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It’s Only Common Sense: Reps Need Retainers

You heard me right: The age of reps working months and months on their own dime before they see a cent from their principals is over. We have finally come to this point. Reps are now going to need some sort of compensation before they will even think of signing on with a new principal.

They have finally had enough. They have had enough of working for months, wooing potential customers, guiding their principals through the introductions, the surveys, the qualification orders, the meetings, the quotes, the first pieces and on and on until after eight or nine months, six if they are very lucky, they get the first real order. They have had enough of all the problems that the PCB shop principal has with that first order, almost losing the customer a couple of times, before the customer finally delivers those first boards.

Then they wait for the orders to be built and delivered, and then they wait for the principal to get paid, which these days can easily take up to 90 days (especially if the customer is a large Tier 1 company that pays when it feels like it), and once the principal gets paid it is still 30 days before the rep gets paid. So think about that for a minute: In many cases (the most common cases actually), it can take a rep almost a year before he sees a plumb nickel for his efforts!

As an added bonus, if the new customer gets too big, the principal has been known to start cutting commissions or (better or worse yet, depending on how you look at it), cut the rep out altogether.

In all my years of working with reps, I have never talked to one who did not get screwed somewhere along the line by a PCB shop principal. Yes, it seems to be board shops who are the worst. They are the worst at treating their reps unfairly, which of course doubles my fun in trying to find good reps to represent board shops.

A small disclaimer here: Some shops are honorable and treat their reps like family. I even work with one shop who pays its reps weekly—the first Monday after they receive payment from the customer. But these are few and far between.

So we have come to this point. We have come to a time where reps want to be paid a six- or twelve-month retainer of anywhere from $1,500 to $2,500 a month, which is what I have taken to calling a hybrid contract. In most cases, the contract details a retainer and a reduced commission rate during the time the rep gets that retainer—say $2,000 a month and 3% commissions. Then, once the retainer is over and the rep-principal relationship is fully engaged, they will go to the normal 5% or 7% or even 10% commissions.

OK, principals, I can hear you screaming all of the way to my office here in Maine. I hear you saying that you had a rep on a retainer once and he screwed you. He did nothing and you lost all of the money you spent on that retainer for a year. To you, I say it’s your own fault. You did a lousy job of managing that rep. You did not have a set meeting every Monday afternoon to review his activity; you did not have a monthly meeting to review his forecast to see how he was performing against that forecast.

In short, you did not formally communicate (manage) that rep. Because if you had, the deal would not have gone on for a year. If you had communicated and managed that rep properly, it would have taken two or maybe three months at the most, if the rep was really a bum, to discover that you were wasting your money and stopped the deal. But if you did not do that and you paid a retainer for a year and got nothing, then shame on you because that’s a sure sign that you are not managing your reps properly. So, give that some thought and reconsider hiring a good rep when he asks for a retainer, and for heaven’s sake, communicate with reps and manage them so that together you are successful.

Consider this: If you pay a good rep a retainer of $2,500 a month for a year, that’s $30,000, which is less than you’d pay a customer service person. And for that amount of money, if you chose the rep wisely, you are getting a $125,000-a-year salesperson—one who comes with years of sales experience and all of the right customer connections to shortcut you into his accounts. That ladies and gentlemen is one heck of a deal!

Think about it: It’s time to change your way of thinking when it comes to good reps, reps who deserve to be part of your team…reps who, for a few thousand dollars and some time and patience, will increase your sales and drive your company to success.

Its only common sense.