone-call/email or do I have to meet the company in person and sign a contract?
Many thanks.
Once you have decided on a line you would like to take, there is no hard and fast rule for how you would contact the principal. It depends upon the type of line, your previous experience, and how the initial contact via phone call goes. I am sure that experienced reps can chime in with a wealth of experience.
Having said that, there is nothing that replaces face-to-face interaction, as it is not simply a matter of “social networking” and Skype. The independent rep relationship is like a marriage. While you might select dates online, you would never agree to marry based solely on the remote experience. With the sales representation relationship, there are some aspects which might require going beyond the remote relationship; yet it can be and is done all the time without that fact-to-face.
A good way to look for lines to carry is to use the free service for reps available at our parent website, RepHunter. You can search for free for new lines in all industries and territories who are actively seeking representation.
Please feel free to create a profile at no cost to you. You can then take advantage our our training tools as well as conduct unlimited free searches.
I hope this helps!
Hey I’m a independent contractor providing a medical procedure service, paid on a per call basis. I’ve gotten a new hospital contract to provide this service. Wondering what would be a fair commission
I am hoping some readers will chime in.
Could you please elaborate on your service? It appears to me that you are not acting in the capacity of an independent sales rep.
We are in energy efficiency and I have always paid my reps a flat rate of 5-15 bucks per fixture (depending on the type of fixture plus 50% on any overages. We are now looking at changing the commission structure and I am thinking a percentage of a sales price but it doesn’t quiet feel right! I would like to factor in the fact that recruitment and residual income is something that I would like to offer also. Anyone here have some sort of the same structure?
We are seeking sale reps. Nonetheless, we sell full container loads per order which vary from $8,000 to $12,000 in product value per sale. Clients might re-order 2 to 3 times a year. From what I’ve read in this blog, sale commissions vary between 10% to 15% which based on our industry seems high as we work with low profit margins and aim in volume. Does anyone has experience on what is a good commission rate due to the sale volumes we carry per sale? Will 3% – 7% make sense or is it simply much lower than the standard?
When we give the guideline 10-15% that is a very broad generalization, and it could vary widely in specific industries. Whereas 15% might be fine in retail, it would be completely inapplicable if your were selling “nuclear reactor facilities”. I exaggerate to make the point.
Thus this would be a good time for others with specific industry experience to chime in.
We are a small private investigative and computer forensics company who is looking to expand and hire a sales person. We have not been able to find any rates that pertain to our type of business for being able to set up a commission structure. We are definitely thinking gross because depending on the investigator on the case (each one gets paid a different rate) the net would be lower or higher at any give time. We don’t feel it is fair that the sales person earn less commission because the investigator working the case that day earns more then another one. Or do we have to look at it that in the long run it balances out with some higher and some lower? Also we are thinking 3-5% commission rate based on the profit scales on different services we provide – is this reasonable? Any feedback on our situation would be appreciated.
Commission rates vary with industry and within industry. As such, it is advisable to network with people in your industry to find out the prevailing rates. However, in your case and in many cases, this is not possible. Hence the popularity of this topic.
Here is another way to look at it: suppose your independent sales rep only was representing your services. What commission rate would they need to earn an acceptable income? If the billings sold were multiple millions of dollars, then 3-5% of that might be an acceptable commission. Then factor by how much of the rep’s work would be devoted to your line. The assumption being that the rep has other lines to sell.
For example, if billings were $5 million, then 3% is $150,000 which would be an excellent compensation level. If they worked one quarter on your line, then one-quarter of the $150,000 is $37,000, which would be your cost for a “one-quarter” rep billing $1.25 million. The example is not necessarily supposed to be realistic, but illustrates the math to determine whether it is reasonable for the rep. Adjust for your real numbers. Then you will know if 3-5% is appropriate.
