The most common questions involved with hiring of independent reps relates to their compensation. Here are key elements to determining commissions for independent sales reps. There is no standard flat rate or easy answer. Fortunately, there is a very important guideline to keep in mind:
Nothing motivates sales better than an attractive commission schedule.
“How do we pay our manufacturer’s reps?”
A commission-only compensation plan is the best way to pay sales reps. The best method being a straight percentage of the sales price. There are a few different ways to handle this, however, most sales reps prefer a commission based on a percentage the sales price.
If there are no fixed sales prices involved, a company might go with a percentage of gross margin.It is worth pointing out that independent sales reps are in fact independent. As a non-employee, they don’t have much stake in what the price of a product is. In fact, a higher price may interfere with their goal of selling as many items as quickly as possible.
If they have the flexibility to negotiate the final sales price, it makes sense to base commission on the gross margin. This both encourages your reps to sell at a higher price and discourages them from selling low to close a sale. Provide your independent reps with an incentive for their financial well-being and your products sell the best price.
With any independent contractor, enter into a Sales Representative Agreement which clearly defines the commissions to be paid. Well written agreements eliminate disputes and hard feelings with sales reps.
Four Key Factors that Influence Sales Commissions
Depending on the industry, commissions can vary wildly in range. Other factors can influence commission including:
- How much customer service do your sales reps need to provide to customers? If you expect your sales rep to provide functions beyond simply training, assisting with installation, testing, and so on, you should raise your commission rates.
- Do your sales reps only provide leads, or do they close sales? Plenty of companies only require sales reps to bring in leads, and prefer to close the sale themselves, and act as account managers. This preference should probably reduce the commission rate to reflect the independent rep’s level of involvement in the actual sale.
- Does your product generate repeat business? When a principal’s line is disposable or consumable, meaning that repeat business exists, commission can often be lower unless it takes time to service the account, generally because the customer does not need to be sold on the product every time. You also have the option of offsetting the lower commission by paying a higher percentage or a bonus for the first sale to a new customer.
- What types of expenses tend to occur for new businesses? In many cases, the front end costs of acquiring new customers can be fairly high, and commissions should reflect this to ensure that sales reps receive an appropriate return on their investment.
What is typical commission percentage for sales
One of the top questions we hear is “What is the average commission rate for sales reps?” In general, most manufactured products prompt a commission rate of anywhere from 7% to 15%. For commissions as a percentage of gross margin, (sales price minus direct expenses) a standard range is anywhere from 20% to 40%. To increase the sales incentive, sales managers often use a sliding scale commission rate tied to the volume of business generated by a sales rep.
Be sure to also factor in any support services. If additional sales necessitates the need for additional support services or inventory, that plays a role in the sales rep’s return on investment.
Most service-based products that do not require manufacturing expense tend to have commissions that can run upwards of 50%. Be cautious in calculating the equitable commission in these instances, as it will have a significant business impact! For service-based products, reps can sometimes be under the impression that as there are no manufacturing costs. Or they assume there is very low overhead. Factoring time expenditures into your commission schedule allows your business to reap a good return on investment.
Commission splits are another important consideration. Sometimes territories are divided by geographical location, or by industry type. You need to define:
- Any provisions on commissions that come into effect if the independent rep sells to a customer outside of their territory
- What sort of commission split your independent reps should expect if someone else sells within their territory.
You can’t always anticipate these issues in advance, and it is very important that all independent sales reps always have adequate incentives to continue performing up to the expectations of their employers.
Contact Commission Only Sales Reps
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Hi, I’m a Canadian and have a solid 14 years of experience selling and negotiating with National Retail Chains Head Offices in Canada in the CPG industry. I’m French bilingual and can also represent the French customers in Canada. I’m really interested in jumping in the independent world of sales, however in my initial research I only found a demand for independent reps covering a specific territory – and probably only calling on retail stores. I wonder if companies are also looking for independent sales representation for Retail Chains Head Offices – covering a National territory? Is anyone specialized in that area and would you know where these companies would look to find their ind. reps ?
