Introduction

John Barro and Bill Stickney had established their small manufacturer's representative agency,
Barro Stickney, Inc 10 years before. John was energetic and gregarious. Even after producing
$1.75 million in sales past year John still made efforts to improve sales. Bill Stickney was
thoughtful and he knew how to get things done and how could they be better. R D Ocean was
BSI's largest principal and it accounted for 32 percent of BSI's revenues. Franklin Key
electronics was BSI initial principal and had remained a consistent contributor of approximately
15 percent of BSI's revenues.
Franklin's representative Mark Heil passed away in a plane crash and BSI could not risk its sales
of over $800000 and were desperate to replace Heil before any customers found other sources.
Franklin offered the territory to BSI and was anxiously waiting for the decision.BSI was not
familiar with the territory but was aware of the sizable orders and specialized sales approach.
Profile

JOHN BARRO

BILL STICKNEY

J.TODD SMITH

Interes
ts

Golf
,Community
organizations
Partners in rep
agency

Gourmet cooking
Boy scout troop

Social Work (Fund

raising)

Positio
n

Partners
agency

in

rep Additional
personnel

Experie
$1.75 million Administrative work
nce
sales in the last of the agency
Resource Allocation
year.
and
territory
assignments
$1.5 million sales in
the last year.

Person
ality

Energetic
Thorough
Gregarious
thoughtful
Meeting
new
people
New challenges

Sales

Worked
for
a
nationally known
cooperation
Experience
dealing with large
customers.
Sales
over
$2
million in the last
year.

and Enthusiastic

Qualitative statements:

With four people and sales of $5.5 million,BarroStickneyInc had become a successful

and profitable manufacturer's representative firm.

BSI enjoyed reputation for outstanding sales results and friendly thorough service to both

customers and principals.

It was mainly through Johns efforts that many of BSI's eight principals had signed on

with BSI.
Even after producing $1.75 million in sales John still made efforts to increase sales
Bill Stickney liked to think of himself as someone a person could count on. He was
thoughtful and thorough. Much of the administrative work of the agency such as resource

allocation and territory assignments was handled by Bill.

Mark Heil Franklin's representative from Virginia, perished when his private plane

crashed, leaving Franklin key without representation in its DC/Virginia territory.

Franklin did not want to jeopardize its sales of over $800,000 and wanted to replace Heil

before its customers found other sources.

Franklin offered the territory to BSI and was anxious to hear the decision within one
week. BSI was not familiar with the territory but it did understand that there were many

military accounts.
If BSI's time were evenly divided among its eight principals each would receive 12.5

percent of the agency's time.

Swanson's products are being replaced by the competition's computerized electronic
equipment, a product category the firm has ignored. As a result, the company is losing its

once prominent market position.

According to a seminar at the last ERA meeting, the maximum safe proportion of a reps

firm's commissions from a single principal should be 25 to 30 percent.

The revenue for investment for the manufacturer's representative firm comes from one or
more of several sources. These sources include reduced forthcoming commission income,
retained previous income and borrowed money from a financial institution

Quantitative statements:

With 4 people and sales of 5.5 million BSI had become a successful and profitable
manufacturers representative firm.

Bill contributed $1.5 million to total company sales.

John Barro contributed $1.75 million in sales this year and was still making efforts to
contribute more efficiently.

R.D. Ocean was BSIs largest principal and accounted for 32% of BSIs revenues.

Franklin Key Electronics was BSIs initial principal and had remained a consistent
contributor of approximately 15% of BSIs revenues.

According to a seminar at the ERA meeting the maximum safe proportion of a rep firms
commission from a single principal should be 25 to 30 percent.

If BSIs time were evenly divided among its 8 principals each would receive 12.5 percent
of the agencys time.

The net income for the year Dec 31 1998 was $238333 which is 7.9% of revenue.

The revenue for BSI principal is as follows: Butler 3%, Dickens 10%, Horizon 10%,
Swanson 14 %, Moore 11% and Knox.

R.D. Ocean had high market saturation and 32% share of BSI's portfolio.

Franklin Key high estimated market saturation and 15% of share of BSI's portfolio.

