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Value Add Agents Agreements

Far too frequently, the shortcomings of an Agent agreement are not apparent until an Agent relationship deteriorates. If the unwinding of a relationship leads to court, the costs to both the manufacturer and Agent quickly escalate, reversing years of accumulated profit. Care must be exercised when drafting and approving the agreement to ensure the presence of a minimum of two features: First, the agreement must be written in a balanced style, providing unfair advantage to neither party. Second, the agreement must be compared to several other agreements used within the same industry in order to make certain that no standard features are omitted. An attorney can review an agreement and evaluate whether the agreement is balanced. However, only by comparing the agreement with others in the same industry can a party signing the agreement be assured that important elements are not deleted.

Agent agreements must promote balance between the power of an Agent and manufacturer. Clever wording in an agreement that stacks more power toward one partner relative to the other ultimately erodes trust. Performance excels where trust is nourished and allowed to thrive. Where trust is questioned, neither party applies optimum levels of energy toward achieving the goals of the partnership. An unbalanced agreement draws energy away from sales and growth performance, and toward issues of compliance with the terms and conditions of the agreement. The best Agent agreements are written with attention paid to a balance in the relative power between the Agent and manufacturer.

An objective in common for both the Agent and the supplier is leverage. The Agent, with the addition of a new supplier, has a greater product line to sell to its customers. That expanded product line affords the Agent to become increasingly important to its customers. The Agent benefits from the advantage of selling more products to its existing customers with the same sales team. The supplier, with the addition of a new Agent, enjoys more people selling its products. The supplier benefits from the advantage of an expanded sales force selling the same product line. Both the Agent and the supplier exploit the power of greater sales without greater cost.

Relationships are Organic


Relationships between Agents and manufacturers are organic. Those relationships are born, often of highly enthusiastic parents with immense expectations. The relationships grow and develop during at a time when they are in a period of great change. The relationships later mature as growth slows down. Once growth ceases and sales begin to slow, relationships begin to decay. After a long period of decay, relationships ultimately die or must be put to sleep. People involved with managing relationships between suppliers and Agents recognize this organic analogy. Sales executives and managers who are new to relationships involving Agents and manufacturers need to understand the life cycle of relationships. Knowing where a manufacturer and a Agentr are in their life cycle is very helpful in understanding the relationships being formed when the Agent agreement is signed.

Performance, not Words, Supports Sales Growth

Words in an Agent agreement rarely extend the life of a relationship between an Agent and a manufacturer. However, properly constructed words and clauses in an agreement can make life easier for all involved during the lifetime of an Agent agreement. Equally important, skillfully constructed words and clauses can avoid agonizing battles when it is time to recognize that the relationship either is dead or must be put to sleep. When the time comes to terminate the relationship for any of dozens of reasons, parting company without a legal skirmish allows both the Agent and the supplier to continue to focus time and energy on customers and not in courtroom or arbitration battles.

What Does Balance Accomplish?

The best agreements integrate recognition of balance into the agreement. Why balance? When an Agent feels neither subservient nor superior to the manufacturer, both parties apply energy to mutual objectives: expanding sales, improving market share, driving manufacturing margin for the manufacturer, pushing gross margins for the Agent, and growing the customers numbers. When an Agent believes that the relationship and agreement with a suppler is well balanced, the mutual objectives shared at the creation of the Agent agreement have a chance of success. Balance does not guarantee success, but lack of balance almost certainly guarantees failure of the relationship.

Examples of Balance

In order to ensure that balance is understood, perhaps some examples are in order. Here are three: First, if an Agent can terminate the agreement for convenience, the manufacturer must be able to terminate the agreement for convenience also. Second, if the supplier indemnifies and holds harmless the Agent if the supplier becomes embroiled in litigation, the Agent should likewise indemnify the supplier when the Agent becomes a defendant in a legal proceeding. Third, if the supplier can terminate the agreement for a number of specific causes, the Agent should also have a list of reasons that might be used to terminate the agreement.

Industry-wide Comparison

Relationships between manufacturers and Agents are generally born during a period of excitement. The Agent's sales team represents a dramatic increase in the number of people promoting the manufacturer's brand and product line. The product offered by the manufacturer nicely expand the Agent's product line and hence its importance to customers. Unfortunately, when a relationship unwinds and the Agent agreement must be terminated, problems that were hidden or merely unobserved began to erupt like volcanoes. During the operating life of an Agent's agreement, omissions in the agreement might be conveniently ignored. Why? Sales are growing. Profits are growing even faster. Not until termination of the agreement do some omissions become obvious. An easy way to ensure that routine agreement clauses are not omitted is to perform a comparison between today's proposed agreement with several live agreements found within the same industry. Be sure to take time to gather a representative sample of agreements before approving and signing that next Agent agreement.

Conclusion

Evenhanded wording in an Agent agreement will probably not extend the life of a relationship between an Agent and supplier. However, one-sided language often hastens the end of a relationship. More important is that a balanced Agent agreement creates an environment whereby an expiring relationship allows both parties to withdraw from that relationship without becoming snarled in a legal proceeding. Before approving and signing that next Agent agreement, be sure to compare it to the agreements of competing Agents and manufacturers within your own industry. Check it for balance now and know that problems will be avoided when the relationship ultimately expires.


21:Taking Responsibility - Taking responsibility even for your mistakes, demonstrates your human dimensions - Steve Parish Original Affirmations V3
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INDEX

Value Add Agents Agreements

 

Relationships are Organic

Performance, not Words, Supports Sales Growth

What Does Balance Accomplish?

Examples of Balance

Industry-wide Comparison

Conclusion

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