Maximizing Manufacturing Success: How Our Expertise Delivers Value
OVERVIEW
WHO WE ARE
Innovative Tool Sales (ITS) is an independent manufacturers’ representative that generates superior sales growth for the manufacturers we represent. We provide technical expertise, excellent communication, exceptional service, and diligent promotion to both end users and industrial distributors. We do this by selling a limited number of high-quality lines in a confined area of product concentration. We have more than 40 years of success serving as a leading independent manufacturers’ representative helping manufacturers reach buyers in the Southwestern United States and Northern Mexico. We also service more than 30,000 machine shops, defense contractors, and other metal working manufacturers through distribution. At ITS, our success comes from our integrity, technical expertise, determination, and excellent market contacts. We take your products to the end user, stay within our field of expertise, and partner only with manufacturers who share our values and have the best products available for specific applications.
HOW WE’LL HELP
In today’s competitive business environment, companies are constantly seeking ways to optimize their operations and reduce costs. One effective strategy for cost savings is outsourcing certain functions to specialized professionals. A stocking manufacturer’s representative, like Innovative Tool Sales, provides many advantages versus hiring an in-house sales staff and renting a warehouse in the Southwestern U.S. A rep’s goal is to ultimately drive sales and build success for their manufacturers. We achieve this in many ways but the most important are elimination of hiring and overhead expenses, minimized payroll obligations, reduced travel costs, flexibility, scalability, and expertise. We’ll explore each of these topics below and break down exactly how you might benefit from representation.
WHAT WE KNOW
ESTABLISHED NETWORKS AND EXPERTISE
ITS has been in the independent representation industry for over thirty years and we’ve built up an extensive network in that time. Whether it’s knowledge of a product or company’s history, or a relationship at a high level, this sort of expertise instantly becomes available to you once you sign on with a rep. We work tirelessly to connect our clients with the best in the industry to ensure that you have the resources needed to succeed. A good rep should be knowledgeable in many areas not limited to sales, technical support, marketing, and customer service. ITS, for example, offers all of the above plus knowledge of metalworking and cutting to better support our specific clientele. Because we posses extensive knowledge in our industry, established networks, and a deep understanding of the California market, we can leverage many benefits for our manufacturers. Some of these benefits include increased market penetration, improved sales performance, and enhanced customer relationships. All of this pre-existing knowledge eliminates the need for you to conduct market research, which can be expensive and time-consuming, sometimes taking months or years to complete. A representative’s connections also make the job of brand building and customer acquisition easier on you by eliminating the need to establish marketing campaigns to introduce your products to customers.
So we know now that a stocking representative can save you a lot of time when it comes to getting your product(s) noticed and into the right hands. We also know that reps come equipped with an extensive arsenal of experience to bolster your place in the market. In the next section, we’ll dive into some of the monetary savings that come with using a manufacturer’s rep.
HOW WE SAVE
In addition to expertise and top-notch service, manufacturer’s reps also save their clients thousands of dollars each month. Are you thinking about adding a sales team to drive increased profits? There are many factors to consider when hiring a team or even just one sales rep such as salary, benefits, and time spent training. But what about some of the more hidden costs like travel and recruitment? These add up fast and before you know it, you’re overwhelmed at the prospect of trying to bring in more business. The good news is that a manufacturer’s representative can help you accomplish your same goal with a smaller price tag; at ITS, we strive to help our principals get the most out of their money.
Cost of hiring a salesperson in-house with an average annual salary of $85,000. Based on average spend with ITS for a mid-sized manufacturer.
The above graph breaks down the costs associated with hiring a salesperson when done through a representative, like ITS, versus when done on your own, in-house. As you can see, the costs add up quickly. But what are you actually paying for? Doing the hiring in-house will save you dollars up front, but will cost you over time; consider that multiple management levels will be occupied for many hours over a few weeks or months during the interviewing process. There is also the large cost of utilizing a hiring agency. While going this route can save some time and energy compared to doing all of the recruiting yourself, it’s very expensive. Agencies can charge anywhere from fifteen to thirty percent of each employee’s salary that is hired through them. In the above graph, thirty percent of a salesperson’s salary of $85k is $25,500 - just to get them hired. By contrast, a representative already possesses the necessary industry knowledge, expertise, and network through our sales people which saves you immensely in both time and money.
Once you have your perfect candidate selected, the biggest expense to consider next is salary and benefits. We’re working off of a presumed annual salary of $85,000 per year, but this number can fluctuate according to location, company size, experience, etc. You also have to consider the salesperson’s benefits package and commissions earned on top of their salary. These costs can significantly inflate the total compensation package above what you planned for. By contrast, a stocking manufacturer’s rep typically operates on a commission basis only, often around 10% of gross sales. This model can result in considerable savings (especially if your product has high profit margins or if sales tend to fluctuate). For example, ITS customers in the past have seen savings between $25k - $75k per year compared to when they operated with an in-house sales team. Dreaded tasks such as managing the sales process, negotiating favorable terms with clients, and maintaining customer relationships are all taken over by the stocking representative and handled for you at a fraction of the cost that a sales team would require.
The next factor to consider when choosing to run your business solo or use a representative is the travel expense associated with a sales team. Of course you want your sales team to travel around and spread the word about your products and services, but it’s costly to do so. A salesperson traveling by car must be reimbursed $0.655 per mile, according to the IRS’ standard mileage rates. An ITS sales rep, for example, may travel up to 3,000 miles per month, totaling about $1,965 in monthly fees. Perhaps you’d rather have your team save on gas and work out of a hotel for a few days? With rates between $150-$200 per night, you’re looking at up to $800 per week, or $3,200 per month. Add on potential rental car fees, airfare, and extended stays and your monthly costs can get out of hand quickly. You should also consider that customer lunches, treats, and dinners are part of the sales process. ITS’ sales reps hover around $200 per month in entertainment spending, but this will vary across companies. If we add up everything for one month, you’re looking at a potential cost of between $2,165 and $3,400 for travel and entertainment costs - that’s $40,800 per year. The silver lining in all of this is that a manufacturer’s representative can eliminate these costs completely. Because reps like us operate independently, we absorb these costs are part of our business expenses. This arrangement eliminates the need for manufacturers to reimburse these costs to their sales team, resulting in additional savings while still maintaining quality service.
And finally, the last expense to consider when bringing on a sales team is the overhead of keeping a physical office for them to work at. We’ll be considering the California market specifically, so keep in mind that these costs can vary from state to state. Renting warehouse space in the Southwestern U.S., particularly areas like Orange County, CA, can be exorbitantly expensive due to high real estate prices. For instance, the average cost to rent a 1200 square foot warehouse in Orange can range from $1,800 to $2,400 per month depending on location and amenities. By contrast, a stocking manufacturer’s rep typically charges a flat monthly fee. For example, this fee can range from $750 to $1,500 per month, depending on the space needed to store your product, etc. That’s a potential cost savings of $900 to $1,050 each month, and we know how quickly that adds up. In addition, costs related to leasing, maintenance, utilities, and insurance are all eliminated for you when you choose to hire a stocking rep.
In conclusion, utilizing an independent manufacturer’s representative offers numerous cost-saving advantages compared to hiring an in-house sales staff and renting warehouse space. The elimination of recruitment costs, reduced overhead expenses, minimized payroll obligations, reduced travel and expense costs, enhanced flexibility, and access to established networks all contribute to significant costs efficiencies. By outsourcing these functions, businesses can focus on core competencies while maximizing profitability in a highly competitive market landscape.
