Most commonly, an independent sales representative or manufacturer’s representative sells the products of several different companies on a business-to-business basis. They may represent and sell to retailers, wholesalers, or other types of businesses. Some representatives, however, represent only one firm and sell only a few products or services.
There are independent representatives who sell products to consumers, such as cosmetics, but the nature of consumer selling through independent representatives is quite different than that of business-to-business selling.
Commission Structure Benefits Businesses
The good news about independent representatives, for small businesses, is that they require no money and little effort up front. They are generally paid on a commission basis, typically 5 to 15 percent of net sales. However, in some businesses independent representatives are paid on a ledger basis, which means that they can earn a commission on every sale made in their territory, even if a customer contacts the manufacturer directly.
In some fields, independent representative firms are common. A representative firm acts like an independent representative in that you only pay commissions, but you pay the commissions to the group. These firms are often owned by an extremely seasoned and successful salesperson. The owner or partners in such a firm may pay their sales employees by salary, commission, or some combination of the two, such as a small base salary plus a bonus.
For a small business, independent reps can be a bonanza!