In the previous article, we discussed the six stages of the process for searching, selecting, and appointing a sales agent. In this article, we will analyze some of these stages in more detail.
In general, ability, organization, professionalism and market knowledge are common conditions required of every sales agent.
Now, in concrete terms, the most suitable commercial agent will be one who (1) operates in our sector of activity, preferably within the same market segment and (2) represents products that complement ours, that is, products that do not compete with us.
Other issues to consider are the following:
– It is advisable to work with agents who do not have an overly large portfolio of represented companies, as their level of saturation may prevent them from dedicating the necessary time and effort to introduce us to the market.
It's not advisable to grant representation to a sales agent who works with large companies (if we're an SME) since they might not take proper care of us. For the same reason, it's a good idea to find out beforehand what potential business volume our company represents for the agent; if it's very low, we run the risk we just mentioned.
We must therefore take into account the above points when we begin the process of selecting a sales agent, whether we carry out this selection directly ourselves or entrust it to a specialized company or a local or Spanish official entity in the target market (National or regional Associations of Sales Agents, Spanish Commercial Office, Business Promotion Centers of the Autonomous Communities…)
When contacting candidates, we must also verify their interest in our company and our products, and request complete information from them, including the following points:
– Territorial coverage.
– Human resources (agency staff) and materials (equipment).
– Sector(s) of activity.
– Products and companies they represent.
– Turnover.
For our part, we must also be prepared to provide the agent with complete information about our company in its technical, commercial, and financial aspects. Our image will be greatly enhanced if we have:
– A technical dossier (products we manufacture, international standards we comply with, quality control organization, production machinery and equipment).
– A commercial dossier (references to national and international suppliers).
– A financial dossier (balance sheet and profit and loss accounts for the last three years).
If the contacts between the company and the agent are successful, it is advisable to negotiate the terms of collaboration and specifically the essential clauses of the contract, which for the company are the following:
– Generic obligations of the agent: information, promotion and sale, confidentiality, non-competition.
– Specific obligations of the agent: objectives and guaranteed minimum sales figures.
– Contract duration.
– Agent's remuneration.
– Grounds for immediate termination due to serious misconduct by the agent (failure to maintain confidentiality, failure to respect the non-compete agreement, failure to reach minimum sales figures).
We will now analyze some practical aspects.
It's common for agents to resist committing to guaranteed minimum sales targets and figures when signing the contract. And in fact, their arguments will be based on undeniable logic: our company isn't known in the market and it's impossible to predict the reaction of potential clients, Spanish products lack brand recognition, and so on.
Possibly their commitment in this field is limited to accepting that the contract specifies that they will make their best efforts to promote and sell the products.
To overcome this initial obstacle, it may be advisable to establish a transitional period (6 months, one year) in which no objectives will be set, although, after this period, both parties must agree to establish them.
Another important issue is the agent's compensation. This generally consists of a commission on sales made, but in practice, sales don't occur until some time after the contract is signed.
Therefore, many agents typically request a monthly payment from the company for the first year of the contract as "promotional expenses," anticipating that no sales will be generated before this period. At this point, it is advisable for the company to link this payment to a more specific commitment, such as the agent's completion of a "Target Market Report" (potential clientele, competition, etc.) and the presentation and implementation of a Marketing Plan.
A key point to remember is that the company should never neglect the market based on the mistaken assumption that the agent is responsible for everything. This policy only leads to demotivation and a decline in the agent's performance.
The support and motivation mechanisms for the agent include (1) the preparation of a Training Programme about our company and our products and (2) incentives for exceeding objectives.
Furthermore, the company must maintain regular contact with the agent to have up-to-date information on what is happening in the market, and to exercise control and monitoring of its activities.
Finally, as we pointed out in the previous article, it is worth remembering that most countries have very protective legislation for commercial agents, a consequence of their vulnerability to the company. This protection is embodied in various provisions. The most relevant are:
– Obligation to pay the agent his commission not only when he actively intervenes in a sales transaction, but also when a sale is made without his intervention, but the buyer is a client that the agent had previously obtained for the company.
– Obligation to indemnify the agent upon termination of the contract, to compensate him for the clientele he has obtained for the company and which the company will continue to benefit from.
In the European Union, severance pay is equivalent to one year's commissions, calculated by averaging the commissions earned by the agent over the last five years of the contract. If the contract lasted less than five years, the calculation is based on the number of years it was in effect.
The exception is France where the courts usually set the compensation at 2 years of commissions and exceptionally at 3.
Obviously, compensation is not payable in the event of termination of the contract due to serious misconduct by the agent.
Any questions about this news?
Talk to Coexia, the AI of the foreign trade
International business service providers
Aresbank
Aresbank is the bank of reference for financial and foreign trade operations between Spain and the MENA region.read more...
Banco Sabadell
Banco Sabadell is the fourth largest private banking group in Spain, comprised of several banks.read more...
Cajamar
The Cajamar Cooperative Group is the leading cooperative financial group in Spain, a benchmark for.read more...
Banco Santander
We drive business growth with tailored solutions, tools, and an expert team.read more...