Manufacturers Reps – The Basics
Having been an independent manufacturer’s rep myself on two different occasions in my career, I know a thing or two about this business. I think it’s a great business model because of the low start-up investment (other than time and effort) and the fact that you do not have to carry inventory or receivables. It is also a simple business to get off the ground especially if you are involved with the wholesale distribution channel and have developed a good name for yourself in these circles. With a large number of colleagues looking for jobs in an environment where few are available, this may be a good alternate source of income.
What is a Manufacturer’s Rep?
An independent manufacturer’s representative (or Rep) is a person or organization that basically takes the place or is an extension of the manufacturer’s sales team. An outsourcing of some of the sales functions, if you will. The Rep does all the same things an Account Representative or Field Sales Representative would do if they worked directly for the manufacturer. This includes but is not limited to:
* Account Management What Is Business Finance In Hindi
* Business Development
* Distributor & Reseller recruitment
* Strategic planning
* Partner Program recruitment
* Attend Trade Shows / Road Shows / Floor Days
* Sales training
* Lead follow-up
* Communication with the channel
* Assist with marketing plans and coop claims
The manufacturers would continue to do what they do, which is manufacturing the product, research and development, market the product and service the product pre and post. They also set the pricing and the terms and conditions for signing up new distributors. As a Rep, you will need to follow those guidelines.
How do you make money?
Fees charged by Reps range from low single digit percentages to mid to higher single digits depending on the product line being represented. Manufacturers of commodities such as memory products will pay 2% – 3% commissions, where manufacturers of higher-end product lines such as Network Appliance servers for example, will pay more (5%-8%). This makes sense in that it is easier and less time-consuming to sell commodity products in the channel than it is to sell more high-end niche product lines to the distributors and resellers who deal with those products.
The manufacturer usually pays the Rep based on sales reports from the distributor or on direct purchases. The larger distributors such as Ingram Micro, Tech Data and many others already send a weekly or monthly “sales out” report to the manufacturer. The manufacturer would use the total COGS (cost of goods sold) as the revenue number on which to pay you the agreed percentage. For smaller distributors, especially those with only an in-country presence, the manufacturer will probably pay you based on the purchase orders. As you can imagine, you usually will have both schemes working and will need to keep track of your revenues to make sure you are paid timely and correctly.
Two important things to keep in mind is that most manufacturers will not pay for any of your expenses, but you may be able to negotiate this, at least for the first few months while you ramp up. This means you will be picking up the tab for your biggest expense which will be travel and entertainment. And second, it generally takes 2 – 3 months before you start to receive commission checks depending on how fast you can generate business.
Why would a manufacturer Business Manager Benefits use a Rep?
Well, there are several reasons why this model makes sense for many manufacturers including:
* Lower costs (compared to employed sales personnel)
* Immediate access to the right people in the right companies
* A highly experienced, sales person or organization who are experts in their field
* The benefit of using the Rep’s already long-established customer relationships in the channel
* Having a partner vested in the manufacturer’s success (ie, you win if they win)
The Rep model offers manufacturers many positive factors as noted above. But the biggest selling point you have as a manufacturer’s rep is offering instant access to your network of customers with developed relationships already in place that allows you to substantially increase the speed at which you can get to market compared to the manufacturer by itself.
Where do I find manufacturers to represent?
There are some online options such as and , but my experience has been that most are found by networking. No, you probably won’t be landing a representation contract with the likes of HP, Intel or Cisco but you will have many opportunities with second and third tier manufacturers and start-ups, so focus on those.
Once you have signed one manufacturer, you should continue seeking other manufacturers of non-competing product lines. The Rep model is usually more profitable when you are representing several manufacturers at once. However, don’t over do it. This is not a distribution model, but rather a Rep model and you should keep the number of lines at a manageable number so you are more focused. Besides, some manufacturers tend to shy away from Reps who handle too many lines unless they are large organizations with many representatives on staff.
Lastly, it is important that you have a signed contract in place before you start. The contract should cover things like the territory, the products included, compensation (including how it is calculated and when it is paid), indemnification and termination. There are several other aspects of the contract, but unfortunately they are beyond the scope of this blog entry.
So do some more research and give it a try.
Manufacturers Reps – The Basics