Working with independent sales agents can be an incredibly rewarding and lucrative experience for companies. They require less management than their in-house counterparts and zero up-front monetary investment apart from time spent training. Their existing client networks also make it possible for companies to quickly break into markets you might otherwise have no presence in or your sales employees can't reach.
But there are a number of important criteria that companies must consider before starting their search for independent (commission-only) sales agents. This article will give you 7 important things you must know before working with this type of sales professional.
1. Build Your Brand BEFORE Approaching Independent Sales Agents
Independent sales agents are here to support your company, not build it from the ground up. Before speaking to independent agents you must generally have already achieved product-Market-fit as a minimum and be able to back it up with proof of existing happy customers.
It's very rare that an independent sales agent will work with a company right from day one. Their job is not to build your business for you, but to support your growing business by making additional sales within the territories they cover. You might have a killer new product or service that's bound to change the way we do business but if it's untested in the Market you may struggle to attract agents straight away.
It's crucial to have your business and sales processes mapped out first as agents will definitely want to know that you're ready and in a position to work with them. Many companies use the free resource below to build what's known as a 'Sales Playbook' which will help you get there easily.
Here is the powerful free resource that expert independent sales trainer Jessica Magoch used to create her own 'Sales Playbook' that grew a $40 Million per year sales division for a startup in NYC
What is an independent sales agent?
Independent agents tend to have many years' experience working in sales and make a decision, like any entrepreneur, to break away from the constraints of employment and set up in business for themselves. They choose to become freelancers because they're confident they can make more money and be more profitable on a commissioned basis by representing multiple company Principals and complimentary product/services lines that can be up or cross sold into their networks. As such, they tend to be very effective networkers with no shortage of opportunities.
If your business doesn't offer something tantalizing that's also backed up with proof of product Market fit and happy existing customers, they'll have little incentive to sell for you and will more than likely opt to work with another more established company instead.
2. Be Prepared For Freelance Sales Agents To Earn More Than Senior Management... seriously
One of the biggest advantages to hiring freelance sales agents is that you don't have to pay them regular salaries. Taking on full-time employees can quickly get expensive, between mandatory benefits, time off, and warm-up periods. Freelance agents, on the other hand, require none of these things. They work when they want to work, come ready to sell, and only make money when they successfully close new business.
That's not to say that you won't be paying your agents a lot of commission down the line, in fact sometimes more than the salaries of senior company management, but it's important to remember that self-employed sales reps who earn high commissions earn their worth by bringing you business you wouldn't have otherwise had, without any up-front financial risk.
Agents will (and should!) expect to be paid an agreed-upon commission rate at the close of every sale. They will also expect to be paid recurring commissions on repeat business from their customers. The rule of thumb is that you might be servicing your new customer, but the business belongs the agent that closed the sale. The fastest way to lose an agent that brings you a ton of business is by getting greedy and letting that person go. 9 times out of 10 their clients will leave with them and your company will also suffer from a negative perception should you want to work with reps in the future.
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An effective agent's commissions can quickly add up. Make absolutely certain that you have the funds before you start making promises. A contract should be put in place before starting work with a rep and you must always be careful to pay commissions when they are due and on time. In addition, don't be tempted to take on so many agents that your supply can never keep up with your demand.
It can be a very exciting time when agents start to show interest in your business but the last thing you'll want is to have 200 prospective clients ready to sign their papers and only enough resources to accommodate a third of them. Even worse, not being able to fulfill the orders of the customers they bring to you.
3. Fair Contractual Rep Agreements Are Vital
Figure out what your contract with your agents is bound to look like. Do you offer a first-month bonus? Are commissions paid within five days or by the end of the month? Are there incentives for closing larger deals as opposed to smaller ones? Can hugely-successful agents expect to earn extra commission after hitting a certain benchmark?
Know how things are going to play out and commit to it. Paying agents their commissions late or not at all is a horrible way to inspire loyalty, generally looks bad for your company and can even lead to a lawsuit. If you can't reasonably promise something, then don't.
This video will help demystify independent sales rep contracts for you
4. Calculating Appropriate Sales Commission For Your Agents
Services, due to their lower cost to the company, typically net a higher rate of commission (between 20 and 50 percent) than manufactured products that incur higher overheads (anywhere from 7 to 15 percent). You can adjust those numbers to be higher (or lower) depending on how difficult it is to sell your opportunity and always expect negotiations with the agent who may command higher commission levels if they have solid networks they can introduce you to.
