Master Minds – Masters Share Contract Negotiation Insights

Its the end of the year, subagents. Time to clean house, or at least to review contracts. Heres what some master agents have to share.

First, says Emmet Tydings, president of master agency AB&T Telecom, understand the motivation for a renegotiation, such as a higher commission or improved service levels. If the contract modifications are to improve service, then that should be a red flag, he says. It shouldnt require a contract change to force the master agent to improve service, so the agent may want to consider a different master agent partner.

Rick Sheldon, co-founder of Intelisys, says if a partner feels a change in his or her contract is warranted, that person needs to build a simple and honest case outlining what he or she wants and why. If a partner says, I want to renegotiate, we would not know if what was regarding commissions or terms, Sheldon explains. We have never seen a partner request that we tear up an agreement and start from scratch. It is usually commission and/or specific clauses in the agreement that they want to change. It is also important that a partner try to consider both sides and try to focus on what might motivate the other side. It has to be a win-win or it does not happen. 

At Intelisys, as at most agencies, commissions and terms are not re-visited on a regular basis. Partners must raise the issue.

The same goes for subagents of Telegration. Tim Basa, director of business development, says, We don’t typically offer tips to our subs on renegotiating contracts with us. However, like most master agents we are pretty flexible with our agents. As a master agency you have to be easy to do business with in order to get the mind share  of your agent pool.

In general, when it comes to compensation, Tydings says subagents should look for good commission rates on zero-volume commitments, and for residual commissions for as long as the master agent is paid. He cautions subagents to avoid volume commitments on branded carrier services. Save volume commitments for the exceptions that require [them] and put them in an addendum to the contract, not as the general rule under which to operate, he says. Aggregating volume is generally one of the prime value-adds that the master agent brings to the table to begin with.

Sheldon says agents need to find out whether volume commitments deliver what they promise. They should also consider asking what suppliers and/or products/services the master might have financial or other motivation to sell, he says. If the partner wants an increase on provider (or product) X, they should consider possibly a commitment to sell provider (or product) Y to help the master get what they want. 

Telegration, too, is careful about volume commitments. My advice to subs is get the best contract  you can without a volume commitment, Basa says. Then, once you have track record with your vendor, you can renegotiate and use the volume commitment to improve your position.

Tydings also recommends agents remember to read the fine print on their contracts. Our company offers several services that fall outside the traditional master agent programs, and while subagents want to sell these, we find that they tend to skip over taking time to understand how the compensation or delivery is different, he says. Such services include installation, maintenance, repair and auditing, and private-label audio and Web conferencing. In some cases, there may not be a commission involved and instead there is a markup that the subagent makes, Tydings explains. In other cases, there may be completely different service-delivery models and different support roles. There can be scenarios where maybe the subagent is responsible for a different level of support than they would be for branded carrier services.

At Telegration, agent agreements auto-renew, says Basa. So, unless there are material changes from our vendors, we won’t require new agreements to be signed. The typical drill is to pass down any commission changes to our agents in the form of a commission addendum.

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