If you are developing relationships with independent sellers who see you as a resource rather than whom you see as employees, you should feel a desire to influence the behavior of such sellers because:
- He should talk about our company in the way we want him to.
- He must adhere to the standards of our company and avoid actions such as signing contracts with clients for whom we cannot provide service, maintenance, or repairs, for example, due to their geographical remoteness.
- He should report on his work just like we do. We want. And, in the end,
- He should sell our product, not the products of direct competitors.
In fact, he should feel very clearly that we are holding him gently but firmly by his sensitive paired organs.
In other words, there should be no options like a “gentleman’s agreement.” As soon as your first deal is underway, you need to be ready to present him with a contract for signature, the text of which he has already verbally agreed to in advance.
Such a contract should include many other elements, such as a hint at career advancement, territorial and other limits (for example, the deal amount) related to the work. Moreover, granting the seller any territory should be accompanied by the establishment of a sales plan for that territory, with the threat of losing exclusivity if the plan is not met.
From our side, such a contract should be very flexible to allow for possible changes. Sooner or later, you will undoubtedly face the issue of a mass contract change for all sellers. Therefore, the best way to work is to have a document with the “substance” of the contract separated from a one-page “skeleton.” For example, this document could be called “Internal Sales Organization Rules,” and the “skeleton” contract would state that the seller automatically agrees to any changes by signing the next act of completed work. This can be legally formalized—I won’t go into details.
Any contract will only be effective if the parties owe something to each other. However, after each transaction and payment of the commission, the seller and you cease to depend on each other, and the contract becomes just a piece of paper. Naturally, such a contract should include a clause for automatic termination in the absence of sales over a continuous period. However, how can you ensure that the seller feels their dependence on you?
The most important thing is that, strangely enough, he needs this dependency. If he becomes dependent on us, we will be able to devote more attention to his growth, development, training, marketing support, and so on.
A costly way to organize such a dependency is to divide the reward for work into a variable component (commission) and a fixed component (salary).
However, if you find yourself in a position where you cannot or do not wish to pay a fixed percentage of the seller’s compensation, consider using a staggered commission payment as a dependency tool. This is especially relevant for large deals and transactions that last more than a year. For example, instead of paying a 30% commission all at once, you could pay 15% upfront, 10% after a month, and then 1% each month for the next five months. This is just an example. Of course, we all know about the future value of money, so a fair staggered commission proposal should have a total nominal payout greater than that of a lump-sum commission payment, meaning it should be adjusted for inflation.
You can even offer the sellers two options for the deal: installment payments with support or a nominally smaller one-time payment with “complete disregard.” Of course, the first option should be well promoted, as the “complete disregard” option simply leads to a total lack of results.
The deferred commission, of course, must be paid provided that the seller meets all the standards of their work and contractual obligations, including the obligations regarding minimum activity.