Thank you
@Simon: I am hoping that someone with specific experience can chime in. I will route your question to our internal resources but I do not think we have the detailed information you seek.
I suggest that you go to our main site https://www.rephunter.net. Create a profile (no cost to you). Search our database for companies that meet your criteria. We do have a substantial Canadian presence.
I am considering an Independent Sales Position. I would like a draw on commish what is a reasonable amount of time to take a draw. The sales process could take 6 months for new business. What “if” this does not work out will I owe that draw back or can a contract be negotiated to state no return of draw if within a certain timeframe is met? The saying goes you don’t know what you don’t know and I definitly feel this way going into this position.
But it is a great industry and company that I will be working for. It will be only 1 company represented. If you have any other advise for a newby, I am please to here it. Thank You!
A company wants to pay me commissions on each sale they get with new distributors I bring to them. How do I confirm sales the company is making since the distributor will be going directly to them? Also, at what point do they have to not pay me? For example, if my contract with them expires in 1 yr, then any sales they make to that distributor after 1 yr, should I still receive a percentage or not? This is in the science industry.
@amy: There are no hard and fast rules in such situations. It is more a matter of what you negotiate. In particular, since you are outside the loop of sales reporting, you would have to rely on information provided either by the company or the distributors.
One way to deal with this would be to spell out in your representation agreement how this is to work, and how you are to receive reports. Because the company succeeds when the distributors succeed, they should have an interest in a beneficial relationship with you.
The time period of the agreement is another point to negotiate. They company should realize, or you should “sell” them on the concept that the longer the period, the more worthwhile it is for you, and the more you are motivated to find distributors that will succeed over the long haul. There is a case to be made that you should receive compensation in perpetuity, and there are sales channels that do follow such a plan.
I would like to ask about this commission matters. I was given a 1% commission less 12% vat and additional less 12% for accounting staff & mechanics. The commission is base on total sales if quota is achieved. My question is; is it legal for the company to get the commission for accounting staff & mechanics from my total commission?
We cannot give legal advice; for that you must engage an attorney. However, I would make the general comment that commission arrangements are governed by your Sales Representation Agreement. It may be more of matter of what you are agreeing to than a legal issue.
I am a fashion designer that works closely with various buyers to develop/ design lines. Now I am exiting my current company as a full time employer and starting to work freelance on a few projects for the same company.
My question is how much commission I should ask for. I have been handling these accounts for several years, and I drive the sales. Overall yearly sales on these projects are around $ 4,5 million. This is all for off-price retailers, so margins are around 10-20% only.
One of the project’s I and designing if for a new line. First season just shipped and we are currently working on the next. Now this brand is at the beginning, so I believe I am a crucial part in the look of this brand. How much commission or compensation can I ask for that? The sales here for the whole first season where $1,5million.
So, what is the appropriate amount of compensation to ask for?
And how would you structure the payment since it takes about 3 months for production?
@Uschi: your question is for a specific situation in a particular industry. For many such situations we have no special insight but can respond with general rules of thumb, which probably do not fit your specific situation.
Our “rules of thumb” are as follows:
• 90% of all commissions paid to reps are between 5% and 20% based on gross sale amount.
• Commissions differ with each industry.
• The best way to establish your commission amount is through conversations with knowledgeable reps in your industry.
@Susan: I am not sure which “comment to Tommy” you mean. Could you please give me some of the content, so can pin down the exact response?
By the way, I just reviewed your comments to Tommy on/after Oct 12th – how does my situation differ from his? I get the feeling that the owner of my company doesn’t want to pay me for anything that I have nothing to do with. Meanwhile, this is what I do for him: source databases, prospect, close, help set up displays (in some stores that need help), continuously train owners & staff (a decent amount of knowledge of human physiology is required), place orders (on direct accounts), constantly promote on social media, constantly combat claims made by competitors. I am definitely not sitting around.