I work for a direct mail magazine here in Orange county as an independent contractor. When I originally started about 2 years ago, they initially started me off with a small base ($1k/mo)for the first 6 months, with the following commission structure (month 1 was 35%), (month 2 was 30%), (month 3 was 25%), (month 4 was 20%), (month 5 was 15%), (month 6 was 12%). Then after the 6 month period, my commission plan was a flat 40% commission on all sales (new and existing), without any base salary.
The commission structure is not bad, but with the competition from all these other direct mail magazines, it’s extremely difficult to sign on new clients. In a good month, I may only get 6 new deals, with an average ad rate of $250/mo x 6 month agreement = $1500 total gross for company, of which I receive $100/mo x 6 = $600 over the course of 6 months, or $100/mo towards my monthly check. Since new deals come on and old deals expire, it’s difficult to make even $4,000/mo gross.
I’ve discussed with my manager about a higher commission plan, or even one with added bonus tiers, but she simply states that my comp plan is very high for direct mail. If that’s the case, why aren’t I making a decent income. I do work this job full time, canvassing businesses and making over 60 calls per day.
One last thought, since this is already an established direct mail company, I figured that they already had their fixed expenses factored into the production of each mailer (printing cost, mailing cost, paper cost) some of those expenses would change slightly with the addition of a new ad, but for the most part, it probably wouldn’t change too much. If the owner is getting 60% of each new sale that they wouldn’t have gotten before, should I ask for a higher commission plan. Again, they don’t pay any of my expenses now.
I’d love to hear your and the communities thoughts.
Stuck in Limbo
Unfortunately, commissions for direct mail magazines is not something I have background in. So my comments would probably not be relevant except in generalities.
As for those generalities, it seems you could be making your principal good money. If so, then you should be entitled to a livelihood that reflects your value. On the other hand, if that is not true, then you would need to shift your focus to something what works better for both sides.
Hi,
thanks for your great article. I am interested in your thoughts –
I am interested in hiring a sales rep to sell my product to super markets. Once the initial order is won, there is little work involved in receiving the subsequent monthly orders as these are generated by software – little sales effort involved. Should they receive the same commission for each subsequent order?
Thanks for any advice!!
We generally approach questions such as your from this perspective: do you want to hire somebody who works for you as an employee whose job it is to create leads and an initial sale as an order-taker, or do you want to enter into a partnership with an independent businessman (the rep), who will build sales for you over time?
Many reps will not be very motivated to get a one-off commission. It is a lot of work to create a relationship with the buyer. That initial up-front work needs to be properly motivated: for example, with the hope of building a strong income stream for both you and the rep.
You have to think of the commission as not paid for service delivered by the rep on that one sale, but as part of a larger compensation package for many sales over time. Otherwise, you are in effect telling the rep that they are going to do a lot of work that never gets compensated (for the sales that don’t materialize).
So you should consider the business from the reps point of view. The rep can make you a lot of money over time. Wouldn’t you want them to be motivated to do so?
I wanted to know what is the average commission percentage for independent sales rep that only provides leads/set appointments (company closes sales), for monthly service based product.
Unfortunately we don’t have specific insights into industry averages of the type you are seeking. However, it would seem to me that as the type of service you are seeking is really lead generation. As such you could view it as a portion of the total commission. So as a guideline, say your “full-service rep” commission is 15%. But that includes follow up with the customer, incentivizing new sales, building your line, and many other contributions to your success.
It would seem reasonable to me to say the a much smaller fraction of the total commission is due to the “lead generation” part of the effort. The specific size of that fraction depends upon the dynamics of your industry, and what that lead generator is expected to do, and how much those leads contribute to the overall result. I can imagine cases where “the lead generation is everything”. And also cases where the lead generation is almost a clerical task, a commodity easily replaced. So between these extremes you could go anywhere from the bottom of the range up to a good portion of the 15% of this example.
While I have not answered by giving you a number, I hope my comments help you analyze your situation to come up with the answer that works for you and your reps.
