Estimated reading time: 5 minutes

It's Only Common Sense: An Offer They Can't Refuse

Editor's Note: To listen to Dan's weekly column, as you've always done in the past, click here. For the written transcript, keep reading...For the past couple of weeks I’ve been talking about the rep/principal situation which, these days, is as polarized as the Israelis and the Palestinians, or the Republicans and the Democrats, or the rivalry of all rivalries--the Red Sox and the Yankees. But now it is time to declare peace; it is time to find a way for the reps and the principals to start getting along and to find a way to work together.

These columns have drawn a great deal of interest. I've received numerous phone calls from reps and principals wishing to share anecdotes about why one is worse than the other. Enough already--I’ve got it and I hear you: You guys don’t like each other and you want to show me examples of why you don’t like each other.

But it’s time to stop this now because the fact is, in the end, you need each other; there's no way to avoid it. Companies make stuff and need someone to sell that stuff; reps sell stuff and so they--you’ve got it--need stuff to sell. See, you need each other. So how are we going to make this thing work? How are we going to work together in a manner that will be beneficial to both parties?

Here's the first step: Everything begins with a contract, and what I've discovered is that the contract or reasonable facsimile we've all been using is no good. Why? I'm going to let you in on why every rep I have ever met hates the contracts we throw at them. It’s…drum roll, please…the termination clause. All of these contracts have that hated 30-day written termination clause. The reps I spoke with said that this clause is an insult to them both professionally and, even worse, personally.

As one rep told me, “When I take on a new principal, I expect to do months and months of what I call missionary work. I am going to have to use my own car, pay for my own gas, pay my own expenses, and use up my own time for months--all on my own dime--before I can even smell a commission check." In this rep's own words, the process goes something like this:

• Visit the new principal to learn about his company and what he does best, what his product or service is.
• Develop my own sales plan and my own personal strategy incorporating this principal’s product into my territory. I have to do this on my own.
• Then I have to develop and implement a lead-generation and prospecting plan
• Make cold calls. Sure, I have a lot of long-term relationships, but I still have to go out and visit them and convince them that this new company I'm representing will do the job for them. Although not as time-consuming as cold prospecting, it is still time consuming. Not to mention the fact that I am putting my own reputation on the line, which is a risk because I am still not sure how this new company is going to perform.
• Visit everyone I know already and the new companies. We are now talking about three or four months into this new relationship and there is still only money going out--my own money.
• Then if everything goes well, there will be the customer survey; sometimes it is a visit survey which I have to go on, which cost more money--my money.
• Then we get the first RFQ and then the second and then the third and then at about the six-month mark, four months if luck is on my side, I’ll get an order. Usually a small order to see how the supplier does.
• The supplier has to build the parts and deliver them and, more often than not, there are start-up problems that I have to get involved in.
• The boards are finally delivered and the invoice is sent. Remember, I do not get paid until the principal is paid and then only about 30 days after that. We are now at about eight to 10 months and only my money has only been going out. I have not made a cent yet.
• Finally, after all that time, I will get my first commission check from this new principal. I think the average length of time from signing to first check is about 10 months. And that’s if everything goes well.

"After going through all of that--the money, the time, the effort, the investment--the principal can terminate me in 30 days," explained this rep. "Seriously, this makes no sense at all to me and that’s why I don’t want to work with board shops anymore. It is just not worth it to me. It is not time well spent and money well invested.”

This particular rep went on to explain to me that he is not complaining about having to do all of these things. He understands that it's all part of the sales process. In fact, a good rep likes that part of the process. But, if he is going to invest all of this time to get an order for his principal, he feels that it is only fair that the termination clause is extended to at least six months, if not a year, from the time of signing. I have to say I agree with them.

Oh, I know, I’ve heard all of those stories about crummy and lazy reps, but I am talking about great reps, real professionals who just want to be treated as such so they don't have to worry about investing all of their time and money for nothing. These are reps who just want to be trusted and given the chance to do the best job they can for their clients. Take a look at that termination clause, talk to your reps and, together, come up with a new one--one that is more logical, one that, in the end, is a win/win for the two of you. It’s only common sense.