Problems
BSI is facing a dilemma of which alternative to choose. Firstly, BSI has to decide whether or not
to hire an additional sales person for R.D Ocean. The problem is that it is not easy to find the
right person for the right job and investment concerns are also evident. The second alternative for
Barro Stickney Inc. is the takeover of the territory in Virginia on the request of Franklin Key.

Furthermore, BSI was not familiar with the territory however it did realize that the company can
increase the number of principals by accounting for military accounts. This meant that there was
a potential for sizable orders, although a different and specialized sales approach would be
required to cater to the needs of the clients in that area. The problem with this is that the repute of
the company will be at stake, hence it will be risky endeavor for the company and the military
accounts had their own approach of making purchase decisions.
Due to the distance and the size of the territory, serious consideration was needed as to whether a
branch office would be necessary which meant that there would be less interaction with a greater
independence from the main BSI office. Furthermore none of the current BSI members wanted to
move there however there might be a possibility of hiring someone who was familiar with the
territory. But with this, there was a risk that any successful sales person might leave and start his
or her own rep firm.

Cost Analysis
R.D Ocean:
R.D. Ocean accounts for 32% revenues for BSI and is highly demanding however it is less
difficult to sell due to small marketing investment requirement. Revenue is $96,756 and the
commission rate is 5% and the cost of new hire= Avg. Salary + support costs + safe 30% bonus
That is, $20,000 + $66,000 + (0.3*96,756) = $115,026
Franklin Key:
Franklin Key accounts for 15% revenues for the company however it has moderate demand and
is easier to sell relatively.Franklin Key (Virginia) has total Sales of $800,000 and the profit on
commission is $800,000*5% = $40,000. However, the Cost of new branch:
Compensation ($40,000*0.2 + $20,000) = $28,000
Support Cost = $66,000
Incremental Exp = $24,000
Total Cost = $118,000/year
Fixed cost/annum = salary + transport + insurance + incremental expense = $20,000 + $22,000
+ $16,000 + $24,000 = $82,000

Core Problem
The issue at hand for BSI is to answer the following question:
Is growth possible if BSI expands its territory, sales force or number of its principals as requested
by Franklin Key & R.D. Ocean?

Solution & Recommendations

There are two Key Accounts demands on the table, lets look at each one by one:
Franklin Key:
Positive aspects:
1. The market is already developed and Sales stand at $800,000. The
commissions generating from this client will become TWICE once BSI enters
this territiory.
2. Low market investment required for this product category.
3. Opportunity for growth is there. As new principals from military accounts can
be added. In the coming years, revenues from Swanson are expected
to go down, hence, new avenues for growth have to be tapped now.

Negative Aspects:
1. New Territory risk increases.
2. Office needs to be purchased. We dont recommend giving a sales rep the
responsibility to single handedly handle this territory because theres a great
risk of him opening up his own sales office (Barro Stickneys owners did the
same thing too when they started their business!)
3. Low capacity to serve new principals. Any new client can lead to drop in
customer service.
4. Additional opportunity is mainly for military accounts for which B.S.O doesnt
have experience.

R.D.O
Positives:
1. This account gives 32% of revenue. Hence, too much dependency on this
account and by simply adding one sales rep. the account will remain happy
and satisfied.

Negatives:
1. Theres a high cost associated with hiring a new sales rep and this territory is
already saturated for R.D.O. hence, the returns against the costs are not
expected to be too great.

What We Recommend:
Theres no question that both the options should be declined and BSI does nothing. It needs
future growth opportunities because one of its existing account Swanson which accounts for 14%
of revenues is expected to face some hard times in the future hence, commissions will go down.
The only real opportunity is in the form of F.K.Es request to cover Virginia. Its a relatively safe
way for the agency to expand and increase its size. Also, by expanding this new territory it will
reduce its reliance on R.D.Os billings.
On the other hand, R.D.Os demand is purely customer centered and the only interest BSI has in
serving it is to keep the client happy; theres no real opportunity to be tapped.
We recommend that BSI enters the Virginia territory for Franklin Key and develop its human
resources to cater to military accounts and generate more revenue channels in that territory. As
for R.D.O, BSIs team needs to reason with the client and tell him how investing further in a
saturated market is not in his interest. If the team is successful the matter will be resolved, if
however, the client exists, BSI should make the hiring because a happy client is a happy
business.