By Ted Schuman, CEO, PlanetOne
When you sign up with a telecom master agent to deliver connectivity and telecommunications services, beware of empty promises. You can make a lot of profit in this business, but if you enter into a poorly written contract with your master agent, you could see your commissions shrink in a hurry, even after being promised ridiculously high payouts.
Some master agents will promise you the world, but here is what they aren’t telling you: The commissions they offer are only as good as the contracts they have with their vendors. And it’s important to remember that not all master agents are created equal. Don’t assume just because the master agent has “preferred status” that you have a safe and secure agreement. In almost all cases these vendor agreements are negotiated individually and could vary greatly depending on the negotiation skills of both parties.
Ask Questions. Demand Good Answers.
Ask your master agent about their agreements with vendors, and be sure to check the small print. Remember the old adage that if something looks too good to be true, it probably is. So before locking yourself into a contract full of empty promises, check that the company is profitable, has a good track record of delivering on its promises, and has the capability to support you and your customers.
A reputable, well-financed connectivity partner makes substantial investments in its relationships with vendors to ensure the best possible terms and conditions for themselves and their agents. Strong master agents protect the safety of their partners’ commissions by negotiating meticulously crafted contracts with vendors, leaving nothing to chance.
They recognize that a business agreement ultimately is about survivability. It’s never a good time to sign a bad agreement (Tweet This!). You want to make sure the contract addresses issues such as escalations, change of leadership, acquisitions, and bankruptcy. Are any of these situations cause for stopping commissions or will you continue to get paid?
Be sure to ask about quotas, payout percentages, causes for termination and evergreen renewals. Be especially cautious about quotas. A lot of master agents have contracts with vendors requiring them to meet certain goals. If they miss their quotas, in many cases they try to make up for that by reducing your commissions. You might think you’re safe if you’re hitting your own numbers, but think again – they’ll still reduce your payouts even if you hold up your end of the bargain.
Another key point to make note of – you never want the master agent to have the opportunity to do a “claw back” on your agreement – and this again has to do with how solid your contract is. And if you think you ultimately still have some protection because you can move your customers to another master agent, chances are the contract is written to prevent you from doing that. Remember, this is all familiar territory for a master agent.
Ask the tough questions upfront and take nothing for granted. It’s too late to ask when a problem has already occurred and you are being hit with an unpleasant surprise.
Why am I sharing all of this? Because lately we’ve seen more and more of these questionable practices come into play by master agents and hurt our channel partners. Many are offering unrealistic terms to suck you in because they can’t compete on reputation and partner support. They devalue the industry overall which sucks, but even worse, they could end up destroying your business.
You can protect yourself by ensuring the contract with the master agent is fair, balanced and aligns with the master agent’s contract with vendors. While it may be tempting to test run the promise of high commissions, your instincts should tell you otherwise.
Focus not on getting paid the highest percentage, but ensuring you will get paid for the length of the contract. If you go into an agreement with a realistic and longer-term mindset, you are far less likely to end up with a contract that overpromises, under-delivers and could cause your recurring revenues to come to a halt.
Ted Schuman is CEO of PlanetOne Communications (www.planetone.net), the IT channel and telecom industry’s preferred business partner for identifying and delivering connectivity solutions to small and midsize businesses and enterprises. With more than two decades of experience in the telecom industry, Ted has established PlanetOne as a market pioneer, developing successful alliances with more than 185 global services providers. Headquartered in Scottsdale, Ariz., PlanetOne has been celebrated by Inc. Magazine as one of America’s Fastest Growing Private Companies, for four years running.