Winning an Agency and Agreeing Your Terms

Winning an agency is a sale in itself: the principal is your customer, and what you are selling is your own services. This guide covers why principals need agents, what they look for when they meet you, and how to handle that first meeting so you come across as the professional you are.

Your start-up cost benefit

There are many reasons why principals need sales agents. The cost to a company of employing salespeople (reps) and putting them on the road is considerable and variable. Those costs are incurred before the salesperson has even set foot through a customer’s door, let alone shown a profit on the orders won. If the salesperson turns out to be ineffective it may take months to find out, and salary and costs have to be paid throughout. Because both the costs and the income from sales are variable, the company cannot really calculate the true cost of a salesperson into its prices. It usually makes an educated guess. Your sales, by contrast, are a fixed cost: all the company has to do is add your fixed commission to its costs. You are offering:

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

And because you usually work for other principals too, you are spreading your own costs across several agencies.

Making the principal aware of these benefits

A surprising number of principals offering agencies do not even realise this major benefit, or the others below. They tend to think only in general terms: that they cannot afford to employ salespeople and that agents are cheaper. If you are fighting hard for an agency you want, sell these benefits hard. Remember, you already have something to sell, your services, and you must know their benefits well enough to sell them to a prospective principal.

Bringing the principal a new customer base

Most sales agents choose to work in an industry they have sold in for some time. That means you already have customers you have called on for years and who buy regularly. Even where you have not done business with a company yourself, you often know it exists, know who the decision maker is, and know it is a prospect. This is a major benefit to a principal: you bring an extra, ready-made potential customer base immediately, along with the base you have built up through your other agencies. 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”: most buyers, all things being equal, buy from salespeople they like and respect. As a sales agent you come to understand this more than most, and respect should always be your aim. Most agents build up a base of customers who buy from them, or who are at least willing to hear about further products, because they respect the agent’s judgement. If you are new, or selling into a market you do not know, you will not have this advantage yet, but even then your principal is not paying a salary while a salesperson works out who the buyers are.

Assisting product-biased companies

Many companies are what you might call product biased. They are very good at making the product or service but not skilled at selling it. The owners often do not come from a selling background, or set the company up assuming sales would simply appear. Others have spent so much developing the product that there is little left to employ salespeople. As an agent, you have a great deal to offer companies like these.

Your advantages

• you can bring 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 can end up an unpaid sales advisor
• establishing these companies can be harder work

Identifying the product-orientated company

Your questioning during negotiation must establish whether this is the type of company you are dealing with. It is worth avoiding them in the early stages of building your agencies, as they can be frustrating. Later, once you are established, they can be very lucrative in the long term.

The questions to ask

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

The answers usually reveal a company that is weak on selling. Whatever else, always satisfy yourself that the product is saleable.

Reducing your disadvantages

You do, of course, have disadvantages compared with an employed salesperson. Your principal has no control over how much time you actually spend promoting his products, since how you split your time across your agencies is yours alone to decide. Sometimes a principal pays a retainer to persuade you to spend more time on his offer.

A sales agent’s disadvantages

• there is no control over the 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 weight of these, keep your discussions focused on the benefits of your service.

Retainers, and the possible loss of independence

The string attached to a retainer is that the principal will usually insist you spend a set amount of time on his business, and will want you to prove it, which means unproductive paperwork. There is another question to face: what happens if you take a retainer and then find you cannot sell the product? The principal, being human and convinced his offer is the best on the market, may accuse you of not trying and even tarnish your name. Retainers are unusual, and when one is offered there is normally a reason worth examining closely. Have they had a run of agents they could not hold on to, and if so, why? That is the obvious first question.

Allocating your time

How much time an agent spends on any one agency causes principals more anxiety than almost anything else in a sales agent’s daily working life. Every principal would ideally like all of your time on his product. Be careful when this comes up, and where necessary point out diplomatically that you have other agencies to represent. That said, you must spread your selling time fairly. Nothing annoys a principal more than paying commission to an agent he believes is spending no time on his behalf, and the moment he sees a chance to appoint someone who will, the existing agent loses that agency. Be fair to your principals:

• do not “collect” agencies
• give each agency real effort
• give up any agency that is not producing

Working in traditional “sales agent” industries

There are many industries where using sales agents is traditional and has been for years. Companies that deal directly with retail outlets are probably among the largest users: their agents usually carry a complementary range of products and work a tightly scheduled calling pattern around customers built up over many years. Geography plays a part too. In areas where customers are more spread out, with longer distances between them, it is often more cost-effective to appoint an agent, who covers a wide area for several principals at once, than to put a salaried rep on the road. Parts of Scotland, Wales, the South West and Northern Ireland have traditionally relied on agents for that reason. Anyone with experience of calling on retail outlets tends to make a success of agency work in these industries, whether the offer is products or services. Traditional industries for sales agents include:

• finance and insurance
• jewellery
• fashion
• garden and landscaping
• retail selling
• building materials and construction
• and several other sectors

What a principal is looking for

The principal is looking first for a good salesperson and second for a well-connected agent. If this is your attempt to land a first agency, try to bring some third-party references to your selling ability. Failing that, take a list of the types of customer you already deal with, but do not leave that list with him. His first priority is to take on someone he believes will sell his product successfully. At this stage you are being interviewed as a salesman rather than as an agent, so before anything else you must impress him as a salesperson. The more evidence of that you can produce, the better.

Making your approach

Once you have decided an agency is worth pursuing, contact the principal to arrange a meeting, by phone, email or letter. If you begin with a call, confirm it afterwards in writing. Your first approach should say enough to make him want to meet you, but not so much that he can rule you out without doing so. Cover:

• where you saw the opportunity
• that you are interested, and briefly why
• why you are qualified to hold the agency
• that you are ready to meet

Prepare an agency profile

Take a short agency profile to the meeting, one or two pages, neatly presented. Think of it as a business CV, but where an ordinary CV sells you as a good employee, this sells you as an independent business. A useful profile covers:

• your proposed business name, address and contact details
• your background and why you are qualified to hold the agency
• the types of customer and the territory you cover
• any other, non-competing, agencies you hold
• third-party references to your selling ability

It leaves a professional impression and does a good deal of your selling before you have said a word.

Handling the interview

Asking the right questions

A checklist will help you ask the right questions. There is nothing worse than leaving an interview and only then thinking of the important ones you forgot. Asking them also enhances your credibility: the principal sees that, even as a new agent, you understand what running a sales agent’s business involves. One question, of course, is what happened to your predecessor. The answer reveals a lot about the principal’s attitude to agents.

Managing the interview

Because of the unusual relationship you are entering into, this is not like a normal job interview. You are a potential investor in his business: you are going to put your own time and money into promoting his product, and you must get that point across. The meeting should be far more balanced than a job interview, with you wanting to know a great deal more than an employee would. In effect, you are interviewing him. It is unwise to commit at the first or only meeting. Some things, above all the written agreement, need studying first. If the principal has not given you a copy of his proposed agreement, ask him to send one and tell him you will decide once you have read it.

Managing the follow-up

After the meeting it is good manners to write and thank the principal for his time and interest. Use that letter to set down briefly any points you both agreed that you would not expect to appear in the written agreement, for example the possibility of extending your territory after a trial period. It all reinforces your professionalism.

Before you commit to any agency, satisfy yourself the principal can deliver and pay what he owes: see how to check out a principal.