I am starting a new home party business selling jewelry and if someone wants to do the same thing, by working for me, what kind of percentage should I give? If she (“Jane”) wants to also hire someone else (“Mary”) to give parties also, would “Mary” be making a percentage from “Jane” or from me? Right at the moment, it makes more sense to me if they both work for me, commission only. But, this is not the way home parties are done.
Also, I’m really confused on this!!! If “Jane” hires “Mary” and “Mary” hires “Betty” and “Betty” hires whoever, this line is getting long and pretty soon who will be getting money? I’ll still be making money from “Jane” only. Right?
Sure hope you can clear me on this. I’m starting my business real soon.
You are on the path of “multi-level” or “network” marketing. While such a channel is quite viable, we don’t specialize in that area. There are many other websites that cater to that type of channel, so I suggest that you search further.
You could use search terms like “party plan”, “multilevel marketing”, and “network marketing.”
I hope this helps!
I would like to hire reps for our perfume company to go to independent retail stores/boutiques and give our samples/PR info to store managers. What would be a reasonable commission when wholesale orders are placed?
Most reps on our database receive a commission between 5-15%. However, since we deal with every market available, it is best if you communicate with others in your specialty to understand what the acceptable commission is in the market that you are going into, so that you are not only fair to the rep or rep agency, but also to yourself.
I want to bring a couple of people onto my team who would visit bars, liquor stores, introduce our vodka, and provide leads for the sales reps who work directly for the wholesaler and take the actual orders. I’m having difficulty determining how to determine a commission for these guys. Any thoughts? Thank you!
I cannot be sure but it sounds like you are part of a rep agency, as you refer the wholesales as apart from your team. So in effect it seems to me at first glance that the people you are seeking are working for the rep agency. Or it could be that you could think of them as sales assistants to the reps. If this is so, then you would have to figure out how much of the total commission on you are willing to pay to these assistants, or even a rate that is not based on sales but rather on effort for the lead gathering.
So my initial response addresses some of the possibilities, but cannot be more specific with more info on the details of the relationship.
Jas,
Thank you for your words of wisdom, I will put your advice to use. One more thought/question I have..Let’s say I do offer the “exclusive territory”, would you recommend 10% as a base commission regardless or offer a lesser commission (say 7%) if I am the one that would end up closing the sale? Thank you!
Setting your commission is something that we cannot easily do because we are too far removed from your specific situation. However, you should be aware that 10 – 15% is considered a normal commission level across many industries and markets. Lower rates would not be typical until you get into very high dollar volume situations. These considerations are even with exclusive territories.
How much total commission do you think the rep can earn from representing you? ( A rhetorical question – no need to respond!) Start from that thought. Is that amount something that then can create part of making a living for the rep?
I am an artist and have created a line which specifically markets to wineries and residential wine lovers. The average cost of my main item is between $700-900. I have an interested sales rep and am trying to decide on compensation. My thought is to pay 10% of direct gross sales. What I am unsure of is what are the common expectations (besides the final sale) of her to achieve? She would be independent so would I also need to compensate additionally for any computer/social media developments she could assist with? Is the commission usually just based on her direct approach to potential customers & her travels? Also I would provide all the printed materials and samples she would need for contacts. Would REALLY appreciate feedback soon, I am new to all this marketing biz.
My first impression is that there are two separate services you a seeking from this rep:
1. Sales
2. Consulting
The sales portion of the engagement would fall under the normal concept of commission. But if the rep is helping with social media developments, that seems to me to be something outside of the usual sales representation arrangement. For example, you could hire a consultant to help you, and you would have to pay for that service. I am not thinking that the rep should provide that service “for free” along with the selling that you expect.
