When to use a nonexclusive purchasing agent

The costs and timely delivery of the resources needed to produce goods and services can have a vital impact on a business's bottom line. A purchasing agent plays an important role in this regard, as they are responsible for managing your business's relationship with your suppliers and vendors.

Take a look at your company goals, cash flow, and your own workload to determine if you need the services of an independent purchasing agent. If that's the case, one important decision you need to make is whether you should contract for an exclusive agent or one who will work with you nonexclusively.

Nonexclusive vs. exclusive purchasing agent agreement

When bringing an independent purchasing agent onto your business team, there are two types of agreements you need to consider: exclusive and nonexclusive.

With an exclusive purchasing agent agreement, you agree that there is only one purchasing agent working to obtain specific resources for your company. A nonexclusive purchasing agent agreement, on the other hand, permits you to contract with other purchasing agents for the same goods and services.

While your specific needs may vary, you generally benefit from signing a nonexclusive agreement if you anticipate that your purchasing needs might exceed the abilities of a sole purchasing agent at any time during the duration of the agreement.

For example, the following potential situations might increase your purchasing requirements:

• You are working to implement production processes for a new product.
• You expect your business to grow geographically, with the opening of new branch offices in one or more locations.
• You have expectations of landing a new, lucrative contract for your goods or services.

In other words, if you foresee that a sole purchasing agent may not be sufficient to meet your purchasing needs at a point in time covered by the term of the contract, signing a nonexclusive agreement is likely your best option.

The nonexclusive purchasing agent agreement

Whether your purchasing agent signs on with you exclusively or nonexclusively, it's important for your business to use a well-drafted agreement to outline the parameters of the relationship between the two parties.

In general, a nonexclusive purchasing agent agreement should include clauses covering the following:

• Independent contractor status. Your agreement should clearly state that your purchasing agent is an independent contractor, not an employee. Because state rules about independent contractors vary, it's also important to comply with the specific independent contractor requirements set by your state.
• Nonexclusive nature of the relationship. If you are contracting with more than one independent purchasing agent or if you contemplate doing so at some time during the term of your contract, the agreement should specify that it is a nonexclusive agreement.
• Territories and products. This clause specifies any limits to the products or services your purchasing agent is responsible for obtaining, along with any geographical restrictions.
• Manufacturers, suppliers, and vendors. Describe any specific types of manufacturers, suppliers and vendors you want your purchasing agent to contact or seek out.
• Compensation. Most independent purchasing agents are paid on a commission basis. Your agreement should not only outline what the commission is but also include specifics such as how the amount of commission is determined, when it is determined, and when it is paid.
• Confidentiality. Because your purchasing agent is an independent agent, you want to make sure any confidential company information stays confidential. Whether this is accomplished through a confidentiality clause or a nondisclosure provision, it's important to have some sort of wording about confidentiality in your agreement.

As with any business contract, your purchasing agent agreement should also include standard legal clauses to protect the interests of both parties, such as a termination clause and a dispute resolution clause.

Deciding to hire an independent purchasing agent is an important step for any small business. In most cases, it means your hard work has paid off and you've grown big enough to warrant having one or more people handling your purchasing needs.