Definition of 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 and 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 companies use a mixture of employed salespeople and sales agents
*Terry James is author of the book: Become a Freelance Sales Agent in the UK
A legal definition
- A commercial sales 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 sales agent does not need to be authorised to conclude sales on behalf of their principal and 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 sales agency.
Sales agents vs. distributors: the difference
There is a possible misunderstanding in the difference between a sales agent and a distributor.
The function of a distributor:
- purchases and holds stock
- solicits orders
- delivers the orders
- invoices the goods or service
- takes the credit risk
- makes a profit on the transaction
The function of a sales agent:
- solicits orders
- passes orders to the principal
- earns an agreed commission on those orders
The Relationship Between Sales Agent & Principal
- It is a partnership. A sales agent is an independent business.
- They are bound together by an ‘agency agreement’ (more detail later)
- The relationship can sometimes be adversarial, as principals do not understand sales agents’ circumstances, risks, outlook, etc.
- The sales agent’s customers become the principal’s customers once an order has been placed. Although they may remain loyal to the sales agent, and the sales agent may be able to steer them away from a principal’s products after a relationship has ended.
The Upside vs. The Downside
The obvious UPSIDE
Clearly sales agents offer a very attractive upside:
- Self employed = independent, flexible, mature, grown up, serious.
- Commission only = results orientated. Hungry.
- No fixed salary. No holiday pay, sick pay, expenses, car, office, desk, PC, employers NI
- Low costs of recruitment, management, payroll
- Have their own customer base – 100-200 established trust relationships
- Wealth of experience and understanding of markets.
Cost of an employed sales rep are estimated at between £50k and £100k a year, plus recruitment costs of up to 25% of salary.
(You probably already appreciate this, or you may not be reading this!)
The potential DOWNSIDE
What you really need to know is:
What can stop me from realising all these benefits?
Working with sales agents can be spectacularly effective and successful. And it IS possible.
In order to maximise your chances of success, you need to understand:
- how sales agents operate
- how sales agents run successful agency businesses
- how commission only sales people think
- where commission only sales reps’ priorities lie
- how sales agents regard you
- what mistakes are possible
- the risks for the sales agent in taking on your agency
Possible pitfalls include:
- Lack of control and feedback
- Not understanding the sales agent’s role, risks, strengths and limitations
- Unrealistic performance expectations
- Over-estimating your power in the relationship
- Not understanding the sales agent’s psychology and behaviour
- Over managing sales agents
- Under managing sales agents!
- Complicating things
- Getting the legals wrong
And so on.
More articles here