PRESIDENTS MESSAGE
By Rob Neal, 2007 President
Hey y’all (that’s “Hello” for our northern neighbors). I hope everyone’s year has been successful and that everyone is having a happy holiday season. As I sit here pondering on what to write, I have decided these articles may represent one of the more difficult tasks of this position. But there are several items I would like to mention.
First, I would like to again thank Past President
Second, anytime the prospect of a major change confronts any organization or individual, a certain amount of uneasiness and apprehension is expected. AIMRA was no exception. We heard from many on their concerns as to which direction AIMRA might take. However, there was a somewhat unexpected up side to all of this, and that was AIMRA emerged, in my opinion, stronger than before and with a better outlook of what lay ahead. We had one of the better attended conferences that I can remember. We also had several new members join. Our appointment session was well attended, and our cocktail hour with FEMA continues to be a great success. That’s a lot of positives and a great way to end the year.
Finally, I want to express our appreciation to Dave Heath and the great job he did with his presentation. It’s a tough challenge to present technology to any group, let alone ours. I know I need to be doing more along these lines and it helps to see what is possible and how others are incorporating the internet and other tech tools into their business. I think we need to continue to offer information and advice on technology and the rep business. I especially enjoyed his slide show; he is in real danger of becoming our official photographer. As “President of the World”, I should be able to make that happen (that makes sense if you were at the convention).
It’s December 14th as I write this, and like many of you I am trying to wrap up some last minute orders and call it a year. So I’ll finish this up and save some of my thoughts for future issues. Good luck and Good Selling.
SPECIAL REPORT: For Those who missed
Minneapolis
It has come to my attention that I should explain what
transpired in
This is very much a synopsis, but represents the basics on what we had to consider and what we decided.
Our board was given three proposals to consider: one from FEMA, one from FEWA and the third from Association Solutions (Jim Manke). I will briefly explain each of these below.
The first proposal
from FEMA:
This proposal had AIMRA merging into FEMA. Our dues would remain the same. The first two years AIMRA would keep its name, after that we would be disbanded and become part of FEMA’s marketing group.
The second proposal
from FEWA:
This consisted of strictly a management contract. In other words, we would remain completely independent of FEWA. Our only connection would be that we would hire their management group to manage us. Their proposal did reflect a significant saving over the old contract we had with Associate Solutions.
The third proposal
from Association Solutions:
This proposal kept us with our current management team. It had the benefits of the cost savings offered by FEWA, as well as keeping us completely independent of the other two organizations.
The board was unanimous in its decision to keep Jim Manke. We felt that it was important to stay independent if at all possible. Association Solutions proposal represents substantial savings to AIMRA as well as some reimbursements should we sustain any operating losses. We also felt that Jim has done a very good job in representing us and our interest in the past.
I know this is brief and may not satisfy some of you with its lack of detail. If anyone would like to discuss this further please feel free to contact me. My phone number is 901-683-5005, my new email is rob@rlnmarketing.com.
Sincerely,
Rob Neal
President
AIMRA
Why Representatives Should Solicit Zero-Income Lines
There is a conundrum in the sales agency world. The demand for manufacturers representatives has gone up while the supply has gone down. Fundamental supply and demand economics dictates that commissions should be going up, but they aren’t. How does the agency solve this dilemma? By actively soliciting lines who value the agency more than the existing lines they have. This includes soliciting lines with little or no present territory income, but significant potential.
Many experienced manufacturers with existing territory agencies take the agency relationship for granted. Manufacturers will argue this statement saying that an agency is on the same terms as a manufacturer- that is a 30-day no-cause cancellation clause. The problem with this thinking is that while many factors are contributing to the volatility of the manufacturer’s sales strategy (whether to keep an agency or not), none of these factors affects the sales agency itself. Most agencies are in it for the long-haul and many have outlasted most of their principals. Therefore, agencies are more loyal to the principal relationship than principals are to the agency relationship.
Also, the manufacturers often mistake years of experience using agencies as implying they value the relationship. Value of the sales function is based on the $/ unit time for the agency. Manufacturers have been reducing commissions and asking for more reporting and non-selling field activities from the sales agents. This drives the real value ($/unit time) of the relationship down. Furthermore, even agents with exemplary performance are cancelled on thirty days’ notice. That’s hardly a valued relationship.
However, a new line that wants to develop a territory- whether it be a small manufacturer or a foreign manufacturer- is going to be hungrier. They will value the agency and the relationship more than the mature agency lines who are cutting commissions and forcing representatives to file more detailed, customized reports for the manufacturer.
The process:
Agencies should look at lines from a strategic business growth viewpoint, not from a current income viewpoint. The growth potential includes looking at growth in revenues and commission rates. New lines are more apt to pay a higher commission. This combats the continuous trend of manufacturers bleeding the commission rates over time.
