Master Agents & Subagents: The Exclusivity Debate Rages On

Clark AtwoodBy Clark Atwood

**Editor’s Note: The following is part of an ongoing conversation among Channel Partners readers about what’s turned out to be a highly controversial Channel Partners Zone, an invitation-only event at the Spring 2012

Channel Partners Conference & Expo

in Las Vegas. The author’s thoughts below were originally posted in our reader comments section.

Click here

for more blogs from readers who are fired up about the issues discussed in the video at the end of this blog.**

It was the intent of the forum to bring together many different opinions and discuss them in an open forum. Unfortunately, the forum was limited by time and did not allow for complete expression of all of the ideas presented. [The blog by TelecomMedic’s Bill Leutzinger, “Masters Gripe About Their Agents,”] latched on to one of the sound bites from the video that did not adequately explore the idea of using multiple master agents versus using a single master agent.

I wanted to address [Bill’s blog] point-by-point for clarification.

  • “Let me start by saying this. There are two types of people who work for master agents: the ones who work there and the ones who own them. If those people knew how to run a business so well, they would be doing it and making a hell of a lot more money.”

I agree that there is an employer mentality and an employee mentality. I want you to know that the statement regarding exclusivity was made by one who owns a master agency, not by an employee. I also still carry a bag to support agent sales and work with a handful of house accounts on a regular basis. I am not out of touch with either the struggles of owning a business or how hard it is to sell.

  • “One thing that stuck out to me was the gentleman who said, ‘If they wont sign an exclusive with us, we dont want them.’ Exclusivity is just bad business for an agent. I believe that you have to have multiple streams of revenue in case something happens to a particular vendor/master.”

I am the one in the video that suggested that master agents, including our company, are or should be pursuing an exclusive arrangement with subagents. The comment was made and was not explored as to the reasons why I made the statement. It was shot down by the other type-A personalities without opportunity to explain. Limited time to speak, free alcohol and a room full of type-A’s. The mix was intended to produce controversy and discussion, which it appears to have accomplished.

As for multiple streams of revenue, yes, if you can get multiple streams of revenue, great. You might want to consider becoming a master agent. If you are with a master agent that does not have transparency, I can see why you would want to pursue this.

  • “We have all seen that certain vendors make decisions to stop paying the indirect side. It happens. Companies get bought, they go out of business, or maybe a new CEO comes in. Anything can happen. An agent that wants to protect their business and their employees is taking a HUGE risk if they have all their eggs in one basket.”

If a provider stops paying agents, it does not matter which master agent you put the business through. The exception is the agency or combined agency group that has been able to negotiation provision in their contract to defend against this. Again, transparency is the key, not diversification of a provider’s business through multiple master agents.

  • “Lets take a look at it from another angle. Lets say that you have all of your business with one master agency. You are told by said master that you are completely covered by an evergreen in the contract.”

Any master agent that says you are completely covered” on anything has no legal experience and should be avoided. Any provider can make a detrimental decision to commissions at any time regardless of what any contract says. He who has  the best lawyer and the deepest pocket wins.

  • “Two years later a contract comes up for renewal and goes month to month. Suddenly, you stop getting paid because said master really didnt have that evergreen they told you they had.”

Did I mention transparency? You have not done your homework as an agent if you have not asked those questions up front. An agent should explore the actual contract language the master agent has with the provider if this is a concern. It is true that some master agents have life of client where others only have life of contract. The agent should ask up front.

So your solution to poor selection of master agent on your part is to make many more poor selections by putting the business through multiple master agents? Why not just ask for proof up front?

  • “Another example is that your checks start showing up on the 10th instead of the 2nd or 3rd like they usually do. Is it a cash-flow situation or is it a case of the master is in trouble?”

Again, the solution is transparency combined with asking for a defined direct deposit date. We notify our agents of missed commissions by provider. If the provider slips the commission date, it does not matter who the master agent is. The model is almost exclusively paid-on-paid. If you are concerned, you should have negotiated contract language that if the master agent is consistently late on their payment that you reserve the right to move you base to another master agent.

Separate the issue of late payments by a master agent and late payments by the provider to the master agent.  You need to ask them to put up or shut up, not diversify income from a provider that is paying the entire agent community inconsistently.

  • “Having many different sources of income to protect your company from the inherent risks that come with this business is critical.”

Many of the master agents would argue that the diversification of sales from a single provider creates more risk for the agent. If you split sales for a provider between master agents it creates confusion on all sides and will hurt you in the end when trying to do consolidation for renewals and escalations for support let alone if you split between channel managers.

If your argument is that you should diversify your portfolio among multiple master agents, keeping a single provider with a defined master agent, I can see where that is attractive to the transactional agent. While you may disagree, the short answer is that if a master agent is to support a subagent at a significant level, the master agent should require exclusivity. The master agent cannot assist with presales support, help manage installation, provide support for billing and service issues for prospects, develop and maintain agent- and client-facing tools and resources all to support the agent for clients that are sold through the agents other relationships. This is especially true for larger clients were the agent may have four, five, six or more providers they have represented. A master agent that invests in their subs’ success and procurement of these larger clients should be rewarded with the service contracts sold to that client. Bottom line is that larger and more complex sales typically require more resources from the master agent and providers so trying to introduce support resources from multiple master agents is the “bad idea.”

