The growth of a company depends to a great extent on how efficiently it is able to generate sales. Companies should focus on what they do best, which is to produce quality products or services. When it comes to selling and entering new markets, companies should appoint independent sales reps that have the know-how, experience, and connections needed to bring their products to the target customers.
Sales reps (short for sales representatives), also known as a sales agents, manufacturers’ agents, or distributors, represent companies in particular territories and sell their products in order to make commission or profit from the sales. They are extremely useful for companies of any size, regardless of industry. They help businesses grow and expand by taking on the responsibilities of seeking out new markets, finding interested buyers, and selling the product or service.
Reps usually have established connections with a set of buyers in their territory, and as a result they are in a good position to introduce new and relevant products to those same buyers. A single independent rep may represent the products/services of multiple companies. Companies may or may not give a rep or distributor exclusivity to sell their products in the rep’s particular territory.
Using independent sales representatives and distributors is a very cost-effective and efficient way for businesses to get their products into the market. Since they are not employed directly, businesses do not have to provide health benefits, pensions, or paid time off. Sales agents only make money if they actually sell the product, so they are highly motivated to work hard and generate a large volume of sales.
Typically, reps sign an agreement with the company that sets all the terms and conditions between the two parties. Whether the sales representative works on a commission-basis, on a buy/resell basis, on a fixed retainer basis, or any combination of the three, depends on the agreement.
The amount of commission received from the company on sales is also specified in the agreement. Commission percentages vary based on the industry, product, pricing, sales performance, and so on. There are exceptions, but commission is usually 5%-25% of sales generated, depending on the factors mentioned above. In order to motivate reps, companies may set increasing commission levels tied to sales performance in the month or quarter.
There are also sales reps and distributors who have the ability to warehouse products from the company. In this case, the customer can place the order directly with the rep, who then supplies the goods to the customer. In this arrangement, the rep makes money through the profit generated by reselling the goods to the customer.