How Much Does a Sales Rep Cost?
So how much do rubs crossed and again I mentioned this during the intro I really want to get everyone in the mind set that you are paying for a service but a reps fee is based upon their sales so sometimes like they get a percentage of your product cost so sometimes makers will equate hiring a sales rep with cutting into their profits I can't hear that quite a bit in different faith groups I'm in oh but its sales rep cost so much is cutting into my profits this and that no let's get out of that mindset you are hiring somebody to facility a service for you just like you would hire a bookkeeper just like you would hire you know a marketing person just like you would hire an accountant whatever it might be so you know again you're paying rap's first service and it's based on performance so the better they do the more money you make put the more money they make two on dh that's way too when we were talking about adding a pure production costs during the beginner's guide to wholesale and ki...
nd of setting your wholesale pricing you really want a factor in that buffer for growth and sales rep commissions are please that this is really prominent soon you know again you're paying them for a service on dh and there's just misconceptions around them cutting into your profit or taking away from your your bottom line you're going to want if you're at a position where you're going to be hiring sales right, you're going to be iron, hiring other employees typically two and these air just the cost of doing business, it's the cost of growing your brand selling your products so what is a typical commission, and how does it work? Commissions really range based on industry I've actually this is fifteen to twenty percent, but I've even seen as low as ten percent for the more like the more luxurious, high end items will have a lower percent typically, but the general gift industry range of jewelry and candles and ceramics and, you know, stationary goods that tends to fall in the fifteen to twenty percent range. This is fifteen to twenty percent of your wholesale pricing, okay? And the commissions are written on orders that they write within their territory, so they'll go out to their stories in their own territory on dh, you'll pay for that. Sometimes there are optional trade show fees if they do shows, and there are some considerations, although this is, quite frankly, a more advanced class. But there are times where if you write orders at a trade show and it's in europe's territory, you would pay for the you'd pay commission on those orders, even though you wrote them because you would be then taking those orders. Passing them off to the sales rep to then manage that account going forward and to build that relationship up. So this fifteen to twenty percent or even lower, depending on what your industry is, this is something you really want to build into your costs ahead of time so that you're not having to adjust your pricing. Um, when you start to work with the rat and also it helps really, with that calculation of can I afford to wholesale? Okay, so sure, room fees are different. Showroom rep fees are very different. You will pay a showroom fee for your space in that show room and the again, they very greatly based, based on the location of the show room the size of the rep group. But in general, for the makers, that air kind of attending this course. One two through one thousand to thirty five hundred dollars seems to be the showroom fee that you pay for about a six month period, and that typically includes they caught one major show on one minor show. So one major shows like you know, atlanta martin and then a minor shows like a smaller show at that show room. It's, not as big a snob is broadcast, but in addition to the showroom fees, you are also going to pay a commission. On any sales that are written in the showroom or commission on any orders that were written by the sales reps that are also employed in outside geographic areas, but they're under the symbol of the showroom ribs. Does that make sense? Okay, so so it's a pretty this is why independent reps are typically the first step, because you're just paying the commission. It's basically, you're paying on what they submit to you show in perhaps it's a whole nother animal, because you are paying the showroom fees, which can add up for a small business and be pretty costly. Um, and again, the commission's you're writing for a sales rep group would be similar to an independent wrap in that if you write orders directly, if an order comes in directly from a shop in their territory, you're goingto pay them a commission on that, and then passed the or past the contact and go off for them to manage the account. Okay, with the show room fees, is there just a general expectation that once you get to the point of being ready for a show room, they're going to be providing the volume of sales? You need to recoup that fee? And is there any way to sort of protect, um, protects your business from, and a major loss? You know, if the show show show her picture up and then didn't end up right I know people that have been extremely successful ashore and wraps it was typically after they had really done a really great job of building their own business and growing their amount of wholesale accounts so they and marketing in their accounts are sorry marketing their brand so they kind of had a name for themselves so when people walked into the showroom they were a little bit more of a draw they also had a little bit more of a prominent location in the show, which is why the fees vary the fees will very based upon the sides of your space in the showroom and also the location of your space in the show room you know something more front and center is going to be more visible therefore it's higher value so you'll pay more for it. But I have had I have had clients that did very well in showrooms but it's a major risk and I've also had people is a major risk for a small business