“How much commission should I pay my reps?”
Those new to working with manufacturers’ rep ask this question frequently. The correct answer depends on a number of variables, such as:
- The product or service.
- The type of customer (OEM, Reseller or End User).
- How much business currently exists in the territory.
- What other services the principal requires of the rep (product training, etc.).
Ultimately, whatever commission rate the two parties agree on, it must work for both.
To provide some assistance in arriving at a fair rate, MANA surveyed its members. We asked them what rates the principals paid reps for different product classifications. We also differentiated the results by customer types.
The survey goal is not to provide a specific commission rate or set an industry standard. The intent rather is to set a reasonable range. The range provides room to compensate for the uniqueness of each relationship.
To help understand the results, we define customer types as follows:
End-User: These manufacturers’ reps sell to customers that use the product themselves. Typically, this refers to capital equipment, equipment used to manufacture or produce products.
Distributor: These manufacturers’ reps sell to customers that then stock the products and resell to others. Customers in this category are distributors, wholesalers, dealers, catalog stores and retailers.
OEM: These manufacturers’ reps sell components to product manufacturers. Typically, these include castings, forgings, plastic injection molded parts, anything a manufacturer uses when they assemble a product.
The commission rates the manufacturers pay their reps tend to stay stable over long periods of time. From the MANA profile survey, we learn that many rep-principal relationships last 20 years or more. During that time, it is doubtful the commission rates change.
We hope you find the survey helpful and it’s worth repeating, whatever rate you agree to, it must work for both of you.
Note: MANA surveyed the members in 1999, 2002 and 2005 to collect commission rate data. Participation in subsequent years dropped below an acceptable level. In analyzing data from the surveys with sufficient data, the commission rates appear to be stable over time. Given there is no other commission rate data available since 2005, please use the results accordingly.