December 1, 2001

7 Min Read
Partner Channel - Compensation Uncovered: Are You Getting the Best Deal?

By Tara Seals

Posted: 12/2001

Partner Channel

Compensation Uncovered:

Are You Getting the Best Deal?
By Tara Seals

When vendors battle it out for agents in advertisements and in recruitment documents, the rhetoric is always the same: “We offer the best in commissions, promotions and support!” “Join our team and start earning top dollar today!” “We’re focused on your customers!”

Compensation is the end game for agents. But these entrepreneurs must use their experience to sift through the offers to find the best deals, balanced against service levels and support. A chat with three of the nation’s top master agents (known here as agents A, B and C) reveals some winners — and losers — in the compensation game.

A typical compensation deal for individual agents includes 10 percent to 15 percent of the sale in monthly recurring commissions (MRC), and 15 percent to 20-plus percent MRC for master agents, says California-based agent A.

Sales bonuses or spiffs are common and typically equivalent to one month’s commissions. For example, if an agent sells a PRI for a $500 MRC, then he or she will receive an additional $500 the first month.

Agent B points out that despite the guidelines, deals do vary. “On the local side, our primary supplier is Net2000
[Communications Inc.], and we have a very aggressive program with them, but I also understand that they’re not offering that same program elsewhere,” he explains.

Some companies offer impressive promotions that give them an edge. CLEC PaeTec Communications Inc., for example, has “a great thing going,” according to agent A. With bundles of long distance and/or Internet, and a long-term contract with minimum revenue commitment of $1,500, agents could receive $500 for the bundle, $700 for the channel bank and equipment promotion, $250 for the Internet and half the installation charges.

In another example, Access One Inc. offers a quarterly promotion where agents get points for everything they sell, to be applied towards a qualifier of 25 percent of their annual commitments. “That [structure is] nice because you don’t have to be focused on just selling one thing,” says agent A.

Some providers offer upfront payments rather than recurring commissions. Electric Lightwave Inc., for instance, pays the full value of a contract to the agent at the beginning of the term for its data services, switched voice, frame relay, ATM and Internet access service.

“That’s very powerful,” says agent A. “No monthly residuals, but I wouldn’t mind taking that money and putting it into whatever investment and earning a percentage in interest.”

Such a structure also helps master agents recruit subagents, the agent says. “All I have to do is say, you bring this DS3 to the ‘Net through us, we’ll pay you $20K over the next two months,” says agent A.

The tier-one carriers were rated “fair to middling.” AT&T Corp.’s data program is heavy on the bonuses, says agent A, but has poor MRC percentages. “If you’re trying to build a residual, then that’s not the program to market,” he says.

Worldcom Inc.’s UUNet got poor marks from agent B for irregular commission flow.

Sprint Corp. voice commissions also are low for the industry, says agent A. However, the carrier’s data services are competitive, he says.

Amid all the plans, it’s important to realize that some deals are too good to be true. “A lot of the seasoned masters will look at 35 percent commissions deals and go, O.K., this is not going to fly,” says agent A. “They know what’s profitable and what’s not. They’ve seen resellers come around time and time again with these programs and they don’t buy it.”

Independent agents who are more dependent on their monthly checks than master agents often are wooed by the glitter, he says.

Agent C concurs and reminds independent representatives that some providers try to garner market share with aggressive recruitment techniques before falling “apart in their service and their commissions and everything.”

“Individual agents can get burned pretty badly, customers out of service, not getting paid,” adds agent A.

Beyond Commissions

Commissions, the three agree, are not the full picture in compensation. A savvy agent also should weigh service, which affects customer cost to the agency, timely payments and reporting, a company’s financial stability and product sets.

In looking at programs, you look at different reasons you want to be with these companies,” says agent C.

Service. Direct access to support personnel, for instance, is one factor. As a customer advocate, being able to deliver service “without sitting in queue for 40 minutes” is important, says agent B.

“It’s always a trade off,” adds agent A. “What I’m finding is that it’s really to the point where we just will not do business with people unless we are confident they’ll have support for us. You can’t pay us enough to do business with a company that is not going to be there for us.”

Agent C cites Lightyear Communications Inc. and reseller PowerNet Global Communications Inc. as having excellent service, which balances out commissions that are merely competitive.

Agent C is hooked into Lightyear’s back-office system, and sees the same screens that customer service representatives see. “I can change the billing address and look up the amount a client owes, and you can help the client right away and prevent them from having to sit on hold,” he says. “One of the best things about commissions is that they continue if you can hold on to the customer. And that’s the trick. So service has been very important.”

Details. Accuracy and timeliness also are differentiators. “A couple of times [providers have] paid just a strange amount, then you call them and they say well, we paid what we could,” says agent C. “We haven’t had anything from them in several months and we are not caught up on our commissions. In that kind of situation all you can do is your best to rewrite the business with someone else, and you always lose money in the process.”

Agent B has worked with TransNational Communications International Inc. for eight years, and says the company has never once been late or missed a commission payment. That puts it at the top of his list, he says.

“Reporting aspects are huge,” says agent B. “Otherwise, God knows what you have — if you’re a master agent with subagents, it’s critical.”

Stability. Financial stability is another factor that can outweigh commissions. “You would take less commission from a more stable company,” says agent B. “Since we work on a residual commission basis, we need to know they’re going to be around to keep paying those residuals.”

There are exceptions, however, according to agent A, if the product or service is one that can be moved or sold easily. If the solution is important to sell, then agents should sell it regardless of the provider.

“I’m not bummed out about the DSL shakeout,” he explains. “Covad will be gone in six to nine months, but who cares, because we can move clients to New Edge or upsell them to VPN products.

“So what I’m saying is, you can either choose not to do business at all, or you can choose to do business and take a risk, but be ready to move with the market.”

Salability. Agent C says there are other aspects to product “salability.” “Even those commissions that seemingly are getting bigger and bigger, in the 20s and 30s [percentage range], they’re smaller amounts of money to us because the prices are going down,” he explains.

He says agents should look at a company’s products and pricing and determine if the proposition is a good one. Rates may be too low to translate into significant revenue. Conversely, the services may be priced too high and sales too difficult to close to warrant taking it on. “It doesn’t matter what the commissions are if the product isn’t salable.”

Agent C has negotiated a substantial relationship with Sprint. “Their commissions are not good and they’re not bad,” he explains. “But they shine in knowing the company’s going to be around for a while and in having fantastic products.”

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