because it's a large investment but it could have a major game at the end of it to I've also had some clients that started with showroom arrives and it didn't go very well they felt like they didn't get the attention because they, you know, show them reps tend to have more lines than the independent reps they have a bigger space typically, you know, road. Rupp is carrying stuff into the shop, they can't carry hundreds and hundreds of things but a showroom it's all set up, so the people that didn't have success with it, it was more that they felt like they were a small fish in a big pond and they were kind of overlooked. And so whether it was because of their placement or just there was too much happening, that was kind of it. So again, it goes back to asking a lot of questions, too. If you decide to go the showroom round, I mean, obviously you want ask a lot of questions about what my fees cover and whether or not you have any flexibility or control over, sign it or branding that's aside into your display, you know different things like that, too. Yeah, as a new designer, too, you can negotiate sometimes with a show room just depending if you're doing a first time show, sometimes the showroom owner or lead wrap will let you come in and sell your own product, you know, for the duration of market, and then you can negotiate a lower showroom fee because you're actually there representing your own brand, you would still have to pay them the commission. Obviously for the territory that you're writing and but you personally would be handling the order so sometimes show rooms are open to that you know, it just depends well and I agree that brings up a really good point than numbers I provided about the cost on the last flight. Those are kind of industry standards but I want to really enforce here everything is negotiable. Everything in business and life is negotiable. So if somebody comes at you with the percentage of commission percentage or a showroom feed that you're not comfortable with counter it, go back to them and say, what about this or could you know if I work in the showroom on this you know, for this show can we lower the fees or whatever it might be so anyhow, everything's negotiable just just always remember if they really want to work with you, they're going toe negotiate something with you, you know, it's a two way street? Yes. Sorry exacted. Okay, so thank you, kelly. Um, okay, other expenses that you need to factor into into this kind of whether or not I can do this whether it's worth it, you know, you you want to think of the cost of these sales tools to these catalogs, add up sometimes they're a couple bucks apiece, depending on how many order so, you know most sales reps will ask for twenty, it depends too, if they sell mostly from a catalog, they're going to want more the the reps I've worked with have all asked for about twenty five catalogues, so it is one person, twenty five catalogs is no big deal if it's five or six people working under, you know, a small, independent rob group that's that's more s oh, there's an additional cost of that. So I just want you to be aware of that your sample products, teo, you know, again, these things were really invaluable to them to sell your product, so you want to supply to them, but I just want you to kind of think through all the expense is tied to it and the marketing and promotion materials. So again, if you're doing any sorts of postcard mailings or if you're going to a trade show and you're doing marketing to that, you know, send your rep a stack of those that they can then drop off when they go to meet with a source or another fun thing to do is if you're doing show giveaways like little touch keys or pins or pencils or, you know, something tied your brand, of course. You know, send them a bunch of those two that they can drop off little goodies when they go to their shops. It's it's usually pretty inexpensive, but it kind of makes a big impact both in terms of the store's relationship with the rap and your relationship with oh, both of them okay, so as we mentioned, I want you to make sure you're factoring all of these costs into your pricing before you bring on a sales rep. I think newer companies, they're really anxious to higher sales reps before they're ready because they think, oh, I just like anyone listening on my plate, and if I can get the sales rep to do this, I can just feel the orders or I can keep making my products. You know, the idea of a sales rep is fantastic, and actually the execution of working with the sale drop is fantastic, but if you don't have the infrastructure in place, if you don't have your pricing in alignment, you're not going to be profiting the way you should be. So you really need tio I know we talked about production costs and all that stuff during the beginner's guide to wholesale, but I really want you to look back at those materials as you're thinking about whether or not reps are a good fit for you if you could make the pricing work and it could be a really great way to increase your income, so but I don't want anyone jumping in unprepared or feeling like it's it's creating too small the margin for them that they can't two other things because some of my clients have jumped into working with reps too soon it's slim down their margins, and then they weren't able to reinvest in new inventory or things that they wanted to build on a product side of their business. So, you know, working with your raps really has to be beneficial to all aspects your business, not just the sales volume, okay, what questions do we have from the online audience or from the inside onions? I'm in studio audience, I've been talking a lot the last two days tripping over my words fifty gto, yeah, yeah. So, um, you talked about, you know, perhaps having independent wraps, having their own territory. So for example, let's say there was an independent act for west coast, and then I'm looking for east coast line, for example, to use and introduced each