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It’s Only Common Sense: Reconsidering the Rep Situation

I was talking to a good friend of mine the other day. This guy has been in PCB fabrication operations for almost 40 years, so I was a bit surprised when he started talking about how we should offer our reps a better deal than we do now. I was surprised because operations people are usually on the other side of the fence when it comes to doing anything for salespeople, never mind sales reps. They usually look at a rep as the proverbial “necessary evil.” But not this guy. He has a pretty good understanding of how hard it is to be a rep in this day and age, particularly a printed circuit board rep.

It is no secret that it has become nearly impossible to convince good sales reps to take on a new board shop. They either have a couple of good ones already and don’t want to rock the boat, or they have been so burned by PCB shops in the past that they are still scarred enough to never want to go near that fire again.

So, what do we do about that? We still need sales reps. We can’t function using only direct salespeople; that is just too expensive. As my friend and I discussed this, we realized that if we want to encourage reps to come back to the board industry, we are going to have to change our approach.  We are going to have to walk in their tasseled Bass Weejuns for a while and come up with a package that will not only appeal to them but, more importantly, motivate them to actually want to sell for our shops.

We discussed a number of scenarios, starting with the way reps are paid. When you think about the time from initial signing to when a rep gets his first check, you realize that it is one heck of a long time.

Once the rep has signed, he goes out to the customers he knows and introduces his new PCB principal to them. He works at convincing these customers that they need to try his new board shop principal. Even if these customers have worked with the rep for a long time and trust him, and they want to try our his new shop, it is still going to take a long time before they can give him that first order. They still have to send a survey and get it filled out. In many cases, they have to visit the shop, do some calibration quotes, and finally give them that first “try out” order and wait for the boards to be shipped. Once shipped, the boards have to be formally evaluated and officially received. Then and only then will the customer pay the invoice, usually anywhere from 30-90 days after acceptance of the boards.

 And once the principal receives payment from the customer, he will make his payment to the rep in the month following the receipt of payment, at least three weeks. And then the rep finally gets his money! Conservatively speaking, that time lapse can easily be six months. Meanwhile, the rep has had his own expenses from car mileage, lunches, dinners, and whatever else he has spent to get that first order, all part of doing business. But still he has paid for those expenses out of pocket before he has seen one red cent from his principal. When you think about it, that pretty much sucks—forgive my vernacular.

Then you have the whole performance thing. Which, of course, is completely out of the rep’s hands. The customer will only consider placing another order if the first boards were good, if they were on time and if they were economically priced. That’s a whole barrel full of “ifs” before the rep even gets that second order. So, you get the idea. It’s a very long process, and that is the area my friend suggested we work on.

He suggested that we break down the commission payout so that the rep would at least get some of his money sooner. If, for example, the rep’s commission was 6%, the principal would pay him 2% when the order is booked, 2% when the order is shipped, and 2% when payment is received by the principal. Not a bad idea that. I think it might just work.

But being the sales advocate that I am, I have another twist to add to the rep situation which I call the “hybrid” contract. Here’s how it works: For at least the first six months, the rep is given a small retainer that he can use to allay some of the costs of starting up with a new principal, say, a retainer of $1,500 to $2,000 a month for six months. While this retainer is being paid, the rep receives a reduced commission rate of, say, only 60% of his normal rate.

Then, once his book of business has grown to the point where the retainer is no longer needed, his commissions will rise to the full value. I have used this method in the past and it has worked out very well.

Think about it. If you are having a hard time finding good board reps or if you are not getting everything you want from the reps you have now, feel free to give these ideas a try. Rethink this whole rep thing and take a turn for the better. It’s only common sense.