How to Set Up an Agreement With a Sales Rep – 5 Key Issues to Handle BEFORE You Hire!

Hiring an independent sales rep is a great way to increase sales and really grow your business. When I started my business, hiring a New York sales rep doubled my business in a season. With their access and connections to stores, buyers and others in the industry they can increase your business and make your line a success. Once you have selected the rep you want to hire, you must establish certain criteria ahead of the final hiring process:

1. Define the Territory: Find out the general territory the sales rep usually represents. Ask what states or geographic location is included. Do you already have another rep in one of those states or location? If there is a conflict you must discuss it and make some resolution as to which rep will receive commission for a sale. If your rep has a booth at a trade show establish what your policy is for out of territory commission. Let the rep know in writing of any established House Accounts.

2. Establish the Commission Rate: Sales reps generally ask for anywhere from 7% to 20%. It is best to consider what the sales rep can do for you and try a test out for a season. If the rep is well established the commission rate may be on the high end. And if the rep is willing to pioneer your line and help you to become an established brand then it is well worth the commission rate. Do be sure you have this built into your pricing model.

3. When is the commission due? You will want establish payment terms. Ideally you will want to pay out commission when you are paid by your customer. However, most reps want to be paid within 15 days of the when the goods are shipped. They have done their job and deserve to be paid. They will in general require commission on a minimum of 85% of any order that is credit approved. So in case you are unable to ship an order they still get commission because they have done the work.

4. Are there any showroom or other fees? Depending on whether you hire a showroom rep or road rep, most all charge monthly fees on top of commission. These will depend upon the rep, showroom, how much real estate they need for your line and other considera


5. Who pays for the samples? Obviously a sales rep needs to have samples and marketing materials so she can show your line. Establish in advance who pays for these. You can have them returned at the end of the season or offer a significant discount off wholesale to the rep which can be subtracted from commissions.