It is typical for you to provide sales materials. However, the commission would depend upon whether part of the incentive you are offering includes an “exclusive territory”. If so, then the rep gets paid for all sales in that territory. The idea of an exclusive is that it motivates the rep to work for you. If the rep gets $70 – 90 per sale, then would that be enough to pay for the portion of the reps time that is dedicated to you? If sales are sufficiently high, perhaps the answer is “yes” and you don’t need an exclusive arrangement. Otherwise, you have to sweeten the deal to make it worth the reps time.
Thanks. I agree with your point too. I want them motivated to give exceptional service, build relationships and get referrals 🙂
Thanks. I want to make us all rich and have no problem rewarding the right sales people for business they’ve generated and contribute to. What I would like to do is make sure there is always a hunger in them to generate new business.
I have been thinking that rather than a flat 20% paid monthly, starting higher at say 30% and reducing to 10% over the duration of the agreement. So they get the same amount overall, however I am reducing any complacency that could be caused by them hitting a “safe” income level when they hit a certain number of sales. Is this something that is done?
You could certainly do something as you propose. Ten percent is certainly within normal ranges for commissions, so one way to think of it would be “10% ongoing, but 30% to bring in the new business”. Or something like that. It kinds of makes sense too because on the one hand the 30% is higher motivation, but getting the new business is harder.
I just want to make my point about not cutting them off entirely for the long run, as that is what builds loyalty with the rep for the long haul.
I am looking for commission only reps at the moment for my business. What they are selling is a social media marketing package that is prepaid monthly, an amount between 1500 and 5000 per month, for either 3, 6 or 12 months, so an agreement is potentially worth 60K, although it is up to our social media managers to be effective and keep the client happy and in the agreement (as they are not obligated to continue).
How should I structure the commission as I want to reward the sales person, however if the client doesn’t stick around for the full term I don’t want to have lost money? And if they aren’t really responsible for them continuing with us, how does that work? I also want to make it so the sales people want to continue to get new business and not become complacent because of a trailing commission. I hope that makes sense.
Is there a model for this type of sale?
There seems to be two parts to your question.
(1) If client does not stick around — seems very similar to many cases, in that if the client is paying monthly, then the rep should get paid monthly. Huge risk to you if you pay “in advance” and less incentive to the rep to keep the client happy.
(2) It is a very common question about why the rep should be paid because they have little future involvement. While “your mileage may vary”, we find that the most profitable and best incentives for the rep to really produce over the long term is the hope of a residual income stream over the long haul. You should think of your relationship with the rep as a partnership, where if the rep makes you rich, you should make him rich. Don’t think of the rep as a wage earner who is fully paid at the end of a single sale.
If I hire a rep and pay him based on sales of my product and he sells to everyone he was assigned to, at 1% he would make $30,000.00. Isn’t this enough for maybe contacting a few Buyers he may already know, or does
$60,000.00 have to be offered. This still doesn’t reach the 5 to 15% which would be a ridiculous amount of money for probably one week or more of work.
You are looking at this the wrong way. You are in business to make money. The rep is also a business and needs to make money. If that rep can grow your business by millions of dollars, wouldn’t you want him too? There are very few businesses that would work for 1% commission.
If that rep makes $30,000 how much do you make? And how much do you make over the years from that customer?
Is your business making a 1% profit? If so, then 1% for the rep is fair. But if it is more than that, than you should think of the long term, where a good rep can make you rich, along with making himself rich. You should not think “the rep is costing me X”. You should think “the reps is making me millions.”
i’m an artist in maine. i produce a line of note cards and prints which i have been selling to local gift and tourist retailers. i’ve been making calls myself but now i’m thinking about turning this over to a sales rep agency as i believe my time can be better spent in the studio. approximately how much should i expect to pay in commissions?
Most reps on our database receive a commission between 5-15%. However, since we deal with every market available, it is best if you communicate with others in your specialty to understand what the acceptable commission is in the market that you are going into, so that you are not only fair to the rep or rep agency, but also to yourself.
