One of the most significant things that you need to try and get right when you’re hiring new independent sales reps could be the sales contract you have to agree upon with every new sales person. The sales contract is designed for the protection of both manufacturer’s rep, and also the principal. We recommend entering into an elegant contract together with your sales reps, that could lead to a significantly better understanding of the obligations that each party have. A contract vary significantly according to industry, but there are many key parts that you should included in every contract. These include:
Responsibilities - You need to clearly define the role of each one party active in the contract.
Define Independent Contractor - It has to be clearly stated inside the terms of your contract that a independent sales person is a contractor, not an employee.
Compensation - This is very important! You should be very specific in relation to its percentage of gross or net sales. In addition, a superb faith clause should invariably be included. Depending on the volumes involved in an order, as well as the kind of competition involved at the same time, orders will most likely require discounts. In these cases it's not easy to define commissions, however, your sales reps should be given flexibility as a way to close sales. A good faith clause states that in instances where the rep can give additional discounts, it could be necessary for the rep for taking a cut in commission, understanding that any such commission reductions will probably be negotiated in good faith. As incentive, we advise that commissions increase with sales volume. This may lead to defining a quota plus the commission structure for the way these quotas are met or exceeded. Not surprisingly, reps will put additional time and effort in a line whether or not this will provide them greater return.
Termination - If the contract is terminated by either party, provisions for commissions paid on pending and existing orders has to be provided.
Non-compete - For technical or industry specific products, you might also want to draft a non-competition clause. You definitely don't want your independent sales person to develop a fantastic customer base, after which have him/her change to a competing principal.
Territory - Most sales reps would like a defined territory. We suggest achieving this by either geography or industry type.
Product Improvements - Because of their experience in the field, independent sales reps may sometimes have ideas in the way to improve your product! You need to be sure that it is clearly stated how the principal takes ownership of the product improvements manufactured by independent sales reps which are implemented.
Confidentiality - If you have trade secrets or some form of technical edge on competitors, you will wish to include provisions for confidentiality.
Liability - A contract must define liability difficulties with product use, negligence, and so forth.
Dispute Resolution - Provisions should be included including governing state laws and attorney fees.Contact RepHunter for assist with the topics presented on this page.