Factsheet 2: Why Principals Need Sales Agents

YOUR START-UP COST BENEFIT

There are many reasons why principals need sales agents. The cost to companies of actually employing and putting salespeople (reps) on the road is very considerable and variable. These costs are incurred before the salesperson has even set foot in the door of a customer let alone shown a profit on the orders he gets. If the salesperson is ineffective it may take many months to find this out but salary and costs have to be paid during this time.

Because these costs and the income from sales are variable the company cannot calculate the true cost of a salesperson in it’s prices. They usually make an educated guess. Always remember, your sales are fixed cost sales.  All they have to do is add your fixed commission to their costs.

You are offering.

  • no initial costs
  • a fixed percentage of commission
  • no sales no pay
  • no sales management costs

As you are usually working with other principals, you are spreading these costs over perhaps several agencies.

 

Making the principal aware of these benefits

A considerable number of principals who are offering agencies do not even realise this major benefit or others that we shall mention. They tend to think in the general terms that they cannot afford to employ salespeople and that sales agents are cheaper. If you are fighting hard to gain a wanted agency remember to sell these and other benefits hard to the principal.

Remember, you already have something to sell, your services. It is essential that you know the benefits of your services in order to sell them to a prospective principal.

 

BRINGING HIM A NEW CUSTOMER BASE

Most sales agents choose to work in the industry they have sold in for some time. The sales agent therefore has customers who have been visited for a long time and who buy regularly . Even if the agent does not necessarily do business with a company, they know it exists, who is the decision maker and that it is a prospect. This is a major benefit to a principal. You are bringing him an extra, new, potential, customer base immediately. Also as you have probably built up a customer base with your other agencies, you are giving him access to them.

You could bring him

  • market knowledge in your chosen area
  • access to your existing customer base
  • your credibility attached to his offer

 Your credibility as a selling point

It is a fact that ‘people buy people’, meaning that most buyers, all things being equal, buy from salespeople they like and respect.  You as a sales agent will come to know this more than most salespeople. Respect should always be your aim. Most sales agents build up a base of existing customers who buy, or are at least prepared to listen about, further products from the sales agent. They respect the agents judgement.

If you are a new sales agent or are selling into an unknown market area, you do not have this advantage, but at least your principal will not be paying out salaries while a salesperson finds out who the buyers are.

 

ASSISTING PRODUCT BIASED COMPANIES

Many companies are what could be described as product biased. This means they are very good at producing the product or service but are not very skilful at selling . The owners probably do not come from a selling background or formed the company in the hope that sales will just appear. Other companies may have spent too much money developing the product or service and do not have enough left over to employ salespeople. As an agent, you have a tremendous amount to offer such companies.

Your advantages

  • you can bring in immediate selling skills
  • you can advise on how to present the offer
  • there may be flexibility in commission rates

The disadvantages to you

  • the marketing may be non existent
  • you will become an unpaid sales advisor
  • establishing these companies may be harder

Identifying the product orientated company

Your initial questioning, at the time of negotiation, must establish whether you are dealing with this type of company. It is suggested that you avoid this type of company in the initial stages of setting up your agencies as it can be frustrating.  Later, once you are established, they can be very lucrative in the long term.

The questions to ask.

  • how many sales people have they ever had
  • why did they leave
  • how do they intend to increase sales
  • what is their sales strategy

The answers given to these questions can usually identify a company that is weak in the selling area. You must always satisfy yourself that the product is saleable.

 

REDUCING YOUR DISADVANTAGES

You do, of course have disadvantages over an employed salesperson. Your principal has no control over the actual amount of time that you spend promoting his products or services. How much time you spend on each of your agencies is a matter for you alone to decide. Sometimes a retainer is paid by a principal to get you to spend more time on his offer.

A sales agent’s disadvantages

  • there is no control on time spent on his sales
  • he cannot discipline you in any way
  • there must be agreement on sales policy
  • he must treat you as an independent business

To reduce the significance of these disadvantages you must concentrate your discussions on the benefits of your service.

Retainers, the possible loss of independence

A string usually attached to a retainer is that the principal will usually insist that you spend a set amount of time on his business. What is more they will wish you to prove that you spend that time on his business. This will mean unproductive paperwork.

A question that must also be addressed is, what happens when you have accepted a retainer and you find you cannot sell the principals product or service? He, being an ordinary human being and thinking his offer is the best on the market, will accuse you of not trying and may try to tarnish your name.

It is however, unusual for principals to offer retainers. When they do there is usually a reason that must be carefully examined. Have they had a succession of agents and failed to hold them and why is an obvious first question?

Allocating your time

The question of how much time spent on any one agency causes more anxiety with principals than any other aspect of a sales agents daily working life. Every principal ideally would like you to spend all your time selling his product or service.

You must be very careful when discussing the amount of your time spent on a principals behalf and, if needed, diplomatically point out that you have other agencies you have to represent.

However, you must be spread your selling time fairly amongst your agencies.  Nothing is worse to a principal than to pay out commission to a sales agent knowing that he is not spending any time on his behalf.  A soon as that principal sees an opportunity to appoint a new agent who will spend time selling on his behalf, the existing agent will lose that agency.

Be fair to principals:

  • don’t ‘collect’ agencies
  • give each agency some effort
  • give up any non producing agency

 

WORKING IN TRADITIONAL ‘SALES AGENT’ INDUSTRIES

There are many industries where the use of Sales Agents is traditional and has been for many years. Companies that deal direct with retail outlets are probably amongst the largest users of sales agents. The sales agents usually carry a complementary range of products and work to a very tightly scheduled calling pattern on a range of customers, sometimes built up over many years.

Geography also has a bearing on this matter. It is more cost effective to appoint sales agents in the remoter areas of the country, due to the fact that he is covering large areas representing several principals.

It is very easy for people who have experience of calling on retail outlets to make a success of becoming a sales agent in such industries irrespective of whether it is products or services that are offered.

Traditional areas where sales agents operate.

  • Scotland
  • Northern Ireland
  • Wales
  • South West England

These are all thinly populated areas with long distances between towns.

Traditional industries for sales agents.

  • Insurance
  • Jewellery
  • Finance
  • Fashion
  • Bookselling
  • Retail Selling

 

Excerpted from the book: ‘How To Be A Freelance Sales Agent’. by Terry James. Additional content and editing by Paul Brown, MD of AgentBase.