Thanks for the reply, Matt. Here’s the environment that I forgot to illustrate. Our distributor will not inform us of any stores in my territory that have ordered our product. So, I have to ferret them out on my own, and then I can request a movement report on the stores that I am aware of and, therefore, detail. In addition, we experience OOS issues constantly. So, when I am prospecting an account and doing demos, and customers like the product, they either go online or go to one of the chains that carry the product (which I get NO commission on, because the chains will not give us a breakdown per territory). So … rather than just plain selling the product, it’s almost like I’m competing with my own company. This is why I was wondering as to whether or not just getting paid to what is shipped to my territory is customary and should I be entitled to it. BTW, we do NO advertising and very little marketing.
@Susanne – I have forwarded your additional illustration to Matt. But let me just put in my own two cents. Before doing so, you must understand that we are not qualified to give you legal advice, and we are not doing so.
We believe that it is good business for all concerned to arrange so the rep gets paid for all accounts in her territory, and have given good reasons in previous posts. However being “entitled” to payment goes a bit further. As if it is a contractual violation not to give it. Your sales representation agreement is what actually controls what you are entitled to; thus we also strongly believe that you always should have such an agreement. In that agreement, such special deals can be worked out that may not be the usual conditions.
So, we believe it “should be” good business; but not all businesses practice “good business.”
I am an independent sales rep for a sports nutrition start-up, with only one product. I will have been repping this company for 5 years in March. Currently, I only receive 5% on inventory shipped from our distributor to stores in my territory that I personally detail, and 17% on direct accounts. I have been told that it is not customary to give me a percentage on everything being shipped to my territory. Is this common practice?!
From Matt:
Here is my take:
I am not sure what is customary but if I were advising the company shipping the product, I would build that territory with this in mind. Paying the sales rep on everything that is shipped into the territory is a good idea. However, these payments should be used as an incentive program and certainly not an entitlement. So in this case, if the sales rep believes that he has earned this additional income buy working and succeeding in the territory, then yes he should request it. I don’t say that he should request it because it is “customary” but rather because he deserves it.
On the company’s side, they should “want” to pay the rep for all products shipped into the territory. then they have a local presence in the territory to insure that “all products” arrive the satisfaction of the customers and get repeat business.
So, both sides should want the rep to be paid for all products shipped but not as an entitlement, but rather as an incentive plan that has been rewarded.
From Brenda to Dan:
I would consider any marketing materials to be the cost of the manufacturer. Unless the rep is ordering an enormous quantity of them & one believes that the rep might be damaging them by leaving them in their trunk or a similar location that they might get ruined.
When should a rep be paid?
The steps I advise to manufacturer is the following: 1. Rep gives you a P.O. 2. You fulfill that P.O 3. You receive payment in full from the company 4. On a set date in your contract, say any order that has been paid in full by the 30th, will be paid the complete commission on the 15th of the following month.
This limits the # of checks you as a company need to write.
Makes it easier for everybody to do book keeping & reconciliation
Limits the number of charge backs that might occur
Everybody knows expectations.
I have a manufactures rep who wants 10% plus a 5k marketing fee. Is this common?
To Tom:
With an established business such marketing fees would not be common. However it is common in the case when a new company or new product line is being introduced, as the rep may incur substantial out-of-pocket cost to create the demand or build the channel. In particular, it could also be six months or more before the rep starts getting paid, depending upon the industry. So you can see that it is not reasonable to expect the rep to work hard for you for six months to a year without compensation, while in effect he is creating your business for you.
My suggestion is to shop around to see if you can find other reps who will take your line with no fees. If not, then that establishes the case that there are just too many up-front costs for the rep and that you are making an investment in your future sales capability.
To Azza:
Most reps on our database receive a commission between 5-15%, however, since we deal with every market available – it is best if you communicate with other reps in your industry to understand what the acceptable commission is in the market that you are going into, so that you are not only fair to the principal/manufacturer, but also to yourself.
