Vol. 10, #6 – May 28, 2018 ALLAN GOLD’S BLOG
Next blog post of weekly series over 3 months on contracts for company executives & owners of family-small businesses
TODAY’S TOPIC: “The case of the once agreeable sales agent, first, under-aggressive, now agitated, indeed in agony*”
SPECIAL ANNOUNCEMENT TO READERS
√ Hello Readers. Please be informed that I write a blog for my professional community – it’s titled “Gold’s Legal Minute*GLM*” . Because you do not have a lot of time and since time is money, I aim for a quick and easy read. Since I practice primarily in such fields as corporate and commercial law, civil litigation, etc., the subject matter is more or less in such areas. In addition, seeing that I am passionate about the well-being of older people, and as I also practice in the field of civil law relative to elder law, I write about this area as well. Furthermore, I write about topics in the news in order to highlight what’s then legally at issue.
√ In each blog post, I shall deal with a legal notion or raise a legal issue and deliver, strictly for informational purposes, some commentary respecting the same. As per the format, I shall first answer the question, “Why you should read this?” Next, in the facts section, to illustrate some of the things in play, I will recount a fictional story of imaginary characters or companies, not based upon any person or enterprise in real life. For fun, it will be titled “The Case Of The …”, this in the style of the vintage “Perry Mason” TV show (1957–66). And then, through the sections, “Judgment”, “Analysis” and “Lesson Learned Or Take-A-Way”, I shall provide my take on the facts and some thoughts thereon. At the finish, I will offer a “Closing Thought Of The Day” plus a preview of the next in the series.
√We have re-launched the blog, such with a series over 3 months on contracts, especially geared for company executives & owners of family-small businesses. Kindly note that as per our schedule, we will usually make new blog uploads each Monday. Some weeks, usually on Wednesdays, there will be one or more bonus uploads.
A. WHY YOU SHOULD READ THIS BLOG POST (next of weekly series over)
First, this blog post series is written especially for business people, ranging from proprietors of small-family enterprises through to executives of mid-to-large corporations. The assumption is that they routinely make contracts. The proposition is that it’s good business to make each contract sound and profitable. The premise is that a good contract can mean money and profit. And if you’re a member of this group, this is for you.
Second, you want to know about the pertinent contract, notably that of the agency agreement. In the instance of a sales agency, this is where a manufacturer-wholesaler or branded service provider (engaging party), engages, an independent sales contractor (engaged party), as a sales agent, to sell its goods and/or services, this within a certain territory. In the case of a representation office, this is where an establishment/enterprise (grantor/granting party) grants an independent contractor (grantee), the right to be its authorized representative/ agent, and this, within a certain locality. In the writing in both instances, there would be a contract term and provisions where the engaging/granting party recites its rights, obligations and recourses, and also, where, the engaged party/grantee makes its undertakings.
Third, you’re interested in becoming a sales agent or securing a representation office. You recognize that you will then be the owner-operator of a family-run, small business. And you’re intelligent and you don’t know everything about everything. You’re open to learn. You recognize that you enter into many contracts each and every day. You want to be better informed and do better.
B. FACTS OF THE CASE
Note to Readers: In this space, I will recount a fictional story of imaginary characters or companies, not based upon any person or enterprise in real life.
Scenario #1: “The bad Fasttalker -vs- Sellerman match”
Scene #1: Augusta (Aggie) Fasttalker. In grade school, she was not well liked. On seeing her aggressiveness with class mates and persistent bullying behavior, a lunchroom mother called her “Little Miss Aggie (for aggressive)” and it stuck. As an adult, the word, “nice” was not used to describe her. Instead, particularly, with other women, the word was “bitch.”
She is undisciplined, unable to keep an agenda. She is unreceptive and intolerant of directions and instructions. She is without limits, seeing rules as applying to others – she calls them the little people. This is because she sees herself as something of a V.I.P., way above all of that. You see, she likes doing things her way. Indeed, you could say that she is quite the free spirit in a bad way.
Besides all of the above, she’s lazy and slow moving. With no oomph in her, she acts like nothing will light a fire under her butt. That’s why, her employment record was very poor. Not finding success career wise, she started feeling as if she lived under a black cloud, waiting for the next misfortune to land on her head. But, Fasttalker was lucky. Her father set her up in her own sales agency and found her a good line of factory parts. And then, her father twisted arms to get his business network to buy from her. That’s the only reason that she posted good sales numbers.
Scene #2: John (Big John) Sellerman.
Sellerman is super clean, well-put together and highly groomed. He is a classy dresser. He is big and strong. He’s a high- energy guy, moving like a laser, to get to his destination or accomplishing his goal.
As an adult, Sellerman gravitated towards sales. He never liked being cooped up in an office, retail store or an industrial building, working on his lonesome, tapping away on a computer morning, noon and night. Instead, he is very social, preferring to be out and about, interacting with people. He took an entry level job in the field of industrial products and has continually worked in this sector, achieving great success.