of them to each other. Like how how what's the rep to rep interaction or relationship like in their world, right, good question, so just to break it down a little further. You wouldn't have arrived just for the west coast like what's the time in fact, even just within california it you'll have a southern california rat have a northern california rat again because you think of the volume of numbers like the volume of stores in that territory and then, you know, korean is up in pacific northwest and she's got a couple of states there which she'll tell you about later, so it really you're gonna have it kind of breaks down into weird chunks sometimes I've had people having half of the stain draws the line here, you know, so you want to get very clear in your contract about where their territory specifically covers, but to answer your question, my reps never talked to one another. I was kind of the hub that communicated out to all of them so I would do blast, not blast email but bulk e mails where it was coming straight for my email where I was like, ok, here the new releases here, the new images here's the new catalog inserts and I like to send them digital materials as well as sending them a packet of printing materials for my reps that did have a pretty good social media presence I like to send them images that they could then reuse on social media feeds and stuff like that, so I was always a communication hub to my reps they didn't because all of them were independent contractors okay with them and it get wise, do you do they need to, like know each other? Do you need to introduce it like not really all not really. I mean the only the only change to that my only the only reason they would would be if they all fell within like a rap group. Okay, like how crowing canary has five or six wraps like they all communicate, but again that's karina's job tio coordinate all of them I would provide information tio karina and she would disperse it to her sub reps or not suburbs that's not the right word. But you heard your colleagues. Yeah, that makes sense. Yes. Ok, he looked like he still had a question. Okay, that's a did you have a question? Okay, so once you feel established and all the check marks protect what's a typical so for well established a paper goods person number of reps that someone may have we're talking five ten, you know, it's going to very widely based on the territories you need help in how quickly you're growing. You know, at my biggest point I had, like three, so it wasn't very money, but I know people that have significantly more than that or they'll have showroom reps that have, like, once you get kind of more established, you'll probably sound with the showroom reb and again they have road wraps in diff and geographic territories, so then you would just kind of be filling in the holes of other areas. The other thing is to know your market, so I know that my products sell really well in the east coast, they've got a lot of pattern, they've got kind of a preppy vibe, so, like, I get a lot of it attention from stores on the east coast, so to me having reps on the east coast in those areas because I'm not, you know, aside from going to the stationery show, I'm not back east very often, so having people on the ground in the areas that you know are drawn to your product is the best way to start again. Maybe you're covering this later, but as far as paying reps when I mean, from my understanding, it comes after the store has paid yeah, there's two different ways that that can work, and I will talk about that, um, after the breaking of that mind waiting. Yeah, sure, but I'm also wondering about how they're if they're paid is a contractor to ninety nine s o weaken table that for all right, sounds good at is write it down and ask me later yeah, katie had a question I'm curious so once you get to the point where you're ready to work with sales up, do ah brands typically leverage reps like for places beyond the scope of their own reach and still maintain kind of those individual relationships with stores that maybe they first started selling in or does it usually get to a point where it's like I wantto kind of push all the sales off? Or is it just a mixed depending on the business and that's a really great question? I'm glad you brought it up because there's a thing called house accounts, house accounts or something that you can't continued to service so you'll keep those in house basically is where the term came from and you'll service them say you'll be the one reaching out to them tio two field orders and you'll take those orders directly and have that relationship with the accounts it's not common to keep many house accounts like you have to have a special circumstance really to keep those if it's a big box store that you've been working with prior that sometimes a reason another reason is if you have a personal relationship it's a store owned by a family friend or something like that those are reasons that house accounts will stay with the brand, but really if you're at a point where you're ready to higher sales grabs it's in your best interest to let them do their job and let them do it well, because they'll follow up more regularly than you can and that's her job, you know they're good at it, so I would say trust in them given given, yeah, thanks just a few questions from the online ideas allison williams was wondering for showroom fees is that a thousand to thirty five hundred dollars per month or for the six month term, if you're human, a six month term, polka is for six months. Yeah, got it before six month term, and sarah cooley asked, what would you do if you bring on a wrap in a territory? But you already have accounts of that territory? Are you still going to pay a commission if that stores still wants to order directly through you? So, yes, you will still pay a commission if that store wants to order directly. Three you but again, going back to a case question why you'll really want to pass those accounts