How to Write a Sales Representative Agreement: Step-by-Step Guide

Starting a journey as an entrepreneur, there comes a moment when you need to expand your sales team or engage with independent sales representatives. In such a situation, having a Sales Representative Agreement is non-negotiable. But what is it? And how do you go about drafting one? This guide tackles these questions and more. So, grab your coffee, and let's chat.

Get Your Sales Representative Agreement Today!

Legal GPS templates are drafted by top startup attorneys and are fully customizable🛠️.

Get Template

Trusted by 1000+ businesses to close secure deals.

What's a Sales Representative Agreement?

A Sales Representative Agreement serves as a legal contract between a business and a sales representative. It's the framework that defines the terms of your working relationship, including payment details, territory, and the representative's responsibilities. It provides a clear replication of the understanding between both parties to prevent potential disputes. This document is as vital as your business plan!

The Importance of a Well-Written Agreement

You might be wondering, 'Can't we just make verbal agreements?' However, relying on 'gentleman agreements' can lead to misunderstandings and could potentially be disastrous. It's always better to get everything on paper, for transparency and legal protection. A well-drafted agreement works as a road map for the sales representative, clarifying their roles, responsibilities, and the rewards they can expect.

Imagine, if you were a sales representative, and your only source of income was commission. You've worked hard at building relationships with local businesses, but now that you're ready to close the deal, it's time to get some contracts signed! You've already invested time and effort into these companies; wouldn't it be nice if they agreed to pay a little more than what they originally offered?

How about a Template?

Drafting contracts from scratch can be a daunting task! Here's where contract templates, like ours, come into play. These professionally drafted templates take care of legal intricacies and help you avoid common pitfalls. They also save your valuable time, which you can channel into growing your business.

Contract templates, like ours, are a great way to save time and effort. They’re also useful because they help protect your business against legal pitfalls and other risks. If you value your time and money, then this is definitely something worth considering.

Steps to Drafting a Sales Representative Agreement

To give you an idea of how these contracts look, let's walk through a step-by-step process of drafting a Sales Representative Agreement. Even if you decide to use our template in the end, it's good to understand what goes into it.

Step 1: Identify the Parties Involved

First and foremost, you must identify the two parties involved in the agreement: the company (your business) and the sales representative. Include the following for each party:

• Full legal name

• Mailing address

• Contact information

Ponder over these questions:

• Is the sales representative an individual or a business entity?

• How should you address your business in the agreement to prevent confusion?

Step 2: Describe the Scope and Responsibilities

Clearly define the products or services the sales representative agrees to sell on behalf of your company. Be specific and detailed; ambiguity may lead to misunderstandings.

Next, outline the representative's responsibilities. Some examples include:

• Regularly contacting and following up with prospective customers

• Presenting and demonstrating the product or service

• Providing excellent customer service

Take a moment to consider:

• What sales techniques or methods should the representative use?

• Are there any marketing materials or resources they need to follow?

Step 3: Specify Territory and Exclusivity

Define the geographical area the sales representative will cover. Include specifics like country, state, or local regions. Make sure you cover any overlaps or restrictions if you have multiple sales representatives.

Determine if the sales representative has exclusive rights to their territory; in other words, are they the sole person responsible for selling within that area, or can other representatives work there too?

Example: “The sales representative will cover the United States, excluding Alaska and Hawaii. They have exclusive rights to sell our product within their territory.”

Ask yourself:

• What happens when potential customers outside the assigned territory show interest in the products or services?

• Are there any limits on how many sales representatives can operate within a region?

Step 4: Detail Payment Terms

Key components of payment terms include base salary, commission structure, and potential bonuses. Define the commission percentage or formula, and elaborate on when and how the representative will be paid.

Ask yourself the following questions:

• How often will they receive a commission (e.g., monthly or quarterly)?

• Are there any situations or conditions when they wouldn't get paid for a sale?

• Do deductions apply, such as taxes or expenses?

Example: "This is a commission-based position, so you'll earn a percentage of each sale. We offer standard commissions of 10% for our sales reps."

Sales Representative Agreements Explained

Step 5: Set Sales Targets and Performance Metrics

Specify minimum sales targets the representative must achieve, along with the time frame for meeting these goals. Establish key performance metrics to gauge their success.

Consider these questions:

• How will you monitor and track their progress?

• Will there be penalties or repercussions for not meeting targets?

