What is a principal?
📚 Definition of principal
Generally speaking, a principal is an individual or legal entity who grants another person the right to represent him or her and sign legal documents on his or her behalf.In a commercial relationship, the principal is a company that grants a sales representative the right to negotiate and sign contracts in the company’s name and on its behalf. The sales representative is generally paid on a commission basis.
It’s important to understand that the principal is a company like any other, whose specific feature is that it works with an independent sales representative. This company could be, for example, a simple bakery that needs a sales representative to negotiate contracts. Calling it a principal only means that it’s a company that has appointed a sales representative.
His relationship with his representative must be defined by acontract, known as amandate.
Difference between principal and agent
The mandatary is the person appointed by a company to represent it.
In other words, the person who represents the principal to customers. In sales, this could be a sales agent or a sales representative, for example.
Resource : All you need to know about commercial agents
📚 Did you know?
A sales agent can represent several principals simultaneously, unlike a sales representative who is tied to a single company. This flexibility enables independent salespeople to diversify their sources of income while remaining experts in their field.
Read also: 6 differences between sales agents and sales representatives
| Features | Principal | Agent |
|---|---|---|
| Role | Delegating company | Sales representative |
| Responsibility | Set targets and conditions | Negotiate and close sales |
| Compensation | Pays commissions | Receives commissions |
| Number of partners | Multiple agents possible | Several possible principals |
| Legal status | Company (SARL, SAS, etc.) | Self-employed or employee |
The principal-agent contract
As mentioned above, the relationship between a principal and an agent is based on a written contract known as a mandate. This legal document is essential, as it precisely defines the rights and obligations of each party.
The sales mandate contract must mention :
- Contract duration (fixed-term or open-ended)
- Geographical area of intervention
- Products or services to be marketed
- Terms of remuneration (commission rate, payment terms)
- Contract termination conditions
- Non-compete obligations, if any
Resource : How to draw up a sales representative contract?
💡 Advice on your principal contract
Before signing a mandate contract, always check that you have a clause covering termination and compensation in the event of improper termination. This will protect you as an independent sales representative.
Can a mandatary have several principals?
Under certain conditions, a sales representative can work for several principals at the same time, often in the same business sector. This gives them more options when they visit a customer, so that they remain experts in a single market.
However, nothing prevents a principal from working with a sales representative who has no experience in his or her market. The key is to ensure that there is no conflict of interest between the different companies represented.
5 tips for a successful principal-agent relationship
1. Define a solid contract
A well-drafted contract is the basis for a smooth collaboration. Make sure it covers all aspects of your business relationship: territory, exclusivity, targets, commissions, and termination conditions. A good contract protects both parties and avoids future misunderstandings.
2. Negotiate your commissions
Never underestimate the importance of fair commission negotiations. Your compensation should reflect :
- The complexity of the product or service sold
- Sales cycle (short or long)
- The objectives
- Business expenses incurred
🔍 3-step guide to negotiating commissions
- Analyze the market: Find out about rates in your area
- Calculate your costs: Integrate your expenses and professional tools (knowing that your mileage expenses are reimbursed).
- Propose a progressive model: for example, a model of increasing commissions according to the level of sales achieved. It’s a good compromise for the ambitious! 💪
3. Cultivate trust and transparency
Trust is the cornerstone of any lasting business relationship. How can we build it?
- Communicate regularly about your actions in the field
- Share your successes and difficulties
- Ask for feedback and advice
- Scrupulously respect your commitments
4. Promote your actions
Your principal can’t always measure the extent of your work in the field. That’s why it’s crucial to make the most of your actions:
- Send detailed reports after each important visit
- Share customer feedback (positive and negative)
- Propose market analyses based on your observations in the field
- Use reporting tools to present your results professionally
5. Invest in the right sales tools
It’s often difficult for a company to effectively manage its sales network, especially when it works with independent sales representatives with different working methods. Principals find it hard to get a clear, real-time view of activity in the field.
Nevertheless, with an application like Moovago specifically designed to digitalize sales forces, companies can finally structure and optimize collaboration with their independent sales representatives and in-house team.
A CRM like Moovago enables principals to :
- Centralize all sales activity in a single dashboard (salaried + self-employed)
- View actions in the field in real time via an interactive map
- Standardize information feedback with customized forms (standardized reports, merchandising statements with photos, competitor price statements, etc.).
- Analyze each salesperson’s performance with key indicators (visits, sales, conversion rate)
- Share prospect database and track progress in real time
- Collect qualified data to feed your strategic decisions and sales statistics
- Monitor the frequency of visits and the application of your sales policy
- Easily export your data for internal reporting or advanced analysis
- Secure your business information on French servers (with nightly backup)
All with a simple, affordable solution, backed up by 100% French customer support that understands your business challenges.
Equip your independent sales representatives with a professional tool and keep control of your business development. Test it for free for 15 days 👇