"I Sell My Furniture Through Independent Reps and I'm Worried About the Future" - 01/08/20 Edition
Stephen Says Column

Dear Stephen:


My family and I own a mid-size furniture manufacturing company producing high-end A&D oriented products. We invest in new designs, some say they are cutting edge, that we market to the industry through trade shows and social media. The business has been gangbusters for the past few years, pretty much like everyone else, so I cannot complain. We almost exclusively use independent rep organizations to sell our furniture, and I dare say these independent businesses are part of our success. From a cash flow perspective, it's a savior in a down economy because we have no salaries or benefits to pay. Then when they do sell, which thankfully has been happening a lot during the past eight years, we are only too happy to send out these fat commission checks that our independent reps have earned. We pride ourselves on keeping the same reps for many years, so it's a very family-like feeling. These are fairly large independent rep groups with an owner and three salespeople — sometimes more sometimes less. Not a mom and pop scenario.

Here is my question or problem. Many of these independent rep group owners are aging out. Most of the owners of these rep groups have qualified salespeople that work there, but I see the owners keeping the best A&D or dealer accounts for themselves. They make an effort to hire salespeople but then they don't do enough to make them successful so there is excessive turnover.

Let's face it, the main reason salespeople leave is that they are not making enough money, and when an owner does not pay enough base salary and then keeps the best accounts himself, there's turnover. On top of that, as the owners are getting older and set in in their ways, they tend to phone in their job, which affects the morale of the people working for them and another aspect of why they cannot hold on to people. Also of great concern, I see no succession planning in these businesses and that worries me because they are the lifeline to my customers. Most of the owners have become friends so it is difficult to confront them. My family has known them for years and they have helped our business grow, but when I talk to the owners about hiring better and more salespeople they always have an excuse. In some cases, I am tempted to make a change in a rep firm and in other cases, I just want to push for the company to get more feet on the street. Am I wrong? What can I do?

Signed, Independent Rep Problem
 
 

Dear IRP,


You are not wrong and it is a very big problem in every aspect of the furniture industry. That is because the furniture industry does not hire from outside the industry very often, so it makes sense that many in sales are aging out!

Here is your problem plain and simple. You have made a group of independent reps that are fat and rich and just too greedy. They need to share the wealth. That means raise base salaries and share the accounts so that salespeople that work for them are making a decent competitive income, the same as if they were working directly for a manufacturer. And how about medical benefits — something on everyone's mind these days and just as important as income. And succession planning! This can be used as an effective tool to keep good people at the company while securing cash flow for the owner, yet few owners do it.

They may be your friends and have helped your business grow but you are going to have to be direct with them, tell them your expectations of how many sales reps they need, and why, and tell them your concerns about them holding on to all the good accounts and how that could backfire on your business. If they will not change just find someone else and if they are over 60, start looking for your plan B back up which you will sooner or later need. I know that many of these rep groups are family businesses but it does not mean the son/daughter is as good as the father/mother and that's another thing for you to think about. Start making some changes and stir up the status quo.

And here is my Viscusi tip: do not go out and find another old-time rep instead find a top producer who works for a major manufacturer in a traditional job and wants to go into their own business. In other words, turn them into an independent rep for you. They will be forever loyal and you can teach them the right way to do it. Open them up as your rep and even help finance them for the first year. Be a little innovative and break the mold. The best new sales reps I see out there are people who left major manufacturers and wanted to be in their own business. They are young and hungry with new ideas and something to prove. Let them prove it to you!

Stephen