over to the rep. So if you already signed two stores in that territory and you bring somebody on you want to send them the contact information for the stores you're already working within their territory, and then sometimes to you also wanna facilitated introduction of so and so is starting to work with me. They're my new reb. They'll be out to meet with you all that you guys coordinate, you know, pass it off to them because again, their job is to sell and bill, they're in the local area. They'll be able to go out more frequently, they'll be able to show your products in person. They'll be able to show your snazzy catalog that we built during our effective catalog course. So you know they will again. This is kind of why I report and having them understand your industry so important to you. You want this person to represent your brand really strongly when they go to these retail shops, and so yeah, just to go back, tio sarah's question, in my opinion, you would want to pass is off. If you did have a special circumstance, like a personal relationship with the shop or something you could keep. It is a house account, but that's not usually recommended, and then rhonda born asks for orders taken at trade shows. Do you send those orders, the reps also you at that point, you already have the order and as we went through that flow process the reps job is to get the order to capture the order to write it and then send it to you to fill so that part of the job the front under the rebs job is already done. So at that point you would then continue to fill the order but you would want to make sure that that contact information gets to your sales rep so that they can do any follow up that's needed they can schedule a visit a couple months later or whatever it might be so you will want to be in communication with your rap and share that information but you wouldn't for them the order necessarily you'd mostly want to be focusing on sending the contact information great and finally smurfy had another question if you get rid of a sales rep what do you do about the stores they wrapped that you still provide stuff tio do you send an email to the store to let them know and you owe them any money for the fact that you're still working with the store they found the only reason you would owe the reb additional money is if there's an outstanding order that's just pending usually that thirty day grace period gives both parties time to wind down too so the stores the reps rather will stop writing orders during that thirty day window and that's kind of just a chance for you to feel anything that's outstanding put together your final commission statement and make sure everybody leaves at the end of the thirty days kind of on even territory everybody's been paid you've hopefully gotten your samples back and any other materials but in terms of what was the first part of that question if you leave a sales right who gets accounts basically right is that what do you what do you do about the stores they repped do you still do you still do send them an email right to let them know our yeah so I mean if they still if you're still providing gods to that store right you but you see the relationship with the rap right at that point it depends on what you're doing if you're hiring a new right that if you're hiring a new weapon that territory I talked to the new rap and say I'd like you to reach out to the store these air my current accounts in your territory if he'd you're not hiring a new rap in that area, then I'd probably reach out to the store directly and just let him know that you know you'll be reaching at him directly and here's going to, you know, provide them with another cattle it kind of do your initial pitch again of just letting him know we love working with you and we'd like to continue this relationship you don't owe the cell drop money for future sales, but not their future sales no, once your contract is done and you know that thirty day grace period of, you know, giving each other notices done and everyone's kind of paid up for that past that contract, you don't owe them money, okay? Yeah, great. So we're I think alert one time for one question sure question my name is laura in a stationary in and woodcuts through thoughtful migrations, but my question is about etiquette, so let's say you do have a ripped like you were talking about on the east coast and say, you happen to be over there for vacation or whatever what's the etiquette in terms of can you drop in and introduce yourself face to face because it's nice to have that connection, or is it better to just totally leave that up to the sales rep and not necessarily make that initial like, I, you know, that's for carrying my line? And what sort of the etiquette about that up? I personally would drop in and just say hello, but I'd make it very clear that it's not a sales call, that I'm just traveling in the area, and I was excited to see a shop that I'm working with and, you know, more of just a social visit I would, but I would in my circumstance, I'd probably give my rep a heads up that, hey, I'm going to be traveling back east, and I wanted to pop into these shops, and if they felt there was a need to let them know if they wanted to help coordinate so that I could meet the actual buyer instead of whoever was just in the shop that day, they could do that, but I don't know that there's a formal rule or etiquette around that I think you need to just do it feels right and and also communicate with your rep and see, but I wouldn't want to stop by its fund is here, it's in stores and it's fun to me, the people that are buying from you and, you know, it really puts a face to the name of the product, because again to we've we've been talking to other courses about the relationships and the personality, and they want to know the people behind the brand and the story of the companies that they're buying from so that's, really, if you're in the area, I'd stop by but that's just me, thanks, yeah, sure.