Master-Subagent or Master-Slave?

By Bill Leutzinger, President, TelecomMedic

I just finished reading the article, Ethical Dilemmas in the Channel No. 3: Subagent End Run in the April print version of PHONE+. I have to say that it took me a few days to read it because I kept getting so mad that I had to put it down. Then, I had to pick it back up and see what else I was not going to agree with.

Let me start by saying that master agents are a necessary part of the channel. We need them because the smaller agents cannot take on the huge quotas associated with many of the larger telecom vendors. However, we are not slaves to these masters. I really think it should be the other way around. The masters should be slaves to the smaller agents. We bring them their revenue every month. They would not have the customer base they have without us.

Secondly, I don’t know of one agent out there that works exclusively with just one master agent. There are exceptions where a master gives an agent money to get started with an understanding/contract that requires exclusivity. No agent wants all their eggs in one basket. I know from past business experiences what happens when you put all your faith in one place and they go belly-up. Agents have to have revenue streams coming from many different places. I call it the “octopus effect.” If I have revenue coming in from eight different sources and one of them gets cut off, I can still survive.

The example that was used in the article really makes me laugh. A master agency brings in a new player and since I attended the vendor’s Webinar, now I have to put all my business with that new player through said master agent? Wait a minute. I know that the new player put up all the expenses for that Webinar. They begged the master to do it and the master said, “OK, let’s take this to the masses and see how it plays.” The master then gets 50-90 percent of any of the business I put through this new player. However, 99 percent of the time the master did not put up any of their money to put on this dog-and-pony show.

Most agents are now going to see which master agency they work with will pay them the highest percentage from this new player. Or, they might realize that this is something they can sell a lot of and sign directly. At this point it all comes down to business. The new player is using the master to get some advertising. They are most likely paying for it themselves and they are casting a very wide net to catch some new fish.

Next, the successful businessperson will sign an NDA with the new player and look over a contract to see if it is indeed a fit or not. If the new player has a commitment level that the agent can swallow and the terms of the contract are all in place, why would they not sign up themselves directly? This is a basic business decision not an ethical dilemma. The ethical dilemma is that the master agent is treating the subagent like a slave.

Here is exactly how I break down the ethical part of all this. We are all in business to make money. We use the masters for what we need them for and we sign our own contracts when it makes sense. However, once I have made the decision to put business through a master agent with a particular provider, then it is unethical for me to sign direct. But, if I have not used a master for a specific carrier/vendor, then I can do whatever I want.

I tell every new agent I speak with to make sure and have their revenue coming from at least eight different sources. It is the No. 1 key to success/failure in the agent world. At the end of the day it is your business and you can run it however you want. I just say that you should make the decision to use or not use a master before you turn in your first sale.

Bill Leutzinger is president of Chicago-based TelecomMedic, an agency providing voice, data and video services to business customers. He is a past member of the PHONE+/Channel Partners Conference & Expo Advisory Board.