The classic path to market for many original equipment manufacturers (OEM) is to hire a sales staff and provide them the with the tools and product knowledge required to get their product into the hands of the customers that need them. The cost of this traditional sales approach however can be difficult for small businesses and start-ups when travel expenses, salaries, income tax implications and long term benefits (health and retirement) are taken into consideration.
The manufacturer’s representative or independent sales representative acts as a contracted agent for the OEM while working as a commissioned agent, usually for multiple manufacturers.
The representative approach can provide a major benefit to the sales and marketing effort of a small and/or fledgling company in that the commissions paid to the representative are paid after the invoice from the customer is paid. In addition, the representative pays his or her own travel expenses, taxes and benefits.
While the multiple line representative model may be considered by some to be a drawback initially, the savvy manufacturer who maintains direct communication with his sales representative, and plays a continual role in the development and direction of their sales effort, can benefit substantially by this approach. Proof, as they say, is in the results and many manufacturers continue using the sales representative model with great success long after they are well-established in their marketplace.