Manufacturer Reps Explained

Business Owner’s Toolkit:

Manufacturers’ reps–sometimes called sales reps, sales agents or even brokers–are long-term independent marketing professionals. Like yourself, they are entrepreneurs: small business owners who maintain an ongoing presence in a set territory for specific manufacturers. (A manufacturer is often referred to as the rep’s “principal.”) The rep-principal relationship is set forth in a written contract specifying such issues as territory to be covered, commission rate, computation and payment terms, termination date and so forth.

Unlike the typical “distributor” who takes title to and physical possession of goods and sells them later on at a profit, a “rep” generally only solicits orders for the manufacturer and does not carry an inventory. Using a rep instead of a distributor lets you (the manufacturer) control the price at all times. And unlike selling your product with your own sales force, you don’t have to carry all those extra employment-related costs for wages, benefits, taxes, insurance and so on. The costs of maintaining your own sales force accumulate regardless of the level of sales achieved for any given period. But you only pay your manufacturer rep his commission based on a percentage of his actual sales. A rep is a self-motivating entrepreneur–no sales, no commissions!

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