Depending upon the dollar volume, expect to be at the high end of that range. Or even higher if the rep is going to have to create a market for you.
hi, what about a toy and gift rep percentage. what is the going rate and is it on net or gross sales
I would say the going rate varies between 10 – 15%, but there are many variables that could affect this. Such as whether the line is well-established, or just breaking into the market. If you mean by “net sales” gross sales less returns and allowances, then I am more familiar commissions on net sales. But I was never in that industry, so your mileage may vary. Each relationship could have its own special aspects.
I’ve been doing freelance sales on commission for a company for 10 years. there used to be an accountant who paid me every 3 weeks or so, based on what i was bringing in. the accountant left, and the CEO took over accounting duties, and I was then paid once a month. the company was then taken over by another company, and now my commmissions are being paid every 2 months, as they want to take care of the payroll first, and then deal with outsiders, of which I am unfortunately considered after 10 years. However, with the new company, the payroll is bigger, so the money i am bringing in goes to pay other people, and I am waiting longer and longer to be paid, in the last 4 1/2 months i’ve only been paid once. i’m trying to keep the relationship professional so as not to lose the freelance sales position, asking every week when i’m getting paid, but i’ve had to relegate my time to other things in order to make money to pay bills and rent and such. it also makes my gumption to sell go down, as I have less time and less positive reinforcement to make sales when i’m not getting paid. any suggestions?
I am hoping that other readers might chime in.
Although this comment is a bit off topic, I would ask if you have a contractual agreement – a “Sales Representation Agreement” in place. If so, you have a legally enforceable contract. If not, I suggest that you consider establishing one.
Thank you for the reply Jas.
My approach would be a rather small. I am going to introduce the cosmetic company to the U.S. buyers, starts with mostly small retail or online stores (buyers). The buyers will then directly order from the cosmetic company and I will receive commission from the cosmetic company only. The cosmetic company is small size and I really don’t think they will pay me any up-front costs other than printed/digital marketing materials. Perhaps I can ask for 25% commission?
In your particular line, perhaps 25% is not too much. I am generalizing with more normal rates of 10 – 15%. You might have to justify to the company that you are asking for a higher amount because you will have start up costs to create awareness, etc.
But you might not actually have such costs. I am simply guessing what circumstances might apply and how you might handle them. I think if you can get 25% you are doing well, especially if you keep your expenses down.
Hi There,
I am about to Rep for Korean cosmetic company who wants to sell their cosmetic
and beauty care lines in the U.S. Launch in Metro NYC and expend to other area.
Currently they have no assigned Sales Rep.
They will be No retainer fee and a commission-only independent rep deal.
I am hearing from other rep that commission can be Gross Sales Volume of 10-30%
(without tax, customs duties, insurance, and shipping charges)
Can anyone advise me on a fair Cosmetic Sales Rep commission?
While each industry and relationship is different, 10 – 15% would be typical. So if you are in 10 – 30%, that might even be better for you.
However, you have not said anything about expected launch costs. Breaking into the new market is going to make it more effort for the rep. So if there is no retainer or provision of other up-front costs, the higher end of the 30% range would help cover your extra costs.
But you are taking the up-front risk that you can successfully establish the market and brand. So you have to weigh your channel development costs against the higher commission, assuming that in fact the commission will be at the higher end of the range.
Hi: Since I’ve done quite a bit of educational marketing in the past, an acquaintance has asked me to promote his computer programming books. Here’s my question: The books are listed on Amazon and Barnes & Noble, as well as on the author’s own publishing site. No one else is marketing them. I’ll be promoting the books through several channels on the Internet, as well as telephone calls. Sales may come through that I’ve generated on the web, but there’s no way connect me with them, since I’ll not see purchase orders. How can I be sure that I’m being paid on sales that I generated through contacts on the Internet? Someone may see a post on Twitter, for example, and order the books – I’d never know it. How are people dealing with this kind of commission structure? Thanks.