Some agents will be willing to work at a lower commission if your opportunity is easy to market, leads are provided and has a relatively short sales cycle - or a combination of those factors.
Take a look at our sales commission calculator
5. Search for commission-only sales reps in the right places
Take your search online. Independent sales agents are always looking for new opportunities to grow their portfolios. While generic job-hunting sites all have plenty of sales agents, you should be careful when advertising with them. Remember, you're searching for a very specific type of sales professional and spending too much time trying to convince unemployed sales people to work for free can quickly drain your company's resources.
Instead, you might find more luck with organisations like CommissionCrowd that are dedicated to the independent sales industry and also provide all of the tools needed for both the sales rep and company to manage multiple working relationships globally.
Create a compelling opportunity. A generous commission always helps to attract attention, but it's not enough on its own. Take some time and come up with a truly noteworthy title. Think of something that will draw in agents and inspire them to learn more about working with your company. Highlight that one thing that would excite you more than anything else were you in their shoes.
Then move on to your description. Has your company won any exciting awards? Now's the time to gloat. Talk about how many countries you operate out of, how many people you've served, who some of your big-name clients are (with their permission, of course), what other work your founders have done, or how far you've come in the little time you've been around.
Every company should have something interesting to say, but the most important thing to remember is your tone. You need to remember that independent sales reps are not employees and should be regarded as partners in your business. The worst thing you can do is list a number of demands in the same way that you would in a traditional job description. This kind of sales professional will also be rarely work exclusively with one company, instead preferring to build diverse portfolios of products and services that compliment eachother.
The biggest mistake you can make is expecting the agent work a set number of hours, achieve strict sales targets or work from your company's premises. Reserve these rules for employees, not independent reps. The second is to avoid being long-winded. Agents don't want to read twenty pages about every accomplishment, struggle, and turning point your company has ever experienced. Keep drawing your opportunity out, and you can easily lose people who were already on-board with what you were selling. Instead, focus on the most interesting highlights you can muster and make yourself memorable. The best advice we can give is that you need to sell yourself to them, not the other way around.
6. Choose Your Sales Partners Carefully
Don't jump in too quickly and take on everyone that shows an interest in your sales opportunity without first learning more about them. If you're selling root beer, your ideal agent will have established clients in the soft drink industry. That's not to say that an agent with twenty years of unrelated experience shouldn't be hired, though. Just be scrupulous when it comes to who you accept. If you think your opportunity requires people with five years in the business, prioritize those people first. Don't pick independent reps who you can tell don't believe in your vision, image, or company culture. Bringing agents on without first checking their credentials can be a huge waste of time for everyone involved.
It's also important to note that you can diversify your search and shouldn't always have to limit yourself to working with independent sales agents that have experience only in your niche. Agents are in and out of a variety of different premises doing business every single day, they also have established relationships with company owners who may just be your next client. Let's say a rep who sells a line of gym equipment to Spas, hotels and leisure clubs is in with a client one day and notices that the lighting is needing replaced or hears that the hotel is requiring a new website, that agent can connect with a company that provides those things, make a referral and earn a commission on the back of the sale.
7. Reward Your Sales Partners Handsomely
Once a company agrees to work with an agent and visa versa, you have a responsibility to treat them fairly. That should go beyond just paying their commissions within your agreed-upon window. Agents tend to have the most loyalty and sell best for the partners that treat them well.
Want to encourage more enthusiasm? Surprise your agents with small gifts. Give them incentives when they sell particularly well or secure a big client. If you've got a product or service they can use, offer it to them. That way they'll know even more about it the next time they go to show it off.
Not all rewards have to involve money. Provided they're receptive to the idea, get your agents more and more involved with your company. That way they'll start to look at your team as a family, rather than just another product/service range to add to their portfolio.
8. Don't Treat Your Sales Partners Like In-House Staff
Remember that independent sales reps are not your employees. They are self-employed and will absolutely work with multiple companies to build portfolios full of complimentary products and services. They are not bound by the same rules as in-house sales staff.
Unless agreed upon otherwise, freelance agents are not expected to work on a regular schedule. They don't need to clock in a certain number of hours or show up in an office to do their work. Independent agents are primarily driven by how well they can sell the products in their portfolios. Overburden them with status reports, micro-management, needless meetings, or other red tape, and you might find your company going through a horrendous turn-around rate.
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