Sales Representative Contract: Recruiting Independent Sales Reps

When you engage sales representatives to sell your product, you should look for representatives that have experience in your field, have the time to effectively promote your company, and understand your sales goals. You’ll almost certainly need to interview numerous folks before making a selection. You will explain the details of your sales representative contract once you have chosen the reps you wish to work with. You will pay them a commission on their sales rather than a salary. They will not be compensated. And because you’ll be utilizing many salespeople at the same time, they’ll be working on a nonexclusive basis.

What does the Nonexclusive Sales Representative Agreement cover?

You will require the sales representatives to sign a sales agreement outlining the parameters of your engagement. This agreement should include:

➤ Both parties' names and addresses
➤ A declaration stating that it is a nonexclusive sales agreement that allows you to collaborate with other sales representatives
➤ A declaration stating that the salesman is an independent contractor, not an employee, and that they must pay income taxes but will not get benefits
➤ A description of what the salesperson is permitted to sell
➤ Any limitations on where the salesperson may sell, such as defining a geographical zone, or to whom they can sell; a customer list may be placed here
➤ A statement about how expenses will be handled and what, if any, expenses the company will pay for, how they should be reported, and how they'll be reimbursed; if no expenses will be paid, that should be clearly stated
➤ A statement about how commissions will be paid, how often they will be paid, how chargebacks will be managed, and how commissions will be calculated
➤ A nondisclosure agreement that ensures the salesman does not divulge sensitive corporate information
➤ A conflict of interest provision that indicates that the sales person has no conflicts of interest and that any conflicts will be notified
➤ A section that specifies the reasons for termination and how termination will be handled
➤ A statement that any business property used by the salesperson, such as a laptop or automobile, is the property of the firm and must be returned when the agreement expires
Commissions in Sales Representative Contract

What is the Sales Commission Structure?

The sales commission agreement is built on the foundation of your company’s compensation scheme. You want the final contract to be extensive enough to cover a variety of conceivable circumstances that may emerge throughout your engagement with your sales representative.

To that purpose, a well prepared sales representative contract should include specifics regarding all aspects of your sales commission scheme, such as:

1. When a commission is received

It is critical that the agreement explicitly states when the sales person gets their commission. Depending on the conditions of the transaction, for example, there might be a significant difference between crediting a sales agent with commissions when an order is booked vs when the order is actually paid for. When commissions will be paid The agreement should also specify when commissions are to be paid and when the amount of each payment is to be determined.

2. The repercussions of refunds, cancellations, or payment failure

In a perfect world, every sale made by a company is the last one. However, as all small company owners are aware, a variety of circumstances can occur to transform a sale into a nonsale.
Whether it’s the return of a goods for a refund, the termination of an order, or a client who fails to pay, your contract must account for all of these scenarios and the impact they may have on commissions.

3. Your commission structure

Whether your sales representative is paid a salary plus commissions or on a commission-only basis, your agreement should completely define all facets of your commission system. The specifics should contain not only the amount your representative will be paid for each sale, but also the algorithm used to compute the sales amount on which the commission is determined. For instance, if commission is to be paid on sales less taxes or shipping expenses, this should be explicitly specified in your agreement.

4. Incentives for performance

Many firms provide incentives to their sales representatives to motivate them to make more sales, such as bonuses for attaining a certain amount of sales or a commission system with tiered percentages paid out.

How can I cancel a Sales Representative Agreement?

You can fire a sales representative who works for your organization as long as you follow the processes outlined in the agreement. Most contracts enable you to cancel for any reason.

You may draft your own nonexclusive sales representative agreement, consult with our legal expert, or utilize a nonexclusive sales agreement template. A nonexclusive sales representative agreement allows you to define your business relationship with the sales representatives who will offer your items.

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