Commission structures must reflect the reality of the relationship between the creator of the product and the marketer or seller. If you are acting in the traditional outsides sales manner in which you develop a territory, call on customers, produce orders, etc. that relationship is well understood. In such cases, the amount of sales that come directly through you are deemed as a good basis for establishing commissions.
However, when sales occur over the Internet which cannot be directly credited to your efforts, then a different model is perhaps more appropriate than one of “independent sales rep”. Rather it seems that there is a certain element of partnership involved. You would promote his products and a means of determining how you can be commissioned must be derived. It might not work to base the rate upon “your sales”, because in this model what does that mean?
It might be possible to agree with your principle on a hybrid model, whereby you get a certain rate say 15% for all sales that come directly through your effort, and a lesser rate (say 3 – 5%) on ones that do not. The thinking is that these indirect sales could be vastly larger than the ones you have direct involvement with, yet your efforts related to the sale are by definition indirect. That is, you did not close the deal, but perhaps you created the sales strategies, collateral materials, promotions, etc.
Another approach would be to have commission on your direct sales plus a fixed fee for the indirect efforts.
I believe it always helps to look at motivations and overall benefits. Can you make a living from your efforts? How much compensation does that require? If at the end of a year both you and your principal have answered that satisfactorily, then the deal is working.
Hi, my husband and I recently started a business to sell a “gadget” that he designed. We have a patent pending and we have developed prototypes.
We recently met a regional rep (fishing products) through a close and trusted friend and we are looking to work with this rep to get our product into retail chains and wholesale distributors.
We will provide all the marketing such as packaging, POS, website, social media, etc. We expect the rep to utilize his established contacts to generate sales orders and perhaps coordinate product reviews with various publications. We anticipate that all orders he receives will be routed to us and we will coordinate fulfillment/delivery.
Couple questions:
1) If the cost to manufacture is just under $9, what is an appropriate wholesale amount, retail amount? Is there a standard formula.
2) What is an appropriate commission?
3) What if WE generate orders via the website, should the rep receive a commission?
4) Should the contract/agreement extend beyond one year?
Your feedback is much appreciated as we venture into uncharted territory…thank you.
I will try to answer your questions based in part on my experience in manufacturing, as well as in the manufacturers rep channel.
1. We did used to have formulas for computing selling prices, and at the time, you could call such formulas a “standard”. However, my experience here dates back to the 1970s, so it might be out of date. In any case, we engineered the selling price based on the following build up of prices.
Raw material and direct costs
+ Indirect cost (computed via a “burden factor”)
= cost to manufacture
The “burden” we had from the accounting department. An example would be $3 for raw material and direct costs. Let’s say the burden is 200% (or times 2), so you add another $6, giving a cost to manufacture of $9. These indirect manufacturing costs are also called “overhead”. When you say $9 to manufacture, you should just be clear whether that includes the overhead burden or not, and adjust your computation accordingly.
Then to the cost to manufacture, you next add on the selling and general and administrative costs. For simplicity, you might again multiply times a factor. Let’s say that the accounting department has computed that the selling and G & A is again 200% (times 2 again).
cost to manufacture
x Selling and G & A
= cost of sale
Multiplying that out gives you $9 times 2 = $18 to cover direct and indirect costs, plus selling and G & A, or your cost of the sale.
Then you finally have to take into account your profit. Let’s say you want a 20% profit margin on this product line. So with a little math, you would take the price and divide it by 1 – .20 = .80. Doing that with the $18 example gives $22.50 as the final selling price. Instead of multiplying, you divide by the discounted amount, so that when you get the $22.50 price and take 20% of that you get back to the cost of the sale.
cost of sale / (1 – profit margin percent) = sales price
The combined formula would be as follows:
((material * (1 + burden factor)) * Selling-GA factor ) / (1 – profit margin percent)
As a side note, the above also assumes that in bound shipping costs are already included in the material cost.