Our company sells software as a service solutions to the oil and gas and medical industry. A person who has been a national account sales manager in the oil and gas industry would like to work for us commission only and leverage her contacts. A typical sale is $35,000 first year and $20,000 annual recurring. The cost of good is 20%.
She see an opportunity to build a base of customer accounts and manage them and be paid commission for the annual recurring each year in addition to the upfront sale. Do you have any ideas for commission structure in Cloud solution sales of this nature?
The incentive for her to go commission only (reseller) is the cumulative annual commissions and no limits.
Do you have any suggestions?
I too am trying to figure out what to offer a sales rep. We are a new business and have an excellent gross margin, so I belive we can be flexible.
Reading over all the responses, I realize there is no set guideline or scale as every industry and case is different. That being said, I think I am leaning towards a percentage of gross margin.
My question is the following- If the rep is determining the wholesale price to sell to the retailer, how would I provide the marketing materials without an established price? Should I just leave the pricing details blank and let the rep fill it out?
Lastly, when should rep be paid? According to my understanding, a P.O. is considered filled once product leaves our warehouse, so is the rep paid then? Or when the funds clear our account? Any help is appreciated. Thx
Hi
I will be selling temporary grandstand seating/stadiums on commission only.
What commission rate do you think would be reasonable?
@Jack – It is hard to know if this is too good to be true. I would recommend trying to contact other reps that have worked for the company to get a feel for the legitimacy of the offer.
Hi, Thanks for taking a moment.
I’m contemplating getting involved with a company that is offering 20% commission + 15% of every first month of orders for each store (wholesale). This is for a food product, to be distributed in grocery stores & health stores.
Sounded very high to me, so I’m a bit concerned… To good to be true maybe…?
Thoughts?
Thnx,
J
After being in business for 30 years we are selling our cabinet company and the equipment. We would like to know what the standard commision is for someone who sells our high end equipment.
I would think it depends on how closely your sale comes to a liquidation as opposed to a normal selling channel. Commissions for a liquidation might not be comparable to what we are familiar with in the Independent Sales Rep channel, as it is a completely different animal.
I am interviewing for a manufacturer’s rep position that is all commission with a monthly guarantee base against commission. The territory is already well established and I am taking over where someone is leaving. I would be handling around 40 different lines for the personal care/home decor business. Very successful lines-high end territory. What is a fair percentage to expect in negotiations? This should pan out to be around 80K to 90K annually.
I will be an employee with limited benefits-medical only.
Thank you.
With an employment situation the normal commissions for an independent rep (which we normally deal with) would not apply. Thus you would have to look at the total compensation package and come up with something that is fair and rewards your specific talents.
I would hope that some of our other readers might chime in on this one.
I am having difficulty collecting my commission for sales I made for the last 30 days . I have worked for this company for the last 4 years and had my best month ever this last month. I quit my job and now they are refusing to pay for sales that have been fulfilled and customers have been invoiced.
Any ideas how I should approach this or what my legal rights are?
My first question would be “were you an employee or an independent rep when the sales were made?”
Depending upon the answer to that question, your rights would either derive from your employment contract if any or employment policies of your company. If you are independent, then your rights would be governed by your Sales Representation Agreement.
Depending upon which type of contractual relationship you have, you could inform the company that you will take the action specified in your agreement. You might be out of luck if you were an employee with no employment contract.
In either case, you might be best served by legal representation. To cut your costs, I would suggest joining one of those membership organizations offered by some law firms. For a low monthly fee you would have the benefit of legal representation. You could search the web for “Pre Paid Legal Plans.” I have used a firm with good results which was formerly called “Pre-Paid Legal”, but has changed their name to “Legal Shield.”
I hope this helps.
While we do not have specific expertise with how software companies structure their incentives, we believe you will find some guidance in our Training Tools at RepHunter at https://www.rephunter.net.
To access our Training Tools, you would have to create a profile, which is free to you, and then go to our Training Page.
I hope this helps!
