Sales Agent Jobs – Common Terminology
Here’s some basic terminology to support your understanding of the topics on the website:
What is a Sales Agent?
A sales agent is a sales person that works on a self-employed basis. They are usually rewarded by commission payments for their sales. Sales agents are independent and work with businesses, rather than for them, they are not an employee. Unlike wholesalers or distributors, sales agents do not normally buy or store product stock. They agree the sale with the customer and pass the details to the business principal who fulfils the order.
Sales agents will often sell products and services from more than one supplier. An agent can, in some instances, be an existing business. For example, a clothing manufacturer may become an agent for another clothing supplier as they have a sales team already prominent in the market sector and a readymade network of customers.
Sales agents pay all their own day to day expenses, e.g. transport, telephone, laptop. The commission they earn has to be enough to cover their expenses plus holiday pay, pension payments, and business costs such as insurance cover and accountants’ fees. And an income on top of the expenses.
A sales agency can be a small group of sales agents working together as an agency, or it can be a large agency with its own sales agents or paid sales employees. Similar to independent agents, sales agencies are rewarded for their results. The contract between an agency and a business principal reflects the agreement made on the terms and conditions of sales and payment and can accommodate all types of sales to all customer groups, B2B or B2C.
The Business Principal
The business principal is the company or individual whose products and services are sold by the sales agent or agency. The principal could be the manufacturer, supplier, or provider of a service. They are the company or individual that has the relationship, and a contract, with the sales agent.
A business principal is not ‘The Boss,’ they do not employ the sales agent. There can be some management of sales agents involved, especially administrative, but this depends upon the terms of the contract and the relationship between the agent and the principal. The business principal can be located anywhere in the world and does not need to be in the same country as the agent.
Sales Agent Commission
Sales agent commission is the payment made by a business principal to the agent as a reward for the sales made. It can be a set amount per unit sold, a percentage of sales revenue generated, a percentage of profit per sale, or can be based on any other measurable metric.
Commercial Agent Directive
The EU Commercial Agent Directive 1993 was created to protect the sales agent and give them more rights. Agency agreements should take these points into consideration. For a summary of the agreement (not the official document, please see here). You can also read our interview with the EU.
Agency Agreement – The Contract
An Agency Agreement is the contract between the sales agent and the business principal. We’ll discuss lower down the page what the agreement should cover, but we strongly advise having a contract drawn up by a legal professional with expertise in sales agency law. If there are problems in the future, a proper contract can prevent additional costs for agents and principals and help to resolve most disagreements.
In most cases the definition of a sale is obvious, it’s when a customer orders a product or service. In some sales agent-business principal relationships it is not always that simple. The sale, what the agent is rewarded for achieving, must be clearly defined. What is a sale can best be answered by considering, what does a sales agent need to do to get paid?
Sales agents may be paid for closing a sale or reaching a stage of the sales process. Sometimes agents also act as introducers, where instead of closing sales they introduce potential customers to the business principal. Agents may be paid for the introduction or if the introduction becomes a closed sale.
The Sales Agent Contact List
You will often see in the advertised sales opportunities reference to a sales agent having a customer and contact list in an industry sector, a network of contacts, or connections in decision making positions.
The sales agent’s contacts are one of the most valuable benefits a sales agent has that a business principal can benefit from. It is their list of people they have sold to, have a connection with, or are familiar with. Also called prospects, this list means that the agent has a readymade prospect list to present the business principal’s products and services to.
From the agent’s perspective, it is an asset to convince principals to work with them as an agent. The list will also help to quickly close sales of new products and services and earn commission for the agent. It is one of the key reasons businesses decide to use sales agents rather than employ sales staff that will have to start from scratch by cold calling and door knocking.