06: Sales
Brokers and Sales Agencies
When it comes to expanding your CPG brand, brokers and sales agencies can be powerful allies—or they can be costly missteps if not approached with caution. Many early-stage founders enter these relationships with high expectations, believing brokers will take over all sales activities and deliver instant results. The reality, however, is far more complex. To maximize the benefits of working with brokers and sales agencies, it’s crucial to understand their roles, timing, and how to choose the right partner.
The Role of Brokers and Sales Agencies
Brokers and sales agencies act as intermediaries between your brand and retail buyers. Their primary function is to help you secure shelf space, manage relationships with retailers, and increase your sales presence across various channels. However, it’s important to recognize that these professionals are often “brokering” deals rather than doing all the heavy lifting on sales. As the founder, you will still play a critical role in the sales process.
Key Responsibilities of Brokers and Sales Agencies:
- Product Placement: They pitch your products to retail buyers, negotiate shelf space, and work to ensure that your products are well-positioned in stores.
- Relationship Management: Leveraging their existing relationships with retailers, brokers can get your products in front of the right buyers and help maintain those relationships over time.
- Sales Strategy: They develop and execute tailored sales strategies, including pricing, promotions, and in-store marketing.
- Market Insights: Brokers provide valuable insights into market trends, consumer behavior, and competitor activity, helping you stay ahead of the curve.
- Negotiation: Skilled in negotiations, brokers can help secure favorable terms and resolve any disputes with retailers.
Retailer-Specific vs. Category/Regional
Understanding the different types of brokers can help you choose the right one for your brand:
- Retailer-Specific Brokers: These brokers specialize in getting products into a particular retailer, such as Target or Whole Foods. They have deep connections within that specific retailer and know exactly what it takes to get your product on their shelves.
- Category or Regional Brokers: These brokers focus on a type of store or a specific region, such as independent grocers in the Northeast. They have broad networks within their niche and can help you penetrate a specific market.
When to Work with a Broker
One of the most critical decisions you’ll make is when to hire a broker. The best time to bring on a broker or sales agency is when you have proven awareness, demand, and retail velocity. At this stage, your brand has established a foothold in the market, and you’re ready to scale by getting into as many stores as possible.
On the other hand, if you’re still in the product-market fit stage, hiring a broker might actually be detrimental. Without strong consumer awareness and demand, a broker’s efforts may not yield significant results, and you could end up paying for services that don’t move the needle.
Common Pitfalls:
- Slow Growth: New sales through a broker can take time. It’s not uncommon to pay a broker or sales agency for 3-9 months before breaking even on the retainer, as the CPG sales cycle is notoriously slow.
Mismatched Timing: Brokers are often eager to take on new clients, but it’s crucial to ensure that the timing aligns with your category resets. For example, if you’re selling crackers but the category reset at your target retailer is in June, starting with a broker in August may result in nearly a year of waiting before they can pitch your brand.
Costs and Fees
Brokers typically charge a retainer fee ranging from $1,000 to $3,000 per month, plus a percentage of sales, usually between 3-5%. You’ll continue to pay this retainer until your sales volume reaches a level where the percentage fee covers the broker’s costs. For instance, you might pay $3,000 per month until you reach $100,000 in sales, at which point the 3% fee would cover the cost.
While these costs can be significant, the investment often pays off through increased sales and market penetration—if your brand is ready.
Getting Started with a Broker
Once you’ve selected a broker or sales agency, it’s time to kick off the partnership. Here’s how to get started:
- Define Your Goals:
- Clearly outline your sales goals and expectations. This could include the number of new retail accounts you want to secure, sales targets, or specific stores you want to enter. Make sure you’re clear about timing expectations.
- Provide the Right Tools:
- Equip your broker with the resources they need to succeed, such as product samples, sales materials, and detailed information about your brand.
- Collaborate on Strategy:
- Work together to develop a sales strategy that aligns with your brand’s objectives. This should include pricing, promotions, and in-store marketing tactics.
- Regular Check-Ins:
- Maintain regular communication with your broker to stay updated on progress, discuss any challenges, and make necessary adjustments to your strategy.
Choose the right type of broker for your needs, ensure your brand is ready, and carefully consider the timing of your partnership. Remember, while brokers can open doors, it’s ultimately up to you to close the deal and drive your brand’s success. By entering these relationships with realistic expectations and a clear strategy, you can maximize the benefits and set your brand up for long-term growth.