In the manufacturing industry, the process of bringing manufactured products to market starts with the decision to choose between an Independent sales representative vs Sales Employee. So how would you decide whether you should hire a direct sales employee (W2) or outsource the task of sales to a 1099 independent sales representative for your business?
This decision is part of long-term strategic planning and can impact the sales performance and profitability of a company significantly. To be able to get the best answer to your question, “1099 vs. W2, which is better?" let’s first understand the role and advantage of independent sales representatives so that you can make an informed decision for your machine shop’s sales strategy after ending up reading this article.
Understanding the Role of Independent Sales Representatives
The most important role of Independent Sales Representatives is to bridge the gap between manufacturers and customers by promoting the products produced by manufacturers to their target customers. They perform the sales task very well by putting into use their industry knowledge, established networks, & relationships. They have a broader range of solutions to offer to their customers, which enables them to conduct a more effective promotion as compared to the direct sales employees of the company.
Advantages of Hiring Independent Sales Reps
When it comes to the advantages of hiring independent sales reps, the primary advantage is their ability to offer scalability and flexibility. That’s because they can be hired on a contractual basis by the manufacturers, and it’s also possible to adjust their services in such a way that the business goals can be achieved.
In addition, each independent sales rep carries with him his industry experience, expertise, networks, & relationships. You can leverage his market insights to drive significant sales and expand your market reach.
Independent Sales Rep vs Sales Employee
Below, we have compared independent sales reps and sales employees in their various important aspects:
Understanding the Economics
The comparison between hiring an Independent Sales Rep vs Sales Employee is usually based on economics. If you, as a machine shop owner, plan to appoint a salesperson, you will need to cover various costs that may include basic compensation (salary, bonus, etc.), health insurance, an average cost to train a new employee, costs related to employer-based health insurance plans, employer social security contributions, etc. In addition, the cost involved in the rewards offered in the form of incentives to the good sales performers is also there in the game.
On the other hand, the payment made to independent sales reps is dependent on the value of the orders booked by them. The more business a company receives through an independent sales rep, the more payment the rep makes.
So 1099 sales representatives are professionals who work for the company on a contract basis, earn at an independent sales rep commission rate, and cover their expenses from the commissions earned. In other words, this kind of sales strategy is based on a cost structure that is directly dependent on sales performance.
Beyond the Numbers: Prioritizing Results
There is no doubt that economic considerations are important. But as far as the true measurement of success is concerned, it lies in the outcomes generated by each approach. I have been in the sales profession for decades now, and I have learned the tactics that work. I have learned that it’s trust and relationships that are crucial and must be kept as priorities.
In other words, customers usually prefer buying from sellers that they know very well, that they have a relationship with, and that they trust. And it’s a good practice for salespeople to prioritize problem-solving over mere transactions.
If we compare Independent Sales Rep vs Sales Employee, unlike sales employees, independent sales representatives of manufacturers often excel at building a relationship of trust by solving a diverse range of customer problems. Where sales employees represent only a single product line, a 1099 independent sales representative offers solutions across multiple lines, which makes these professionals valuable partners in comprehensively addressing customers' needs.
The Trust Factor
As highlighted even above in this article, customers’ trust is a critical factor affecting sales figures. In this aspect, independent representatives usually outperform direct employees of a company by developing trust with customers. They often succeed with the aid of their established relationships and diversified product portfolios.
In most cases, the commissions that a company pays to a 1099 sales representative go above the costs of employing a direct sales employee. However, the ultimate return on investment is worth it since an independent sales professional generates higher sales volumes as compared to a direct employee.
Finding the Right Partners
If you are wondering how to find independent sales reps for your machine shop, always keep in mind the most important characteristic, which is having a relationship with customers based on trust. In other words, always prioritize the candidates who have a track record of cultivating high-trust customer relationships.
You should collaborate with independent reps as "Partners in Profits." And the incentives should be aligned for mutual success and long-term growth as well.
Conclusion on Independent Sales Rep vs Sales Employee
So finally, we are in the conclusion part of this debate on choosing between an independent sales rep vs sales Employee. We can confidently conclude that there is no one-size-fits-all answer to this debate. On one side, we have to keep in mind the economic considerations that play their role, and on the other hand, prioritizing results is also important in making a final hiring decision.
Hiring independent sales reps brings with it the benefit of robust customer relationships that drive sales, thus making these professionals superstars in the competitive market.
By welcoming partnerships established based on trust and long-term mutual success, it becomes possible for the companies to open new roads to success and growth. This approach ensures high profitability and prolonged success in the sales aspect of the manufacturing business.
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