Factsheet – Working with Sales Agents – The Bare Essentials

Thinking about using self-employed, commission-only sales agents, or already have and want to understand what you are dealing with? This is the plain-English starting point: what a sales agent actually is, who these people are, how they think and operate, and the real upside and downside of building a sales force out of them.

What is a sales agent?

According to Terry James

A sales agent is a freelance, self-employed sales person who works, usually alone, for perhaps several non-competing companies, obtains orders for those companies, and is paid a commission on those orders. Each arrangement with each company is usually referred to as an agency. A sales agent sometimes describes the company he is working for as his principal. Sometimes a retainer is paid to the sales agent, but this usually comes with strings attached. He or she usually works in a specific area of industry or commerce, and usually within geographical limits. There are no limits to the types of industry and commerce where sales agents are found. Many companies use teams of sales agents to get national coverage, and some use a mixture of employed salespeople and sales agents.

Terry James was a friend of AgentBase and author of the book: Become a Freelance Sales Agent in the UK.

A legal definition

• A commercial agent is a self-employed individual, partnership or company who has continuing authority to negotiate the sale or purchase of goods on behalf of another business (known as the “principal”).
• A commercial agent does not need to be authorised to conclude sales on behalf of their principal. It is usually sufficient that they are authorised to introduce customers to the business.
• A party that buys products from a business and then resells them would not generally be a commercial agent.

The relevant law is the Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053), now assimilated law, which apply in Great Britain (Northern Ireland has its own equivalent). The “goods, not services” point is one of several distinctions that decide whether an agent is covered. For the detail, see our legal articles on commercial agency.

Sales agents vs distributors

There is a common misunderstanding about the difference between a sales agent and a distributor. It matters, because the two are treated very differently in law and in practice.

Who are sales agents? The typical profile

It is a male-dominated profession. Sales agents are predominantly male, and females are still rare: perhaps only 10% of agents. They are typically aged 40 to 70, with the median around 55. Only a few self-employed commission-only sales agents are in their 30s, and fewer still in their 20s. Many are well into their 60s and 70s, and some are still going in their 80s and even 90s. Typically they are ex-sales professionals. Some will have risen to managerial positions, and a few to director level. But not always: sales agents come from many walks of life. It is extremely difficult to generalise. A roomful of sales agents is a very varied and colourful mixture of people from all backgrounds.

Where do sales agents come from?

It helps to understand where sales agents come from, and the unique UK sales agent culture they are part of.

The path to becoming a sales agent

Not many people set out in their professional careers intending to become a sales agent. It is what might be called an obscure profession: there has traditionally been no clear route in, no courses, and no professional bodies (other than sales agent registers and a small trade union). Most sales agents found out about agency work through talking to existing agents, or through seeing or being offered opportunities. They may have considered the security of employment more attractive than the challenges, risks and potential rewards of self-employment, and may have lacked the confidence or knowledge to make the move. Many are then nudged by circumstance into becoming self-employed. The stars align:

• Getting older, and finding it harder to find sales employment.
• A desire for more control over work-life balance, to be their own boss, and not to be managed.
• Not a “yes man” or a “company man”: they like to do things their own way.
• A possible double income (a wife earning) providing security.
• A possible nest egg (pensions, redundancy pay-offs, inheritances) providing security.
• A low-cost lifestyle (kids grown up or left home, mortgage paid off, no expensive hobbies) meaning low overheads.
• Being made redundant, getting offered an agency, and giving it a try, possibly as a filler until they find another job.
• Loving it and not looking back: earning more, more time off, more control, taking holidays when they want. “Why didn’t I do this sooner?”

Why supply rises and falls

There is an imbalance between the supply of, and demand for, sales agents. Sales people do not tend to venture into agency work in boom times. Recessions force people out of work and into considering new options. The UK enjoyed a prolonged boom between the early 1990s and 2007/8, which saw the pool of agents slowly dry up as agents retired or went back into attractive jobs, with very few new agents created. That produced an acute shortfall in supply, and relatively rich pickings for the agents who remained: they could pick and choose from the buoyant demand from industry for self-employed sales people. More recently that has reversed, with the cost-of-living pressures that began around the pandemic pushing more people to consider agency work. As a rule, more agents are made when unemployment rises, and fewer when times are good.

How sales agents think: the low-investment entrepreneur

Sales agents are not as money-motivated as you might expect: for many, agency work is a lifestyle choice. A lot of them sit in a relatively comfortable niche where the balance of risk and reward is firmly in their favour. They are low-investment entrepreneurs, at least in money terms, with very low barriers to entry and exit:

• No fixed overhead
• No stock
• No premises
• No staff
• No equipment

A sales agent’s investment is his time. His assets are his relationships. His risks are mainly time wasted, and customer relationships that can be damaged if he takes on the wrong agencies. Understanding this outlook is the single biggest thing that separates principals who succeed with agents from those who do not.

How much of an agent’s time do you actually get?

A sales agent cannot devote 100% of their time, or brain power, to your project. They have several other principals, typically 3 to 5 agencies, so they will be part-time for you (as they are for everyone else they represent). That affects both the volume of orders they can bring and the level of complexity they can carry. But part-time does not mean a fraction of the results: a good agent can leverage existing contacts and experience spectacularly. It helps to understand how an agent manages that portfolio of agencies:

• The time an agent spends on an agency and the money they earn from it are often diametrically opposed.
• An agent may deliberately restrain earnings from an agency to keep it out of the danger zone, where a principal might be tempted to replace them with employed reps.
• Below a certain threshold, an agency may simply be dropped: too much time, too big a share of the agent’s available hours, too little earned to justify itself (often around £2,000 to £5,000 a year).

The relationship between agent and principal

• It is a partnership. A sales agent is an independent business.
• The two are bound together by an agency agreement. It is well worth getting this in place from the outset: see Do I need a sales agency agreement?
• The relationship can sometimes be adversarial, usually because principals do not understand the agent’s circumstances, risks and outlook.
• The agent’s customers become the principal’s customers once an order has been placed. They may remain loyal to the agent, though, and a good agent can steer them away from a principal’s products after a relationship has ended.

The upside and the downside

The obvious upside

Sales agents offer a very attractive upside:

• Self-employed: independent, flexible, mature, serious.
• Commission-only: results-orientated and hungry.
• No fixed salary, no holiday pay, sick pay, expenses, car, office, desk, PC or employer’s NI.
• Low costs of recruitment, management and payroll.
• They bring their own customer base: often 100 to 200 established, trusted relationships.
• A wealth of experience and understanding of their markets.

By comparison, an employed sales rep is estimated to cost between £50k and £100k a year, plus recruitment costs of up to 25% of salary. You probably already appreciate that, or you would not be reading this.

The potential downside

What you really need to know is: what can stop you realising all these benefits? Working with sales agents can be spectacularly effective, and it genuinely is possible. To maximise your chances, you need to understand how agents operate, how they run their agency businesses, how commission-only salespeople think, where their priorities lie, how they regard you, and the risks they take on when they accept your agency. The common pitfalls:

• Lack of control and feedback
• Not understanding the agent’s role, risks, strengths and limitations
• Unrealistic performance expectations
• Over-estimating your power in the relationship
• Not understanding the agent’s psychology and behaviour
• Over-managing sales agents
• Under-managing sales agents
• Complicating things
• Getting the legals wrong

AgentBase can guide and advise you on every aspect of working with sales agents. Established in 1993 and equipped with the UK’s largest resource of sales agents, we make the whole process easy. Get in touch to find out how we can help.