Monday, March 26, 2007

Import Export Business Agent Value

The following question was sent to me over the weekend, I thought it was about time for an update to the blog and this would be a good question to answer here.

Here is the inquiry:

If your job is to find buyers for your sellers (or sellers for your buyers) and you ask for commission when you set up the connection, is it reasonable to expect commission on every shipment from the point forward? After all, the two businesses are now in contact and they don't need you anymore. Surely it'd be less of a hassle (and cheaper) to deal with each other directly.

My Answer:

The question touches on a common misconception and undervaluing of one's efforts in obtaining new business for a company.

The first part asks if it is reasonable to expect a commission on every shipment from the beginning point forward.

My immediate answer is yes, it is reasonable. Consider an insurance company agent. In most instances the agent brings new business to the insurance company in the form of a new customer and in the case of life insurance, auto insurance, homeowner's insurance and just about every form of insurance, the agent continues to receive a residual commission for many years into the future (often 10 or as long as the agent is active and the policy is active).

Often in the case of insurance, an agent does little in the way of future work to maintain that policy other than to contact the insured periodically (usually to try and sell them something else), but there is a small amount of servicing most do provide, but the large amount of service comes direct from the insuranc company.

The insurance company is very appreciative to their agents and understand who butters their bread or puts the food on the CEO's table. Without that agent bringing that new business to the table, no one eats.

Getting back to the import export business, if a manufacturer or supplier did not hear from an agent/broker with new business, they would not have that business. Thus, if an agent brings $10,000 in new business to the manufacturer each year or each month, that is $10K or $120K or more they "would not" have without the work of the import export business agent/broker.

Everyone is different when it comes to assigning the value of one's services. Some, expecially owners of small to medium size businesses recongnize the value of having new business brought to their table while larger corporations are less likely to see that long term value.

In reply to the last part of the questions about having the supplier deal directly with the buyer, the assumption is correct, the more direct, the better. The value of the import export agent/broker still resolves back to the conclusion that this direct business relationship would never have happened had it not been for the work of the agent/broker.

Affixing that value is often interesting. I personally have been offered 20% commission to perform as both agent/broker in bringing new business to a company and acting as a laison for that relationship.

I countered with 10% and the company handle the one on one relationship and the residuals are paid on all business, both new and future purchases. In another similar situation, we accepted 20%, have no follow up responsibility and receive 5% on all future sales for one year (hey, we all have to be negotiable).

Still another company sends us a check about every quarter for work that we performed in 1997. It is a family run business doing over $10 million a year but they understood (and still do) the value of the new business we brought to their table.

So the bottom line is, in my opinion, one of how much does a company value new (and ongoing) business?

If you are a finder, import export business agent/broker and you are developing new business, always shop around for the best deal for both you and your potential referrals to a supplier. Remember that without you and your efforts, the manufacturer/supplier will most likely never get the new business you are bringing to their table.

Ron Coble
Coble International Marketing Services

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Anonymous Anonymous said...

What steps do you take to make sure all future sales are not done behind your back, to avoid paying you a commission?

7:28 PM  
Blogger Ron Coble said...

To Anonymous - you get an agreement signed by the supplier - if they are a USA based company then you can sue them if they circumvent you or simply do not pay you. More information about working as an agent is posted throughout this blog, I suggest a thorough review will help you decide if this is the business you wish to pursue.

7:31 AM  
Anonymous Anonymous said...

Thanks for the information Ron. when you stated you negotiate a commission of 10 to 20 percent is that from the sales price?I am brand new to this field however I met with a supplier today and what they offered me was 2% of the sales price is this industry standard?

6:02 PM  
Blogger Ron Coble said...

To the latest Anonymous questioner - please read the entire blog but to answer your question, read the post again - I never said that I "ask" for 10-20%, I asked the manufacturer to name a percentage and in a very specific industry which I will not name, those type of markups are not uncommon. They offered the 20% because the markups are available in their industry, most industries they are not. You should try to learn what % they pay their brokers or simply counter with 6-7% but realize that most companies are operating on very slim margins and to remain competitive they cannot offer much more than 2-5% depending upon what you bring to the table.

6:41 PM  
Blogger Oluwole David Olunuga said...

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Shagamu, Ogun State.
Tel:- +2348171947645

5:04 AM  

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