This decision should not begin with which model costs less or gives you more control. It should begin with understanding how your company sells, supports, distributes, delivers and services its product into a specific market. Manufacturer sales strategy follows from that. It does not lead it.
Why the Manufacturer Rep Question Is Usually Asked
Cost and control are real considerations. They are also consequences of something more important, which is why leading with them produces the wrong answer.
A direct sales force gives you more authority over people who may still be unable to sell, because the factory behind them is not doing its part. An independent network looks cheaper right up until your line cannot command enough of a representative’s attention to be sold at all.
Both failures have the same origin. The model was chosen before anyone examined whether the business was built to support it.
So rather than starting with the two options, I work through four things. The answer usually emerges on its own.
One: The Sales Organization Already in Place
Before comparing models, look hard at what exists today. Whether the manufacturer operates regionally, nationally or internationally. Whether the salespeople are independent sales reps or salaried factory sales representatives. How many sales territories are covered, and whether the current structure is working.
And then the question that tells you the most:
How many representatives are successful, and in which markets?
Then the follow-up that matters just as much: can that success be tied to the efforts of the sales rep, or to the market itself?
Where certain markets outperform others, the reason is worth isolating before anything else is decided. It may be the product. It may be the customer base. It may be the competition in that region. It may be the strength of one individual salesperson.
Four explanations, four different decisions, and all four come into play. Only one of them is about the sales model at all.
Two: Whether Your Line Can Earn a Manufacturer Representative’s Attention
If independent representation is being considered, this determines whether the model is viable before anything else is discussed.
A manufacturers representative carries multiple lines, and yours competes with the rest for time. Find out which lines the rep handles and which are the biggest. The question is not whether your commission rate is competitive. It is whether the line can generate enough commission income to justify the time required to develop the territory.
Then the fit question, which is separate and just as decisive: is your product line a good match for this rep, and is the rep’s existing customer base already buying your type of product?
The term nobody negotiates
Compensation is only one component. The full picture takes in the sales commission structure, incentives, sales quotas and reporting requirements. Manufacturer rep commissions are frequently set by looking at the percentage alone.
It also takes in something manufacturers rarely price at all: the time between making a sale, shipping the product, invoicing the customer and ultimately paying the salesperson.
A long sales and billing cycle can dramatically change the attractiveness of a product line to an independent representative, and good reps understand this.
A representative working a long-cycle product is financing the territory out of their own pocket while they build it. Stretch that cycle far enough and the economics stop working, however good the commission rate looks written down.
Three: Where the Salesperson’s Job Ends and the Factory’s Begins
This is where sales organizations quietly fail, under either model.
The manufacturer needs to settle precisely what the factory provides:
- Inside sales support and estimating support
- Customer service
- Engineering support and technical assistance
- Marketing and market research
- Field service
Or whether the salesperson is expected to carry most of it themselves, from prospecting through order entry and into problem resolution.
An outside salesperson cannot develop a territory while most of their time is consumed doing work the factory should be supporting. Reps call this too much paperwork.
Note that this applies identically to both models. A direct salesperson buried in estimating and customer service is no more effective than an independent representative in the same position. The difference is that you pay the direct person whether they sell or not.
The failure underneath all of this
Of the biggest failures I have seen and experienced over the years, the largest is the absence of systems for a sales rep to operate inside.
When manufacturers build systems that are easy for both the sales rep and the factory to work within, with clear communication and guidelines, there is a far greater chance of building sales.
That is true whichever model is chosen, and it is the reason so many model changes produce no improvement at all.
Four: Sales Management and the Framework Behind Either Model
Finally, what surrounds the sales function.
- Is there experienced sales management in place?
- Are territories clearly defined?
- Are expectations and quotas realistic?
- Is there a regular reporting system?
- Does each territory have a territory sales plan and a market development plan, rather than only a revenue target?
- Does the manufacturer supply the marketing support, competitive intelligence, product information, engineering assistance, estimating support and field service the salesperson needs?
- Is there ongoing training and communication from sales management to the sales rep?
A revenue target is not a plan. It names the destination and says nothing about the route, and it is the most common substitute for genuine territory management.
What Each Model Actually Demands
Working through those four questions usually makes the requirements visible, and the requirements make the decision.
| An independent rep network requires | A direct sales force requires |
|---|---|
| A product line that generates enough commission income to hold attention against other lines | A fixed cost the territory can carry before it is producing |
| A payment cycle a rep can survive while developing the territory | Management capable of directing people day to day |
| Clearly defined territories and realistic expectations | Clearly defined territories and realistic expectations |
| Factory support for estimating, engineering and service | Factory support for estimating, engineering and service |
The final two rows are identical on purpose. Those requirements do not change with the model, which is why changing the model rarely fixes them.
How to read your own answers
Working through the four sections above tends to produce one of three pictures.
- The support structure is thin. Answers cluster around missing estimating, engineering, marketing support and field service. This is not a model decision. Neither model will work until it is addressed, and going direct will simply cost more while it fails.
- The support structure is sound but the economics do not work for an independent. Commission income is too thin or the payment cycle too long to hold a representative’s attention. A direct factory sales force, or a narrower rep network in fewer territories, becomes the practical route.
- Both hold, and performance still varies by market. The variation is coming from customer base, competition or individual capability rather than the model. Territory-by-territory decisions will outperform any single company-wide answer.
None of that replaces the judgement required in a specific business. It does tell you which conversation you are actually having.
So the answer is often not rep or direct at all. It may be a combination, with different territories handled differently according to customer base, competition and product fit. Over my career I have seen many mixed models, serving different markets for different reasons.
The real question is whether the manufacturer’s entire sales-support structure matches the way the product needs to be sold in that market.
A company that changes its sales model without changing the support behind the territory and the support to the sales rep will continue to struggle and see limited sales growth.
Where This Decision Goes Wrong
- Switching models to fix a support problem. Reps underperform, so the company goes direct. The new team inherits the same missing estimating, technical and marketing support, and performs no better at considerably higher fixed cost.
- Judging a network by headcount. How many are succeeding is the useful number, and the reasons behind them usually explain more than the model does.
- Negotiating the rate and ignoring the cycle. The commission percentage gets careful attention. The time to payment is never raised. For an independent representative the second one often matters more.
- Issuing quotas without territory plans. A number tells a salesperson what is expected and nothing about how to reach it.
- Assuming one model fits every market. Territories differ. A combination is frequently correct and rarely considered.
Questions I Get Asked
Can we run both models at the same time?
Frequently that is the right answer. Territories differ in customer base, competitive conditions and product fit, and nothing requires one model to cover all of them.
Our reps aren’t performing. Should we go direct?
Not until you know why. If the cause is thin factory support, an unworkable payment cycle or undefined territories, a direct team meets the same conditions at a much higher fixed cost.
How do we know whether our line can support independent representation?
Work out what a representative would realistically earn from your line in a developed territory, then weigh it against the time needed to develop that territory, including the delay before commissions are actually paid.
What should the factory own rather than the salesperson?
As a working principle, the factory should own everything that does not require being in front of a customer. Every hour spent on estimating, order entry or problem resolution is an hour not spent developing the territory.
If your sales organization is underperforming and you are not certain whether the problem is the model or what sits behind it, that is worth a conversation. One question about a sales rep usually leads to several more.
Across nearly five decades in this industry, I have been involved in most of these situations directly, or watched other companies work through them. That experience is worth having in the room when a decision like this is being made.