He`s extremely confident. He knows that he’s good at what he does. He tells customers that he’s a tool…for them to use to make money, by buying his goods. His slogan is: “If you want to make profits of more than nickels and dimes, call Sellerman, and buy his nuts and bolts.” He became known for his honesty and earnestness. Simply put, he is a “true salesman.”
He is a “stand-alone” sort of guy, who likes to be in the position of doing things his way. He likes the idea of working for himself. That’s why he is an independent sales agent, with his own agency. He runs the business from his home. His wife takes the phone at the home base and helps him with the books. He runs a tight ship!
Scenario #2: “The Misadventures of an Eraserhead at BeeBee Canada”
Scene #3: BeeBee Canada. Basic Brand Industrial Products Inc. of Detroit Michigan, a classic manufacturer- wholesaler, was founded in 1910. It made a variety of goods for use in the nation’s factories. Its products included the “Value Valve,” “Magic Machine Cover” and of course, its unique “Wide Widget.” This firm is now known as BeeBee Inc.
In recent years, BeeBee, now a mature company, still makes its goods “the old-fashioned way”. It was not only inefficient, but also, a poor manufacturer as the discard rate for second grade goods not sellable was more than 50%. And not being innovative, it also had no new products to offer. The market place took notice and had been disregarding BeeBee for some time. Worse still, the market was not now hearing about the “BeeBee” brand in the media, since BeeBee was “old school”, only believing in “word of mouth” business development. As a result, sales were lagging at its Canadian division – it was severely in the “red.” Seeing Roger “Cutter” Eraserhead as a hard- nosed executive able to sell and cut costs, the Board named him as the new president of BeeBee Canada.
Scene #4: Eraserhead knew that he needed to rock the boat and shake things up. However, since his appointment, Eraserhead just couldn’t seem to make time for the fabrication side. He did not pull the deficient goods from the marketplace. He failed to walk the factory floor and get input from the workers at the grass roots. He didn’t make a single move to increase production levels or raise quality to market needs.
Although keenly aware that BeeBee Canada had to greatly increase sales, Eraserhead “dropped the ball” when it came to national accounts, buying groups, etc. Regardless that this is where large orders were common place, he did not, right off, build a program to sign them up. And he never did get around to focus on them in a big way. More, not being a believer in marketing, promotion and/or advertising gurus, and rejecting all of this as “hocus pocus,” he refused to put time and money into any of this.
Scene #4.1: Eraserhead was a follower on social media of Cheeky Peekaboo, an investigative journalist based in Moscow, highly opinioned on a variety of topics. He liked how she stuck her nose into things and was a real muckraker! From reviews on line, people found her to be harsh and insensitive. Looking long term, to break into the Russian market, he had an idea. (When an idea popped in his head, he acted impulsively.) Without thinking further, Eraserhead addressed an E-Mail to her, asking her to do everything possible, in order to drum up interest for the BeeBee brand throughout Russia. The E-mail also contained this line, “We will pay you a fee and cover expenses. We will see to the details later.” On the basis of this E-Mail, she opened a representation (agent) office. For her, this E-Mail was the representation (agent) office contract. She thought this was her big break and the start of her own personal ‘gravy train’.
Scene #10: …Of course, these statements should never have been made. When it came to Aggie, Sellerman knew that the bloom is not off the rose, it was never a rose, just a weed flower in the first place. Sellerman, in pure agony, knew that unless he pulled off a miracle, he was reading the obituary for the Sellerman-Fasttalker Agency.
Yes, there were at least five (5).
Let us put this case under a microscope.
MISTAKE #1 (Agency): Aggie is ill-suited as an entrepreneur/sales agent
Sellerman erred in joining forces with Aggie Fasttalker. She does not have the right stuff to be an entrepreneur. And more, she’s in no way, capable as a sales agent.
MISTAKE #2 (Manufacturer-wholesaler): Poor response to deficient product
BeeBee Canada was not run well under Eraserhead. He was gravely mistaken when it came to deficient product. He did not stop sales of bad merchandise. He thusly suffered more harm to the BeeBee brand and company good will.
He also erred in not fixing production problems – this allowed BeeBee Canada to continue producing goods which were not up to par, imperfectly made, etc. This also kept manufacturing capacity low.
MISTAKE #3 (Manufacturer-wholesaler): Omission to address national accounts, buying groups.
A proper manufacturer -wholesaler understands volume selling. But in the instance of BeeBee Canada, it missed making huge gains in its sales figures by not preparing a program for big buyers and addressing them in a concerted way. This neglect contributed to bad sales.
MISTAKE #4 (Manufacturer-wholesaler): Lack of marketing, promotion, advertising (e.g., national, provincial, regional, local, etc.)
BeeBee Canada did little or nothing as regards marketing, promotion, advertising, be it national, provincial, regional, local, etc. This neglect contributed to bad sales.
