More
Annual Conference coverage from Coeur d’Alene
Build a world-class organization. Building a world-class sales organization isn’t easy, but it is simple, said Garry Layo of Sales Coach International. Protect your assets. Your business is the sum of its resources – your people, your personal resources, your relationships. To save and grow your business, you must protect them. Spell it out. Good manufacturer/distributor relationships rest on realistic, mutually-agree-upon expectations. Specimen selling agreement updated. Suggested agreement better suits changing times and manufacturer/distributor relationships. Next month: Meet IMDA’s newest members!
COEUR D’ALENE, IDAHO--Building a world-class sales organization isn’t easy, but it is simple. “Don’t make it harder than it has to be,” said keynote speaker Gerry Layo of Sales Coach International, Granite Bay, Calif., who kicked off this year’s Annual Conference. As head coach/sales catalyst for Sales Coach International, Layo not only is a recognized speaker and trainer, primarily in the field of sales, sales leadership and customer service; he is also “head coach” for SCI’s “Coach Programs.” In this capacity, he and a team of SCI coaches work with companies throughout North America in an ongoing coach/consultant capacity. Five focal points IMDA members eager to build world-class sales organizations need to focus on five things, said Layo:
Owners must be committed to improving communication in their companies and improving their own leadership skills, as well as the leadership skills of others in their organizations.
Successful sales teams rest on three legs, continued Layo:
Sales reps in world-class sales organizations are always prepared to answer, through words and actions, these key questions from customers and prospects:
World-class-sales organizations also recognize that the entire company – not just its sales reps -- must be focused on the customer. “If you’re not serving the customer directly, you should be serving someone who is,” said Layo. Companies that forget this simple truth risk losing its customers, and that can be costly, said Layo. Most customers “quit” a vendor not because of dissatisfaction with the product or competitive reasons, but because they sensed an attitude of indifference by just one of its employees, he continued. Dissatisfied customers tell as many as eight to 10 others about their bad experience. But customers can be forgiving too. In fact, seven out of 10 complaining customers will do business with a vendor again if the vendor resolves a complaint in the customer’s favor, Layo said. And the more quickly it does so, the better. All this is important because the average business spends six times more to attract new customers than it does to keep old ones.
COEUR D’ALENE, IDAHO--Your business is the sum of its resources – your people, your building, your customers, your investments. To grow your business, you must grow those assets. But to save your business, you must protect them. IMDA legal counsel Mitchell Kramer showed attendees at the 2007 Annual Conference how to do just that. Protect your investment in your people by “building a fence” around them, said Kramer. In your agreements with manufacturers, make sure you contractually agree that they can’t hire your people and you can’t hire theirs. In addition, your contracts with your sales reps should make it clear that they if they leave your company, they cannot go to work for any manufacturer whom your company has represented in the prior 12-month period. “The biggest risk you have with a manufacturer is termination,” he said. “And one way the manufacturer will be comfortable terminating you is by hiring your salespeople.” Protect yourself through non-competes. Protect your personal resources (your personal savings, your home, etc.) by setting up your business as a corporation –
and then running it as one. “The corporation insulates your individual assets from liability, so long as you run it as a corporation,” said Kramer. That means you have board meetings, set up a governance board, etc. If you don’t do these things, a plaintiff can – in legal parlance -- “pierce the corporate veil” and go after your personal assets. Protect your business by maintaining strong, profitable relationships with a number of manufacturers, rather than throwing all – or most of – your eggs in one basket. “Any time one of my clients has more than 20 percent of its volume with one manufacturer, I see a warning sign,” said Kramer. Protect your business through hold-harmless clauses in your contracts with manufacturers. The IMDA specimen distributor selling agreement (on the IMDA website, www.imda.org) contains such clauses, which call for the manufacturer to hold you harmless in the event of certain events, or to cover you should certain events occur. Kramer recalled one case in which his client – a distributor – was forced to defend itself because a manufacturer had charged that one of the distributor’s product lines infringed on the manufacturer’s patent. “That would have been prevented if the manufacturer [that is, the distributor’s principal] had held the distributor harmless against [claims of] patent infringement,” said Kramer. Protect your future by having your accountant examine your investments on a regular basis, added Kramer. He or she will help you answer questions such as, “Are your investments sound, or are they pie in the sky?” “How well are they performing?” “How are they expected to perform in the future?” Finally, protect your business by anticipating and preparing for the loss of key lines. “The first day you represent a new line is the first day toward termination,” said Kramer. Very few relationships last 20 or 30 years. Fewer still for specialty sales and marketing organizations, which introduce innovative technologies to market. Terminations will occur. So be prepared by writing good contracts and keeping them in a safe place. A surprising number of companies literally misplace or lose important contracts and significant correspondence with their manufacturers, and find themselves with no protection when termination occurs. At the beginning of a relationship with a manufacturer, keep a copy of the signed contract you send back to the manufacturer, as well as a copy of your letter to the manufacturer saying you have sent back the signed contract and will expect a copy of it, advised Kramer. That way, if you never get a copy back, you will be protected if and when termination occurs.
