Most businesses have a sales team that is responsible for driving revenue through new and repeat enakbet business. To run a sales team effectively, many businesses employ a sales representative agreement, which lays out the framework for how a sales team should operate. Every sales representative agreement should include seven key provisions.
What are sales rep agreements, and why do you need them?
A sales representative agreement ensures that your sales rep pushes your product to your target audience for a fair price and in the appropriate places. A sales representative agreement outlines the terms of all sales activities via rights and responsibilities assigned to your business and the salespeople you hire. Sales rep agreements can act as protection for both you and your salespeople, and they can govern sensitive sales concerns, such as exclusive territory, confidential information, compensation, commission (and unpaid commissions), trade secrets and termination.
When can you terminate sales rep agreements?
Termination rules vary by state. While some states allow for a sales representative contract that gives your business the power to terminate sales rep agreements at any time, other states require that employers give as long as 90 days of notice before termination. Check your state regulations before writing your sales representative contract or terminating an existing agreement.
Identification of the salesperson’s role. Make sure your sales rep agreement indicates whether your sales rep is an independent contractor or an employee. Additionally, be clear that a sales rep is not a broker, distributor or agent. Explicitly state the work and obligations expected of your sales rep.
A commission provision. If you are hiring a sales rep with exclusive territory or account responsibilities, include a commission provision that clearly states the compensation the rep will earn for all relevant sales. To protect your rep, you should also include details on how to seek recourse for unpaid commissions.
Details of when sales activity should be expected. Not all sales work results in immediate sales. A sales rep agreement should outline how much time a rep needs to develop sales and recover commissions. Provisions about sales quotas should also be included.
Division of power. Outline what power the representative does or does not have to finalize sales, alter prices, sell certain products and make other crucial decisions on behalf of your company.
Confidentiality. If your sales rep will have access to confidential information such as trade secrets, price structures and other commission rates, your sales rep agreement should require your rep to keep this information private.