Independent vs In-House Sales Reps: Which is Best for Wholesale?
January 19, 2017 By Stacey Woods
Whether you’re just gearing up as a wholesaler or are looking to expand your existing sales team, there are two ways to hire sales people to represent your brand in the field. The first is with sales reps as employees; the second is with independent sales agents to sell on your behalf in a particular territory.
While in-house reps get paid salaries regardless of how many sales they make, independent reps (also called manufacturer’s reps) are typically paid on a commission-basis only.
After taking a look at the following advantages and disadvantages of each sales rep ‘type’, you will be better positioned to decide which you should use. Choosing one over the other (or sometimes a combination) will depend on a number of factors, notably your budget, sales goals and management style.
|In-House Sales Rep
|Exclusive representation: As your employees, reps are focused exclusively on your products and can truly act as your brand’s “ambassador”
|Financial risk: Reps are on your monthly payroll regardless of their productivity, and you may end up investing time and resources in an employee that consistently fails to meet quota
|Knowledge of your brand: In-depth familiarity with your products and target markets enables sales reps to interact more effectively with customers and sell more strategically
|Extra costs: An employee incurs costs beyond just their salary: office space, equipment, travel expenses, holidays, insurance, benefits, etc
|Efficient lead generation: As an integral part of your sales and marketing team, internal sales reps can achieve better results when it comes to generating qualified sales leads and ultimately closing deals
|Longer to scale: Because of the complexities involved in hiring and firing employees, scaling your sales team up or down takes more time
|Beyond order taking: You can task your in-house reps to perform activities beyond order taking: retail merchandising, customer satisfaction surveys, stock counting, competition surveys, and more
|Independent Sales Reps
|Cost-effectiveness: New businesses can get feet on the ground quickly without having to deal with the overhead of a salaried employee and benefits
|Harder to manage: Agents may not sell according to the style you prefer or in the manner best suited to promote your brand, which can negatively impact customer relationships and sales
|Quick ramp-up: There are a few online “match-making” sites that enable businesses to quickly locate and readily hire independent sales reps that already sell into their industry. RepHunter, GotSales, and repemployment, are just a few examples of such sites
|Competition with other brands: Agents typically represent other companies besides yours, so your products don’t get their full attention, especially when your brand isn’t well-known
|Added reach: Experienced sales professionals can introduce new networks, connections and territories, as well as business insight into opportunities, market trends and what competitors are doing.
|Loyalty: Agents push those products they feel have the best chance of selling and making them money, and may put your brand on the back burner when others run promotions or increase commissions
|No hidden costs: The agent is in business for himself and any extra costs incurred while selling your products, such as travel expenses, sick leave and holidays, is their responsibility.
|Training: If selling your products requires some technical knowledge, it can be expensive and difficult to coordinate training and/or agents may simply not have the time for it
|Minimal financial risk: Since they work on commission, you only pay for sales made. For a small business with limited resources, this is a big plus, and also helps during downturns.
The best of both worlds
We can see that the deciding factors boil down to budget and control. Independent sales agents can save wholesalers money when they don’t have the resources to hire in-house staff. However, managers have less control over how their brand is represented and their products sold. Often companies use a combination. For example, they will hire outside reps in the beginning with the intention of transitioning to internal sales reps once their brand is more established. Others maintain an internal sales team to serve stronger, more saturated regions with high sales volumes, and independent reps for smaller territories where it’s harder to break into the market.
Whether employing inside or outside sales reps or a combination, sales effectiveness and sales efficiency are always a challenge. Sales automation solutions allow wholesalers to plan, execute, and tightly monitor their B2B sales in a manner that maximizes sale rep productivity and professionalism.