MISTAKE #5 (Manufacturer-wholesaler): Cheeky Peekaboo agency -Poor choice & lack of contract
Eraserhead made a big boo boo in picking Cheeky Peekaboo as an authorized representative. This is the person who is supposed to run the BeeBee flag up the proverbial flagpole in Russia, show the BeeBee flag everywhere, evoking positive feelings. But she is most unsuitable in this role.
First, she has baggage. Her record to date is one of having made many jabs at people in high places and ruffled a lot of feathers. As a result, there will be pushback up and down the country where she is supposed to make nice.
Second, in a word, she’s indelicate. Like a bull in a china shop, she doesn’t know what to say at the appropriate time. More, she is downright rude. She also has crude expressions. She repeatedly brings up negativity in everyone she meets. Indeed, she is like a rusty and corroded knife used to pick the garbage. Indeed, like such a knife, she has no place at the table in polite company.
In addition, Eraserhead goofed when he, in effect, gave her “carte blanche” by not spelling out her duties and setting limits in a written contract. He also failed to address remuneration and expenses. Trouble is definitely brewing after this bad starting move.
E. LESSONS LEARNED OR TAKE-A-WAY: ‘Taking care of business, agent wise?*
Be aware that regardless of the sector or type, many businesses carry out the function of an agent. In many instances, they do so …without there being a formal writing. This results in the agency agreement being oral and/or tacit (implicit). And as to term, it could be indefinite or the contract may be found to be only month-to-month, should there be a monthly payment to the agent. And of course, it’s more difficult for a party to remain in compliance when rights and obligations are not clearly spelled out. All in all, it’s a bad idea, to have an agency contract in an unwritten form. This is especially true, should the agency right be important to the revenue stream of the firm and the livelihood of the principal. Accordingly, in order to really ‘take care of business,’ it’s a better idea to get a proper agency contract, properly prepared and duly signed at the outset!
F. CLOSING THOUGHT OF THE DAY: Give me an “A”, “G”, “E”, “N”, “C”, and “Y”*
Most business people would say that you shouldn’t only operate your enterprise of today, but you also need to devote some time to building your business of tomorrow. Of course, it’s important to be open to new ideas. But it’s also right to be cautious when making moves, big or small. Indeed, on the first hint of a change in wind direction, it’s wrong to shift course and jump “whole hog”. And now for some good news just in time. There’s a method to build for the future, staying in the game, having a good chance of winning and achieving great advantage, all the while, still hedging the bet, limiting the risk of getting it wrong. Surprise , surprise – it’s called “agency”!
This is true if a well-established company. Of course, there are risks in being too progressive. For an executive desirous of leading action and taking the initiative, but also being defensive and measured, he or she should consider making an agency agreement with an independent contractor. Indeed, agency is a great tool. It’s also true, should one wants to kind of, go out on one’s own, or if already self-employed, running a small-family business. You see, for a sole proprietor or an owner –operator, going about his or her business, looking to expand, but also protective of existent sales and assets, he/she should consider becoming the agent of a major company.
So think about agency. And since it starts with a letter, I’ll end this piece in the following way.
- Advantage – Act (as an agent) and gain an advantage; or grant (an agency right) and gain an advantage
- Growth – Grow your business with agency
- Energy – Energize your enterprise with agency
- New – Navigate changing environment and find new methods and procedures with agency
- Cash – Cash in with new developments and make more cash with agency
- Yes – Say “Yes” to agency!
G. PREVIEW OF NEXT IN THE SERIES OF ARTICLES:
The case of the slippery seller and the agent, prone to aggrandize and the near bamboozled buyer*”
Next time, continuing on with the theme of entrepreneurship, and the overall subject of contract, we will look at another type, notably, that of the purchase and sale of real estate (immoveable property). Through the documentation, a buyer offers to purchase the land and/or building from a seller and the seller promises to sell unto the buyer the same. (In business, it’s common for a business person to acquire non-residential (immoveable) property, (e.g., commercial, industrial, office, etc.), either for investment/revenue purposes or with a view to locating his or her enterprise therein.) Typically, a real estate broker/agent is involved. The first document is usually an offer to purchase, probably with an addendum or addenda. It designates the parties, describes the object of the sale and specifies the price. The offer can be conditional upon certain eventualities. It is usually open for acceptance within a pre-set delay after which, it will become null and void. There can be one or more rounds of offers and counter-offers. An accepted offer usually leads to a deed of sale, which is prepared by a notary in Quebec or a lawyer in the rest of Canada. The deed starts with the designation of the parties and the legal description of the object of the sale. In this writing, there are money clauses and perhaps, special terms and conditions. In addition, there are standard form provisions, wherein the parties recite their usual declarations and undertakings. Not familiar with this? See you next time.*
* ©/TM 2015, 2016, 2017, 2018 Allan Gold, Practitioners’ Press Inc. – ALL RIGHTS RESERVED