Case Study: The Hidden Costs of Commission-Based Sales—Why Manufacturers Are Paying for More Than They Realize
Background: The ‘No-Risk’ Commission Illusion
Many manufacturers see commission-based rep firms as a low-cost, low-risk way to handle sales. Since reps only get paid if they close deals, the assumption is that manufacturers are only paying for success.
I’ve seen this logic play out repeatedly across the industry:
Manufacturers would offer 5% commissions, believing it was an efficient, pay-for-performance model.
They assumed they were only paying for sales, not realizing they were funding an entire parallel sales infrastructure inside the rep firm.
The Problem: Manufacturers Pay for More Than Just Sales Effort
In reality, the commissions paid to rep firms don’t just compensate sales reps—they fund an entire duplicate sales infrastructure that ultimately drains profit margins.
Where does the commission money actually go?
Software & CRM Systems – Rep firms often use their own sales tools, separate from the manufacturer’s CRM. This creates duplicate data entry, disconnected sales insights, and inefficiencies.
Office Space & Admin Costs – Since rep firms function as independent businesses, part of the commission is covering their operational overhead, rather than directly driving sales.
Sales Management & Training – Rep firms hire, train, and manage their own teams, meaning manufacturers are indirectly paying for a layer of management they don’t control.
The Hidden Cost: Could Manufacturers Build a Better System for Less?
Instead of funneling millions in commissions into external infrastructure, manufacturers could:
Invest in an in-house sales team that aligns 100% with their priorities.
Centralize data and sales tracking, ensuring complete visibility into the sales process.
Eliminate duplicate costs—every dollar spent on rep firm overhead is a dollar that could go toward a more efficient, manufacturer-owned system.
Real-World Example: The Impact on Large Deals
One manufacturer we worked with relied on rep firms to close multi-million-dollar deals. While they assumed their 5% commission structure was a fair trade-off, they didn’t realize:
For a $2M deal, they were paying $100K in commissions.
A dedicated inside sales team could have handled the same deal at a fraction of the cost.
Over time, these commissions added up to millions per year—money that could have been reinvested into a better sales structure.
Key Takeaway: The Smarter Alternative
Manufacturers don’t just pay for sales—they pay for an entire rep firm’s overhead. By moving to an inside sales model, they could increase profitability, streamline operations, and gain full control over their sales process.
Rethinking Your Sales Strategy? Let’s Talk.
Commission-based sales might seem cost-effective, but are you paying more than you realize? If you’re ready to take full control of your sales process, reduce overhead, and maximize profitability, let’s talk.
📩 Message me on LinkedIn or email to schedule a free consultation.