COEUR D’ALENE, IDAHO--If it’s true that, sooner or later, all lines will be lost, then how can a manufacturer and distributor prepare themselves for the inevitable– and enjoy a productive and profitable relationship in the meantime? They can start by learning about each other’s businesses and capabilities, according to the members of a panel on “Contract Negotiations: Building Stronger Relations with Your Manufacturers,” moderated by IMDA President Shawn Walker at the 2007 Annual Conference. The contract they sign should reflect that mutual understanding. “Every distributor in the world has lost a line it didn’t want to lose,” said Jim Thomsen, executive vice president of sales and co-founder of Vidacare, San Antonio, Texas, manufacturer of an intraosseous drug-delivery and fluid-delivery device. “But sooner or later, all lines will be lost.” Many small manufacturers grow to the point where they become attractive acquisition candidates to larger companies. Indeed, that might be their strategy from the beginning. Distributors need to accept that fact, and prepare for it. “If you know you’re going to lose the line, then you’re not so mad when it happens,” said Thomsen. “So, how can we set it up so that we don’t lose money in the meantime; that we walk foot to foot, hip to hip, in lockstep?”
Understanding is a two-way street, said Thomsen. “Some manufacturers don’t understand what specialty distributors do, and that leads to unfair expectations from the get-go,” he said. For example, they might not understand the investment that distributors must make in order to do the “missionary” work required for new technologies. (It should be noted that although he represents a manufacturer, Thomsen has extensive experience with specialty distributors, having founded two organizations for such distributors in the past.) Carefully crafted contracts can minimize the misunderstandings and enhance the success of manufacturer/distributor relationships, continued Thomsen. The Vidacare contract, for example, spells out many things for the distributor, he said, including: “Here’s how the exit will take place, here’s how you will be protected, here’s what I have to do to terminate you, here’s what you need to do to keep the line.” Although a “firm believer” in quotas, Thomsen did not establish any until six months after Vidacare’s EZ-IO® device was launched, so that he and his distributor partners could gauge its reception in the market. Vidacare took another extraordinary step in that it offered its distributors the opportunity to invest in the company. Indeed, financial equity can be a key in cementing mutually profitable relationships, according to the panel members. Chris Davies of Vector Resources, Midvale, Utah, suggested that manufacturers with new, untested products pick several distributors – whom he called “charter distributors” -- to test the market. Those distributors would then train other distributors as they are brought on. In return, they would get a buy-out at the end, or what Davies called “phantom equity.” IMDA legal counsel Mitchell Kramer reiterated the importance of carefully written contracts for successful relationships. Written contracts are infinitely better than unwritten, handshake agreements, he said. “The problem with a handshake is that the sometimes the hand shaker is no longer with the company” when termination becomes a factor. Contracts should recognize the substantial investment that specialty distributors make to launch new products. “In a well-crafted relationship, if the distributor is terminated because the manufacturer was sold or decided it was in its best interest to go direct…the distributor should by contract be compensated,” said Kramer. “Every manufacturer who gets into litigation because of an improper termination spends more money in litigation than if it had spelled out in the contract what happens at the end of the relationship.” Other factors that Kramer said should be addressed in contracts include:
By Mitchell A. Kramer, Esquire Our firm recently updated the IMDA form Distributor Selling Agreement (posted on the IMDA website at www.imda.org). We do this periodically so that the agreement best suits the changing times and manufacturer/distributor relationship. The specimen agreement is an attempt to create a win-win relationship between manufacturers of medical devices and their distributors. It is meant to be a form, outline or checklist of a final agreement -- not the agreement itself. It does not take into account the laws of different states, which a final agreement should reflect. For example, some states have laws specifically dealing with the manufacturer-distributor relationship. If the distributor is working on commission and not taking title to the products, more than 30 states have statutes dealing with such issues as payment of commissions. And each of the states treats non-competition clauses differently – some by statute, some by court-made interpretation, and some by both. In reviewing the form to reflect recent events in the industry, as well as things brought to our attention by IMDA members, we made a number of changes to the previous form agreement:
Now that IMDA has added manufacturers to its membership, we welcome suggestions from them – and from IMDA’s distributor members -- on ways to improve this or any of our other form agreements and contracts. In the past several years, we have seen this form used, as is, or with minor modifications by more and more manufacturers – particularly start-up companies. As general counsel to IMDA, we are continually looking for ways to make things better and more useful for the members. Mitchell Kramer is IMDA’s legal counsel. He may be reached at (215) 887-9030 or . The specimen selling agreement may be viewed at www.imda.org, in the “Forms Archives” section or “Additional resources for manufacturers.”
|
||||||||||||||||||||
