"In These Unusual Times I am So Glad We Go To Market with Independent Reps!" - 06/17/20 Edition
Stephen Says Column
Dear Stephen,
We are a midsized, family-owned, furniture manufacturer. We make products dealers love to sell and the A&D community specifies — we’re sort of a hybrid dealer and A&D line. We go to market using independent rep organizations and always have. In large metropolitan markets our independents are large organizations, and in smaller markets it’s usually an individual owner operator. I am sure you get the idea. We have no direct field sales employees. Our reps work on commission only so we have basically no sales expense until somebody sells something. That’s a nice feeling, but an even better feeling is signing a big fat commission check at the end of a month for an independent rep that has sold our products.
For us, I do not have to deal with cash needed for salaries, medical benefits, the 401K, car, travel and expenses for salespeople who may not be selling or showroom staff I would not need, considering what is happening in the world today. That is all paid for by the owner of the rep group that represents our company.
It has been an ongoing discussion in our family for years about the great profits we may be missing by going to market with a direct sales force. I am friendly with many of my competitors our size, and I talk with them at BIFMA meetings. They all have a different feeling on what to do, especially in the largest cities. Many of these other manufacturers have a combination of independents and direct sales teams. I have seen this with Andreu World, Bernhardt, Exemplis, Clarus and others. My gut tells me that is not for me and to keep my overhead low and stick with my independent reps nationwide. Our independents are like an extended family — especially now — and they are loyal and are bringing us business. What is the norm? Any thoughts on this discussion?
Signed,
I Love My Independents
Dear Independent Lover,
This question comes up quite often from medium-sized manufacturers wondering if it is time to hire their own direct sales reps. My advice is to stick with your gut, and stick with your independent reps. That is usually what I tell most manufacturers under a certain revenue number. Look, I strongly believe that we will see a “V” recovery and business will be better than people think, but whether I am right or wrong, why not keep your costs low and trust your proven strategy?
Independent reps need to sell your furniture because they only work on commission — they are profoundly motivated. There’s an old expression in sales — kind of crude but true — “you only eat what you kill,” meaning the best sales people believe it’s up to them to sell something if they want to be successful. That’s why the best sellers at a manufacturer sometimes leave and launch their own independent rep business. They believe in themselves. And your company is the beneficiary of this attitude.
Most of the “majors” have had to cut salaries and fire some of the support people, yet very few of the smaller companies who use independent reps have had to reduce salaries or lay off people. It is easy to figure out why. Let me expound a bit more: I do not believe in a “mixture” of the two types of sales forces; direct W2 sales-people in a major market and independents elsewhere. It looks self-serving and puts doubt in the minds of the independent reps because they feel once they build market share it will be taken away from them, and they will be replaced with a direct person.
The manufacturer is taking the best market like NYC and writing off the weaker markets. And, hey, guess who has huge overhead now in NYC, a city that is barely even open? So, if you try to have it both ways I think what happens is the independent reps will trust you less. Again, go with your gut, especially today. It is the smart way for smaller and mid-sized manufacturers to go to market and survive. This does not apply to the largest companies that need their own sales force, but I’d say any manufacturer at about $80 million or less should consider the independent rep strategy. After all, cash is king, and you will have a lot more of it by lowering your overhead while still providing a great living to the independent rep organizations that are, in effect, your business partners.
Signed,
Stephen
You can send your workplace questions to Stephen at: StephenSays@bellow.press
Questions selected to be answered, will appear in this column. Please use the Subject: Stephen Says for all emails. Stephen Viscusi is a bestselling author, television personality, and CEO of The Viscusi Group, global executive recruiters located in New York. Follow Stephen on Twitter @stephenviscusi. Like Stephen on Facebook and follow him on LinkedIn.
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