Managing Sales Representatives in the Semiconductor Equipment and Materials Industry, Part 4

by  John C. Housley

As mentioned in earlier installments, principle companies look for a good representative to sell their products and feel that they are investing in that rep. In fact, the opposite is true . . . the minute that a rep signs up for your product line, they begin investing in your company. That is to say, you are not paying them anything until they perform, so their time, auto, expenses, overhead (some portion of it) is being paid by them while they try to get business for you. Then, if they are successful, there is no guarantee that you will keep them long enough for them to recover their investment over a period of time.

Another current problem reps face is that there has been a trend toward consolidated buying from the larger suppliers. The fact is, the larger suppliers (equipment and materials) usually have their own sales force. The smaller and more innovative suppliers are the ones who depend on reps . . .until their products and the rep's selling make them successful and they join the ranks of the "big boys" themselves. This means that the rep must work harder to convince the buyer and engineers to take a chance on the smaller or newer player.

A third problem that reps currently face is payment. To a rep, they are a member of your team. They feel that the principle should treat their commissions just like they would treat internal payroll. Unfortunately, especially in down times like we are currently facing, many accountants see the rep as just another accounts payable. Therefore, they can be stretched out like everyone else. This starts a whole new chain of events. Thirty days goes to ninety days, to one hundred and twenty days. Meanwhile, the rep still has to pay his/her bills and payroll. Consequently, they slow down selling that principles products ... the sales manager gets chewed on for not selling more product ...he/she panics and starts to look for new reps ...and finally all the good relationships built up by the rep organization go out the window. The principle ends up much worse off than when they started. The next month, the accountant proudly announces how he/she has stretched the payables out and saved the company from destruction. The CEO may never even know the real truth.

In short, the modern rep has a very tricky road to travel and must be a more seasoned businessperson than in years past. More than likely, before a good rep takes on a new product line, they will ask for a monthly retainer to do your bidding, to at least get started. If the principle shies away from this need to literally invest in the rep, they will possibly end up with a much less effective salesforce.

‹‹ John C. Housley
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