We’re starting an automation company and have a couple of independant sales rep joining efforts wirth us. As a CEO of the company I am confused about determining their commission. Even though it’s a service-based company and their responsibilities will stop at lurring clients into buying our solution but my husband will be doing free demo, do technical presentation and close the deal. Does anyone have experience with software companies’ incentives?
I am considering a position as a sales rep for a reputable website selling advertising. No salary. 10% commission–they the money and they provide me the leads. All phone sales. This would be my first sales position and I am wondering what kinds of questions to ask about the company. I can sell almost anything. I trust the company. I am considering working 10-15 hours from home. I would leave my current positions (self-employed) to give this a try.
Questions to ask?
Do I have any negotiating power?
Thanks,
C
From Brenda: My thoughts …
Why leave current part time position for an unknown. At 10-15 hours, they should be able to do both?
Negotiating power? What are you bringing to their table? Do you have sales awards? Met & exceeded a company’s goals? Developed a new territory & can show the results of that?
How are the leads generated? Are the leads inquiring to the company, or are they a demographic lead that the company generated?
I am manufaturing rep. for a Precision sheet metal stamping, product development and Short Run company. We are currently in commission negotiations. As far as I know there is not an industry standard for commission. Is there a guide line or range of percentages in the Precision Metal Stamping industry for rep. commissions? I will have no salary stictly 100% commissions.
Thanx Much
chuck
From Matt:
– 90% of all commissions paid to reps are between 5% and 20% based on gross sale amount.
– Commissions differ with each industry.
– The best way to establish your commission amount is through conversations with interested reps in your industry.
We have a relationship with a former employee of one of the largest retailers who is now starting his own consulting business. This person believes that he can get our company’s products in two or three other national retailers. This person wants an hourly rate for design and packaging consultation, but would like to be paid a percent of the gross sales for any new national accounts he may be able to get us into for a period of three years. What would be an appropriate range for the commission percentage to be?
I am starting a wholesale garment production business and i’m at a loss as to what to pay my sales reps. What is the fair percentage should i pay?
Pls i need help urgently!
We are a small Mom & Pop fitness studio providing private, 1-on-1 strength training sold to new clients in 10 session packages. We have built our business on referral based marketing, but now feel the need to have an outside commissioned sales reps bring in clients. We expect to close the sale ourselves, no “exclusive” territories will exist and we are thinking of paying a flat amount of $100 to the Sales Rep for each client who purchases a 10-session package. Does this even look reasonable? As you can tell, we are total newbies to this!
I am currently considering a position as an independent rep servicing the banking sector. The company that I am talking to requires an up front setup fee and an ongoing monthly fee from their reps. The set up fee is refunded on the first sale but the ongoing fees continue. Although I have a lot of experience in this industry I am unfamiliar with sales rep structures. This arrangement hit me as quite odd…it almost seems like a franchise or a pyramid type setup. The monthly fees are not that large in comparison with the commission potentials so it doesn’t make much sense to me. Is this arrangement something you are familiar with?
@cblass6155: No it is not something we are familiar with. We can understand the one-time fee to make sure sales reps are committed to the program. Beyond that, we are not familiar with companies requiring on going payments, unless there was some specific service that they provided you that made sense for you to purchase.
We suggest you inquire further. They may have their reasoning that gives you a better understanding of their intent.
I work as a sales rep for an entertainment company and he pays me on the net of what I bring in. If I sell a show for $300 and we pay the performer $150 I get 20% of the profits or $30. I have always been paid on the amount sold. In reality, I am paying for his cost of doing business. What should I do. I am a 1099 contractor.
From Matt to Mary:
“It is always best to derive the commission amount from the “gross” of the sale. Doing this is simply much cleaner for both parties in terms of verification. When you derive commissions based of the “net” it gets convoluted and is derived using variables like expenses and other information the sales rep is not privy to.
I don’t believe it is unreasonable for you to contact this company and request that your commission percentage be adjusted so it can be based on the “gross” sale amount.”
