Sales channels to reach your customers

Instead of recruiting, training and financing your own sales staff, you can use an external sales agent. A good sales agent may already have relevant contacts and market knowledge.

Use sales agents for:

• building sales without heavy investment
• reaching specialist and overseas markets

A clear, written agreement is essential. As a minimum, it needs to cover:

• what 'territory' the agent is responsible for - eg a named foreign country
• whether this is exclusive - you could be barred from selling directly or using any other agents in that territory
• how the agent will be paid (usually commission on sales)
• whether you will meet any of their expenses
• what rights you have to end the relationship
• what rights you have to end the relationship, including notice periods and any compensation or indemnity that may be due

Legal complications

An individual agent acting for you in the UK could legally be seen as an employee. You would be required to treat the agent like other employees - eg, deducting income tax under PAYE (Pay As You Earn) and paying National Insurance contributions.

Even if an individual agent is not an employee, there can still be complications. These include:

• You might be held responsible for the agent's actions depending on the circumstances.
• You may be responsible for any shortfalls you cause in the agent's earnings, such as if you fail to supply adequate stock.
• European and UK law can make it difficult to terminate an agency's contract without paying compensation. This could be as much as two years' expected earnings.

Before entering into any agency agreement, take legal advice and make sure the written terms reflect how the relationship will work in practice.