Growing Reps … JD Martin, The Schell Company and 4 Models

Recently two well-known rep agencies in the Gulf Coast area, JD Martin and The Schell Company, “merged”.  JD Martin Co, has locations in Houston, Dallas, San Antonio and Oklahoma City and didn’t change.  The Schell Company changed its name to Schell Martin LLC and is going to continue to serve the Louisiana and Mississippi markets.  According to Craig Schell, essentially nothing changes as he stated “Everyone within the Schell Company as employees will retain their current positions in the combined organization. I will continue to be President of the operation  in the Louisiana and Mississippi region.”

Rep consolidation has been a topic within the industry for the past few years and I did receive a couple of calls inquiring if I knew “why?”

The short answer is “no”, however, the following are potential reasons:

• Craig didn’t feel he had a viable financial exit strategy.
• JD Martin sought expansion and offered a lucrative exit strategy
• The geographic expansion, especially with some line synergy, and incremental commission volume, enables JD Martin to leverage some operational expenses to improve net profitability.
• JD Martin sought to “follow” its distributors with a number of distributors in the Gulf Coast marketplace being in multiple states
• Some suppliers encouraged the relationship
• or, yes, something else (maybe someone will share?)

In comparing line cards there are a number of commonalities between the cards … Dialight, nVent / Hoffman, Quazite, Southwire and there is common ownership for Western Tube and Wheatland.

But there are some potential conflicts from a synergy perspective … Littelfuse and Mersen, Caddy / Erico and Enduro and Thomas & Betts and maybe some other minor lines.  The conflicts may or may not be issues for those manufacturers … and sometimes it depends upon their alternatives or if they are concerned about competitive information being shared within an agency.

Over the past few months we’ve worked with a few reps regarding their strategic planning and “succession planning”.  For many the first question / thought is “should I sell / should I seek to acquire to expand?”  The reality of the answer is “I don’t know. It depends upon your goals, your style and your organization.”  This then leads to discussion, observations of their company and people, considering the competitive environment and the distribution environment and a number of other factors.

Rep Growth Models

We’ve identified 4 potential models for reps to consider.  They are:

• Geographic strategy
• Density strategy
• Diversification strategy
• Lifestyle strategy (yes, this is a realistic, conscious, alternative!)

For some the euphemism of “succession planning” is really “exit strategy.”  Grooming talent to ensure the perpetuity of a business takes time.  Developing a growth and/or profit improvement strategy, which the above are, should be considered regularly and executed upon to achieve goals.

As much as many may not think that reps are focused on building their business and “tomorrow”, quality reps in every market are thinking longer-term and planning on how to capture increased market share through demand creation while at the same time balancing their investments based upon their supplier offering (tough to represent “too many” suppliers but at the same time many suppliers have a “one commission rate” model regardless of rep services and performance provided).

So, why did JD Martin expand into Louisiana and Mississippi and The Schell Company become affiliated with a larger agency? Don’t know but you can bet that it had to do with changes within management (ownership) coupled with a changing local market and the continued need to invest or leverage infrastructure to increase profitability.

Exit strategies and growth strategies are different but can eventually merge, if necessary, to maximize the monetization of the business.

Questions

• Manufacturers … what do you think about rep consolidation? Have the “mega agencies” been effective for you? Do you have a “preferred agency size” to align with?
• Reps, is it “merge or go home?” Do the above growth strategy alternatives make sense?
• Distributors, do you prefer being called on by a large, multi-state agency, a mid-size agency or 1-2 man shops?

Rep Services

• If you are a lighting agent, Channel Marketing Group will be aligning with a lighting agency expert to provide strategy and marketing support to agencies.
• For NEMRA agents, Channel Marketing Group offers a Distributor Satisfaction Assessment service with special NEMRA pricing as well as strategic planning and marketing support.
• We also help manufacturers with rep evaluation as well as rep recruitment and, in selected circumstances, help reps with line enhancements.