This above formula assumes that there is only one layer from you to your customer. The computation would change if you were selling to a distributor who would then have to do some of the same steps to get his sales price. But in that case, your selling and G & A might be lower, as the value added service of the distributor would be contributing that value. But if you were just selling to the retailer without any intermediaries, you could then “keystone” to get the retail price. Let’s say multiply again times two, and your retail price becomes $45.
Assuming all components of the price build up stayed the same, you could simplify and just say “5 times manufacturing cost of $9 gives $45 for the retail price”. Your selling price is $22.50. You asked me “what time is it” and I have told you how to build a clock. But with all these computations, you can really see how the costs flow. A failure of many startups is to set their price too low because they don’t cover all these factors, and thus underprice their products.
2. Regarding commissions, that depends on your industry. You should ask others to see what they are paying. Our rules of thumb (as posted on elsewhere on the page) are as follows:
– 90% of all commissions paid to reps are between 5% and 20% based on gross sale amount.
– Commissions differ with each industry.
– The best way to establish your commission amount is through conversations with knowledgeable reps in your industry.
3. Website generated sales: many people find it hard to want to pay a rep for sales “he had nothing to do with”. However, we take the opinion that in some cases such a practice can work to your advantage. If the rep has an exclusive territory, then building a profitable long term relationship with that rep depends upon his motivation. You are adding to his motivation to build a relationship with a customer if you pay him the commission on sales in his territory. You have to judge whether that applies to you, by determining if it be a case where the rep could nurture that relationship and build you profit for years to come, or whether there is no way for the rep to become so engaged with the website customer.
4. The term of contact renewal would likely serve all best if it was for a relatively limited term at first with the option to renew. That gives all parties the chance to see how the engagement works out. Here is some language from the sample Sales Representation Agreement that we provide to our RepHunter members (https://www.rephunter.net):
TERM AND TERMINATION. This Agreement is effective on _______________, and shall continue for a period of one (1) year. Thereafter, it shall
automatically renew, for successive one year periods, unless either party notifies the other in writing of its intention not to renew at least 90 days before the end of the initial term of this Agreement or any renewal term.
I hope this helps!
I own a manufacturers rep company that has recently taken on a new product line. The new company is holding a national sales meeting next month and has invited all their North American reps to attend , although no offer has been made to pay all or a portion of travel and accommodation expenses.
We have 3 sales people and a small base of current business. Should we be required to pay travel costs or are they the responsibility of the principal?
This would be a great question for our forum when we get it set up!
The easy answer is to say that your Sales Representation Agreement covers this matter. However, that begs the question of what should be in that Agreement. It is common for the rep to be expected to cover a certain amount of sales meeting costs. Yet it could also be a point of negotiation with the manufacturer.
Another consideration is how well established the company is. You said they were new. If you take on these costs, you are expecting a return on your investment. How likely is that to bear fruit? If is seen to be more risky, then you have grounds to expect at least partial reimbursement, as the costs are part of expected launch and roll out costs for the new company.
Finally, I suggest you join the Manufacturer Reps group at https://www.linkedin.com, and post your question there.
I just signed up as a sales rep. with a company that my friend owns. I am bringing in a large watch company, that I will be putting into retail locations. He is offering me 6% commission (the company is giving us 12%, and he wants to split it 50/50). He also wants to split my travel costs, so he would pay half and I would pay half. Is this a fair deal?
It is hard to know if it is a fair deal in isolation. You would need to look at your industry and find out what comparable rates are. I cannot tell from your description the fine points of the deal. Specifically, what are all the lines involved, and what the responsibilities of the various parties are.
However, if you look at the 12% as the full commission, that would be in line with many industry averages. And if you need to split that, then so be it. The travel reimbursement helps. I would think you have to decide whether your time spent on this project is worth the 6% commission, as compared to other lines you could take. If you don’t have alternatives for your time and effort, then maybe it is a fair deal for you. On the other hand, if you could develop other lines that paid the full 12%, you might be better off developing those other lines.