I believe what you mean is “is it a good idea to sue ….” Anybody can try sue anybody for anything. Whether they will be able to successfully prosecute the case is totally different from “can you do it.”
I would suggest that you obtain legal advice as to whether you have a case. It will probably depend upon the wording of the written Sales Representation Agreement that you have with the manufacturer (you do have one, don’t you?)
So the first thing to do is to read your contract to see if there specific language dealing with the particulars of your situation. If you have some kind of protection, then you have a stronger case. But only legal counsel can advise you as to whether they believe your protection is strong enough, whether spelled out in your contract or implied.
Another avenue is to get the input of others on this topic, as you are attempting to do here in the RepHunter blog. Others may have experience in a similar, specific case.
In order to get your question more widely disseminated, I recommend that you join Linkedin, become a member of the Manufacturer Reps group, and post your question there. You should get some response there.
Hope this helps!
Can an independent sales sue a manufacturer if they take away a product line that they’ve greatly increased the sales for in their territory?
Sue – thank you for your inquiry.
Unfortunately we are not able to accurately answer your question. That is because commissions are determined by variables that include only you and the company that you represent. It always comes down to doing what is best for both parties.
I think that you need to be honest and start with a number that works for you. If that number is too high, you will find common ground.
Having said all that, it is very common for commissions to be in the 10%-15% range; again depending upon what is customary in your market segment.
I am trying to create a job as independent sales rep for an upscale candy manufacturer who has always done everything himself. I have found and sold a first customer (small candy shops and food markets, no chains) and have sold him on the idea. However, he has asked me what fee/commission/territory I had in mind. And I am stumped. Not knowing anyone in the business I was hoping someone could help me with this.
what would be reasonable?
From Matt to Ana Maria:
While it would be customary to pay the rep net 30 after payment in full is received, it would also not be unreasonable, depending upon your relationship with the rep, to consider and negotiate “progress commission payments”, to keep the rep’s good will.
In the case of an order that is not paid in full, the obligation would be as stated in your Representation Agreement as pertains to such cases. Again, depending upon your agreement, you may have specified that the commission or a portion thereof on defaulted contracts is refundable from the rep back to you, and could be deducted against future commission payments.
From Matt to Rick:
We don’t have specific information about the usual commissions of your industry. In our “Tips for Working With Reps” at https://www.RepHunter.net we state that you should determine that commission amount by communication with others in your industry.
Now in this case, I would think the commissions you currently get would be a good indicator of what you can expect from the next party.
I currently work as food service rep in the northeast. Since I am in and out of restaurants, and markets, there is ample opportunity to sell cross over items that my company does NOT engage in. In this case fresh fish. I have a contact who owns a wholesale fish company has been after me to help him with sales. My question therefore is what would be a fair structure of compensation for any sales I bring in for his company?
Hello, I have a question in regards to commission pay, hopefully some one can answer for me. As a manufactures representative, in where the products are custom and made to order, Is the commission rate payed 100% when the sale is made or can the commission be split. For example. If a sale for custom product is a total of X and when the order is received we the manufacturer receives a deposit of 50% of X is the rep in titled to receive 100% of their rate then or 50% of the rate and the balance or the other 50% of the rate once the product has been delivered and paid for. Also what happens if an order is not paid in full does that affect the commission of the rep or are we still obligated to pay the full commission.
Thanks!
Does anyone have any experience and recommendations on what commission rate is reasonable for a Representative in Taiwan that will be selling a patented process where revenue will only be generated by license agreements?
Our main website at RepHunter is dedicated to helping principals find independent sales reps who sell products for them, and for independent reps to find new lines to represent. Your inquiry seems to be more of the opposite in that you are looking for someone to help you buy a product or service. In our business model, the seller pays the commission. Your question makes it sound like you are the buyer and you are wondering what commission you might pay an agent to help you buy.
So one answer might be “you would not pay for this service at all — rather the seller of the database would pay the commission.”