Commission rates aren’t the only factor in the value of a line: so is the time factor spent on the line. Even with the higher paying lines, how much more time are they demanding to develop markets, send in reports, follow up after-sale factory-created issues, and do more non-sales related activities?
The first order of business for an agency to increase its $/ unit time value is to decide which line(s) to drop. Increasing value usually means that a line or two will be dropped while another more valued line is added. To see which lines to drop, the agency should rank lines three ways. One, in order of commissions paid to the agency (the line revenue stream). The second is to rank lines by looking at the value each line brings- the $/unit time- and ranking them accordingly. The Certified Professional Manufacturers Representative program (go to www.mrerf.org for details) has an excellent means to calculate this. Finally, rank the lines based on growth value potential. Growth value potential is somewhat subjective, but does include consideration not only for the $’s growth of the line itself, but how the line helps the other lines grow with new business opportunities.
|
Line |
Revenue Stream $ |
Value: $/ Unit time |
Growth Potential $ |
Total |
|
ABC Mfg |
1 |
3 |
3 |
7 |
|
DEF Inc |
2 |
2 |
1 |
5 |
|
123 Corp |
3 |
4 |
4 |
11 |
|
XYZ Ltd |
4 |
5 |
5 |
14 |
|
PQR Co. |
5 |
1 |
2 |
8 |
In this simplified scenario, line XYZ is on the way out, but line PQR has more potential, while line 123 looks questionable. The strategy would be to find a line that has a higher value and growth potential than XYZ that is willing to pay a retainer equal to or greater than the XYZ revenue stream.
Most agents know what they are looking for in a principal. A summary of what to look for with the territory development principal follows:
- Measuring the value of the new line.
- Realistic growth opportunity from current agency accounts.
- Future growth opportunity from prospective accounts generated by the new line.
- Management/ corporate:
- Longevity/ stability.
- Commitment to the rep network (must come from the top and CFO)
- New product development direction and activities.
- Contract
terms- What works:
Retainer for territory development services over an agreed period of time, higher commission rate (than current average of principals), and longer post-termination clause. Period. - Milestones: The measures and milestones are similar to those covered in the Manufacturer portion of this bulletin. Each milestone should result in a decision to continue, adapt, or terminate the relationship.
A decision by the representative to take on only new principals with existing territory income is limiting the big picture growth potential for the sales agency- and may in fact be a factor in reducing agency commissions over the long term. Furthermore, it is possible that manufacturers with a zero-income territory can and should compete for the eye of the quality representative firm.
Soliciting new lines should be a continuous process for the representative firm. However, in the past, most firms ignored lines that required territory development. By including those lines that are “pioneering” lines and negotiating good terms up front that are mutually beneficial to the agency and the manufacturer, agencies can affect their bottom line by taking on lines that value the agency relationship.
Marketing in the Future
By Marcus Kimball CPMR
AIMRA Director
I would
first like to thank everybody who was involved for the successful convention
that took place in
This past
year seemed like a roller coaster for our business, it was up one month and
down the next month. In my opinion,
consistency is very important in the rep business for several different
reasons. You do not want to get too far
behind, especially with the increasing costs of traveling today, so we need to
be more efficient on expenses just like our farmers of
To help be more consistent in today’s business I think we need to be more diversified. Such as not just selling grain handling or row crop, we might need to get more involved with hay equipment. We all know this might not be the answer especially in certain areas of the country but when the cattle business is good it can be very profitable. Sometimes we might need to turn away from the agriculture side and start looking into commercial use such as small industrial equipment or lawn and garden. This business is seasonal as well but for my business there are certain times of the year when selling equipment can take some extra work. With the population of farmers on a decline we might need to think about marketing products to the general public such as power sports (atvs, scooters, go carts). There are plenty of distributors in the U.S. that are importing product from China or Taiwan that need reps for certain parts of the country.
Personally,
I believe the agriculture market is on the rise for several reasons. Ethanol plays a big part in this belief, the
more demand for corn will keep driving the prices upward which will bring more
income for our growers of
AIMRA NEW MEMBER PROFILE
Name: Henry (Hank) Radintz
Company: HCR Marketing, LLC.,
Provide a brief history of your rep firm: I’ve
been representing short-line farm equipment and power equipment manufacturers
since 1981.
What did you do before becoming a rep?: Service manager for a short-line equipment company.
What hobbies do you have: Volunteerism,
photography, spending time “at the lake”.
What one thing do you really find fascinating about
the rep business?:
The challenge of meeting
people and learning to work with them to build both their and my business.
Any information on your family: Married,
three grown children.
New Leadership
At the annual conference in
President – Rob Neal
Chairman of the Board – Ron Reed
President – elect – Miler Hadskey
Treasurer – Dan “Bubba” Peterson
Director – Marcus Kimball, CPMR
Director - Ted Traeder, CPMR
Associate Director – Jerry Sechler