Hope this helps!
Hi There,
I am considering taking up a position in international trade. The company exports fresh produce to various markets around the world. They are offering me a base salary that is slightly lower than the average wage of the country where I live. We have also discussed a commission on top of this. I am wondering what kind of percentage I should be aiming for? I have been unable to find much info related to this industry so would appreciate any and all input!
Thanks.
I am hoping some of our other readers might chime in. The position you are describing as a salaried position is not what we define as an independent rep, so it is outside our normal scope. In addition, the international aspect is outside our expertise.
We are in education service industry. A sales rep will provide leads to us, from there we provide the student services and the service may be repeatable. How should we structure the commission rate given that the service is repeatable? Should we pay based on total repeatable businesses obtained from one customer? Or can we put a cap and take the lesser, say the minimum of either 10% or $100 per customer? Thanks for your advice.
My suggestion is to put yourself in the rep’s shoes. If you were the rep, how motivated would you be to work hard to find new customers under the cap? Let’s say the rep could only earn $100 per customer. How much effort and time would that rep put in? I would say his efforts would be quite limited.
On the other had, suppose there was no cap. You might feel that paying the rep thousands of dollars is too much. But realize in that case that you are making about 10 times what the rep is making. Wouldn’t you want a rep to make hundreds of thousands so you could make millions? Then you have a rep that is motivated to keep the customer happy, as well as find new customers, because he can make a decent living and make you rich. There are repeat sales and repeat commissions, but the savvy rep is motivated to keep that customer happy and lucrative for you over the long term.
With the cap, it may seem more “fair” from your point of view, but you will be stuck with the hundreds for the rep and thousands for you instead of the “sky is the limit for you both.”
I am presenting these thoughts with the hope that it gives you perspective. You still have to balance the needs of your business and your customers on the one side, and on the other side the realization that the effective rep is entitled to his livelihood.
we sell consumable repeat use products, how to pay our rep for business from repeat, exist custmoers,within his territory, shall we set up different commission rate with repeat business or new business?
We also have inside sales, how to pay rep commission if and inside sales rep call a deal in his territory.
does he get all the same rate for these two situation?
thanks
My quick reaction is that you are trying to save money by paying the rep less for repeat business. You should realize that to get the best results from working with reps, the reps need to be motivated, and you need to give them some incentive for building your business. The prospect of excellent residual income is what motivates a rep to put in often under-compensated initial work to build your brand. The longevity of your business can only benefit from having very happy reps. Happy customers -> happy reps -> happy you.
Of course, these are generalizations, and some specifics of your business may change it somewhat. But in our experience, if you would like the reps to keep the customers happy over the long run, you need to keep the reps happy over the long run.
The inside sales issue is different. It is essentially caused by a conflict in what you mean by a “territory” and whether it is “exclusive.” The idea of a territory is that a single rep “owns” that territory. But if inside sales are selling into that territory, then the territory really doesn’t belong to the rep. However, this is a very common problem. Again, unless you want the rep to ignore certain customers, they should get a commission. One way this is sometimes dealt with is to have “house accounts.” Yet, over the long run, this could also be a cause for friction, especially when the sales-rep-developed accounts are taken over as house accounts. I would advise against such a practice. But it is possible to have as a house account one that was truly developed “in house” and not by the rep.
@Simon, from Matt:
We probably have a boat load of subscribers that would love to get into a Canadian national retail chain.
Our service is free for reps. Please create a profile at https://www.rephunter.net and search for lines.
@Glenda: the questions you ask would be governed in part by the details of the industry and positioning of the company within that industry.
For medium to long sales cycles, a draw over a long period of time is quite feasible. It would not be reasonable to expect that if had worked over a long period but it did not work out, for you to take all the risk.
Do they have other reps who are in a similar position? What type of arrangement do they have?
In any case, the specifics you are asking about should be spelled out in your representation agreement, once you have negotiated them.