The “nature of an agent” is to represent multiple options to their clients, not pursue multiple master agents in pursuit of a nickel more from here or there. It is the responsibility of the business owner (agent) to make sure that they have adequately vetted out the business relationship with the master agent to make sure the legal language is in place should the relationship not meet their expectations.

Our agents can offer provider options that are second to none. Our subagent offering to agents is a partnership with transparency. We are only looking for those agents that understand that, value the partnership and can work with us as a true partner. We are so much more than a place to get a quote. A quote is not value. We are adding value to the sales cycle, and for that, we are asking for a level of commitment commensurate with the value we bring.

  • “Another good example of why it is important to work with multiple masters and vendors is the avoidance of conflict of interest. For example, what if you are bidding on a huge MPLS deal and you need help from the master to bring the deal home, but the master has another agent working the same deal? They dont want to get in the middle of it because they are going to make one agent happy and possibly lose the other one because they helped you.”

This confuses me. If you need help from the master to bring the deal home,” then you are going to take it to another master agent? What is it you need? A better price than what the first master agent will get you? It is not about making agents happy, it is about adding value in the sales cycle. If you cant do that with our without a particular master agent, I can see why you would want to shop a large deal and try and win on price.

  • “My advice is to work with three or four good solid masters. You should figure out who pays you the most on each and every vendor you use. Then put an equal amount of business with each one of them. This is not “shopping.” This is being a good businessman. You have diversity in your stock portfolio, dont you?”

I disagree. This is clearly shopping. Your focus is on who pays you the most” and not who brings the most value for what you are paid. This further cements my assumption above that you simply view master agents as a tool for higher commissions and commission diversification. BTW how many stockbrokers do you use for your stock portfolio? Do you have accounts with Fidelity, Merrill Lynch, E*Trade, TD Ameritrade and Scottrade? You want that diversity in case they cant do your trades for you and cant pay you for your stock trades dont you? After all, you know what happened to Lehman Brothers, so you must have diversified your stockbrokers.

  • “I have even had situations where I moved my business from one master to another for less percentage because I wanted to work with a specific rep. Sure, getting the most bang for your buck is important, but the rep from the vendor can make all the difference in the world. If you are a good, experienced agent, you are really just using the master to cut you a check every month. Take a step back and think about how much you actually use their back office. I know that I work directly with the reps from each vendor and just inform the master when a contract comes in.”

The reason you moved a base was to work with a specific rep”? This solidifies the argument that you do not value the master agents tools and resources and are not a partner with the master agent. Nowhere do you describe suggestions about bringing to your master agents attention the lack of support or the challenges with a channel manager. Your solution is to simply move the base to someone you think will do more work for you. Who does not respect who?

When we have run into lack of support from a channel manager or had severe personality conflicts, we addressed it with the provider, and in some cases, been reassigned to a new channel manger that better met the needs of our subs. A true partner is transparent and communicates issues so that both companies benefit and can get better.

  • “I think I deserve the highest percentage possible in that situation as I only use them for their power when a situation hits the proverbial fan, or if I need them to lean on a particular vendor for better pricing on a large bid, or a teaming situation.”

You keep thinking that. I can see you will win friends and influence enemies by only seeing the value in channel managers when there are issues. We, on the other hand, try and use them to help close business. And the thought that you deserve the highest percentage” for pricing on a large bid, or a teaming situation” well, I had to read that a few times. Good luck with that.

  • Make sure you get the highest points possible for each vendor you use” versus I have even had situations where I moved my business from one master to another for less percentage because I wanted to work with a specific rep.”

Your statements contradict each other so you are struggling to recommend that the agent find the value in the percentages they are presented.

  • They all have similar agreements, but some just do more with certain vendors and might get you that extra point or two” versus Suddenly, you stop getting paid because said master really didnt have that evergreen they told you they had.”

Are they all similar or are there comparable differences in their contracts, support and value they bring?

  • “If you sell a $30,000 deal and one master pays you 14 percent and the other pays you 16 percent, that is a difference of $600 per month, $7,200 per year and $21,600 over the course of a three-year contract. Is that shopping or is that good business? “

What is the value the master agent brought to the table to justify the difference in percentage? Again, you prove the point that it is all about price, not value.

  • “It seems to me that the master agencies that use the term “shopping” to put a negative connotation on what is just good business, are probably the master agencies that cant compete from a service and compensation basis, so they hope to lock in an agent before they realize that they should be working with a master that can compete.”

Agents, if you made it this far, shop for value and support, not just points. They need to have competitive commissions, no doubt. Ask for transparency and put in writing your concerns up front. Otherwise, there are a lot of master agents you can bounce to and from.

Clark Atwood is president of master agency Concierge Communications.He also is a member of the 2011-12 Channel Partners Advisory Board.

Looking for more on this channel conflict? Click here for more blogs from readers who are fired up about the issues discussed in the CPZ video.

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