However, that might not meet your needs and you are in effect asking for a service from someone who would provide consulting or research to you in finding the databases you are seeking. As such, you would be looking for a consultant, and the fees paid to a consultant (not commission which is paid by the seller) is a bit outside the scope of our business model.
Having said that, when you are considering the commissions that principals pay to independent reps to represent their product, the range is usually somewhere between 5% and 20%. It is always best to ask the potential reps what commissions they expect in their industry.
What is a good range of commissions to pay for someone to source us databases for our specific needs?
What about base, if you pay base, shouldn’t commission structure be lowered?
From Brenda at RepHunter: “Most reps on our database receive a commission between 5-15%, however, since we deal with every market available – it is best if you communicate with other reps in your industry to understand what the acceptable commission is in the market that you are going into, so that you are not only fair to the principal/manufacturer, but also to yourself.”
I am going to take on a new role reaching out to sell a sports performance consumer product to sports organizations. I’ll be starting from scratch. My job includes sourcing the contacts, introducing the product, and introducing price. Should I ask for a percentage of the sales and if so, what number?
Thanks,
Anna
The percentage of the rep agencies that “just collect money” compared to the ones that actually do their job to earn the money is, to me, irrelevant.
As a principal you’re going to give away money for free once, probably twice, then if you’re on top of your rep agents, you know who’s working and who’s collecting money.
Considering your previous answer, we suspect that we have some reps who are collecting easy money by collecting commissions only because the end customer resides in their geographic territory on sales they have had no knowledge of or direct contact with. Is it those reps whom we make non-exclusive to avoid this situation?
From our team member Matt, in response to Paul of 14-Oct-11:
You have to consider your motive and “easy money” is only a term used by those that have never been an independent sales rep. It seems to me that you would be better served to inform the sales rep that you have a new customer in their territory and require that they contact and service them rather then keep the rep’s commission for yourself. I assure you that the money you keep rather then pay the sales rep will not offset the cost of failure or loss of your sales reps in that territory.
From our team member Matt:
I would answer yes. In fact, it is the Holy Grail. Sales reps have to make a living and need to be paid and should be paid regardless of if the sale goes through their office or not. And companies should be happy to pay that commission.
Sales reps earn their money not when the sales are good but when they are bad. In other words, if that customer decides to stop buying, that is when companies pay sales reps less but the sales rep has to do more work.
So, yes. If this account is in the sales rep’s territory the rep should be paid for ALL sales.
We currently define exclusivity as any sale coming from a given reps geographic territory (submitted through the rep’s office or directly from the end customer, “sometimes without the rep’s knowledge”, into the company)as commissionable. Is this common or are commissions typically paid only on those sales channeled through the rep’s office indicating direct contact from the rep?
Who pays the credit card processing fee when a independent rep receives payment for a wholesale order by credit card?
Should the fee be split based on the reps sales commission – i.e- if they make 15% commission on the order than they pay 15% of the fee; or should the entire amount be deducted from the commission?
We have asked around a bit and the consensus is that such situations need to be negotiated as part of the agreement between the principal and the rep, and should be covered by the Sales Representation Agreement. Normally such fees would be paid by the principal as a cost of doing business, as the principal would be receiving the payments. And likewise, the rep is not normally part of the “channel”, as the rep does not take possession or title to goods. Otherwise, this would be more of a distributor role rather than a rep role.
However, your case is not this typical situation. Taking the typical credit card fee of 3 – 4% and expecting the rep to pick up that cost is only fair in the context of the entire Sales Representation Agreement. For example, a higher commission would be justified relative to the industry if it is not common practice in that industry to have the rep pick up this cost.
We currently work with distributors, but will be working on a commission basis only for our military sales. My question is: do independent reps specializing in military sales receive a a commission rate that is different or based on different criteria than a commercial sales rep?
Thanks for any input.
We at RepHunter do not have any knowledge of special commissions in military or public sectors. Our suggestion is that you contact reps who work in those sectors to find out.
I hope this helps!