Example: "We're looking for a sales rep to generate at least $50,000 in new revenue over the next 12 months. You'll be expected to meet this goal within your first year on the job."

Step 6: Include Legal Provisions

Protect your business by incorporating the following legal clauses:

• Termination Clause: Include notice periods and specific reasons that may lead to termination, such as poor performance, illegal activities, or violation of the agreement.
  
  Example: "This agreement can be terminated at any time by either party with written notice. If you wish to terminate this agreement, please submit a letter of resignation to me no later than 30 days before the date of termination."

   

• Confidentiality Clause: Ensure the sales representative understands the importance of confidentiality when handling sensitive information and processes.
  
  Example: "During the course of this agreement, you may gain access to information that is confidential and proprietary to our company. This includes, but is not limited to, sales data, customer lists, pricing information, and financial records."

Legal GPS Pro

Protect your business with our complete legal subscription service, designed by top startup attorneys.

• ✅ Complete Legal Toolkit
• ✅ 100+ Editable Contracts
• ✅ Affordable Legal Guidance
• ✅ Custom Legal Status Report

Learn more

• Non-Compete & Non-Solicitation Clause: Prevent the representative from directly competing against your company or poaching your clients or staff.
  
  Example: "During the term of this agreement, you will not directly or indirectly compete with our company. This includes working for a competitor, soliciting any of our clients, or soliciting any of our employees."

• Intellectual Property Rights: Retain ownership of all intellectual property related to your products, services, and marketing materials.
  
  Example: “All intellectual property created during the term of this agreement, including all patents and trademarks, will remain the exclusive property of our company and cannot be used by you or anyone else without prior written consent."

• Governing Law & Dispute Resolution: Specify the governing jurisdiction and how disputes will be resolved (e.g., arbitration, mediation, or litigation).
  
  Example: “This agreement will be governed by the laws of the State of New York. All claims or disputes arising out of or relating to this contract must be resolved by arbitration in accordance with the rules of the American Arbitration Association."

The Key Elements of a Sales Representative Agreement

Here are some of the key elements that every Sales Representative Agreement should have:

• Duration: Specify the agreement's length. You can consider provisions for renewals as well.

• Payment Terms: Explain how the representative will get paid – salary, commission, bonuses, or a mix.

• Territory and Exclusivity: Define the territory that the representative will cover, and if they will have exclusive rights to that territory.

• Sales Target: Be clear about your expectations. Set specific sales targets they need to reach.

• Confidentiality: Add clauses that protect your business's secret sauce – the trade secrets and intellectual property.

Get Your Sales Representative Agreement Template
with a Legal GPS Subscription

Why Our Sales Representative Agreement Template Is the Best Solution

Drafting an agreement might be intimidating. That's why we make it easy with our professionally drafted Sales Representative Agreement template. It's customizable, user-friendly, includes all the required elements, and you can download it with just a few clicks!

Get Your Sales Representative Agreement Today!

Legal GPS templates are drafted by top startup attorneys and are fully customizable🛠️.

Get Template

Trusted by 1000+ businesses to close secure deals.

Wrapping Up

Navigating legal waters as a budding entrepreneur sure seems tough. We're here to make it less intimidating. We believe that a better understanding of your legal requirements, like drafting a robust Sales Representative Agreement, can truly empower you. In challenging times when disputes arise or when paths need to be tread carefully, this document can be your compass.

With our templates at your disposal, worrying about drafting complex legal documents is a thing of the past! You can focus on building your empire, while our template ensures you're legally covered. Now that you know how a Sales Representative Agreement works and how to draft one, why not check out our template? We have both a standard sales representative agreement and short form version of the agreement. Whichever path you choose, good luck!

Do I need a business lawyer?

The biggest question now is, "Do I need a business lawyer?” For most businesses and in most cases, you don't need a lawyer to start your business. Instead, many business owners rely on Legal GPS Pro to help with legal issues.

Legal GPS Pro is your All-In-One Legal Toolkit for Businesses. Developed by top startup attorneys, Pro gives you access to 100+ expertly crafted templates including operating agreements, NDAs, and service agreements, and an interactive platform. All designed to protect your company and set it up for lasting success.

Get Legal GPS's Sales Representative Agreement Template Now

Legal GPS Pro

Protect your business with our complete legal subscription service, designed by top startup attorneys.

• ✅ Complete Legal Toolkit
• ✅ 100+ Editable Contracts
• ✅ Affordable Legal Guidance
• ✅ Custom Legal Status Report

Learn more