Independent Sales Agents Commission Research

Goals

To have a broad understanding of some best practices surrounding sales commission that a principal company would pay to independent sales agents to sell educational materials to universities in the United States, Europe, and India. An ideal response would include information and data surrounding how to best negotiate with these independent agents and resellers, any sales commission payouts practiced in different regions or countries, and the factors that influence them. This should definitely NOT focus on sales employees within a company.

Early Findings

  • For the purposes of this research, we have defined independent sales reps, (also known as commission-only reps), as independent contractors who are paid sales commissions to sell a company's products or services and represent the company, but are NOT directly employed by the company.
  • All commission-only sales agents are, in fact, independent business owners. Therefore, choosing to work with a company is as much a business decision for them as it is for the company itself.
  • According to SalesCookie, there are six factors that go into providing a sales commission structure for reps that are not direct employees of the company. These characteristics are: independence, unlimited, fair, competitive, flexible, and manageable. To get more granular, especially surrounding "fair", it is suggested that "products which require heavy customer education, are harder to sell, or require more involvement (ex: travel) should result in higher commissions. The same applies if the sales cycle is longer, or sales are one-time only."
  • By manageable, this means that a company should be very aware that quite often, independent reps receive different commission rates based on the product or service sold. The company needs to be crystal clear about payout schedules, and properly notify any commission-only reps when incentives change.
  • This table provided in this google document shows typical commission structures for independent reps.
  • Again, according to this source, commission rates for independent reps can fluctuate wildly from 5% to 40%. However, most independent reps receive either approximately 25-35% of profit, or around 10–17% of revenue. However, what the product actually is needs to be carefully considered as some may be easier to sell than others. For example, revenue from product A could be worth 0.8x revenue because it sells easily but revenue from product B could be worth 1.2x revenue because it is extremely difficult to sell.
  • According to SalesCookie, there are seven factors to look out for when hiring independent sales agents and setting up an incentive program. They are: discounting policy, several masters, cheap initially, miscellaneous activities, legal agreement, clear role, and repeat business. For example, for "several masters", this simply means that your independent sales agent is very likely working for other companies, which means competition for the sales agents time. If the sales commissions prove disappointing to the sales agent, they could leave or de-prioritize you.

Summary Of Our Early Findings Relevant To The Goals

  • After preliminary research, we have determined that there is no publicly available data surrounding independent sales agents to SPECIFICALLY sell educational materials to universities SPECIFICALLY in the United States, Europe, and India. Therefore, we have taken a broader approach to this question out of necessity, and this has been reflected in the scopings below.
  • Our initial hour of research also revealed that there is extremely limited publicly available data surrounding independent sales agents. In fact, we only were able to find one in the initial hour that focused solely on that. In contrast, there are plenty of sources about "hiring" commission only sales agents, which appears to be NOT what is desired. If that is incorrect, that should be clearly communicated to us in any reply. As examples of what we found that we deemed unacceptable, please review this, this, this, and this. If these indeed are acceptable, then that should be indicated to us.
  • Please select one or more of the options provided in the proposed scoping section below.

Proposed next steps:

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