Sales channels to reach your customers

Using a sales agent

Guide

Instead of having to recruit, train and finance your own employees, you can use an outside sales agency. A good sales agent should already have the necessary contacts and skills.

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 compensation payments you might have to make if you end the relationship

Legal complications

An individual agent acting for you in the UK could legally be seen to be an employee. You would be required to treat the agent in the same way as 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:

  • Depending on the circumstances, you might be held responsible for the agent's actions.
  • You may be responsible for any shortfalls you cause in the agent's earnings - eg 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, it's a good idea to take legal advice.