Commission

In practice

The rep agreement sets the rate, what counts as a commissionable sale, and how long commission continues after the agreement ends.

Related terms

Manufacturers' representative

A manufacturers' representative is an independent sales firm that sells for several noncompeting manufacturers, called principals, in a defined territory and is paid commission on sales. The rep finds programs, manages RFQs, and handles communication between buyer and plant. The principal pays the rep, not the buyer.

Split commission

A split commission is a commission divided between two or more reps when the design influence and the order happen in different territories, such as engineering at one site and purchasing at another plant. Rep agreements usually state the split by percentage for the design, purchasing, and delivery locations.

House account

A house account is a customer a principal sells to directly and excludes from its rep agreement, so no commission is paid on those sales. House accounts should be listed by name in the agreement. Disputes often start when a house account's new division or plant buys in the rep's territory.

Principal

A principal is a manufacturer that contracts a manufacturers' representative to sell its products or capabilities in a territory. The principal quotes, builds, ships, and invoices the parts, and it pays the rep commission on sales. A rep firm's principals make up its line card.