In industrial distribution, the independent reps, sole proprietorships and small partnerships have dominated the business, particularly the technical sales niche. Recently, however, customer expectations of large inventories, repair services, fabrication and packaging, and electronic communications and services have made it difficult for small business owners to compete. The manufacturers' rep, who promotes and sells, then leaves delivery and service to his principal, finds that he cannot respond with the agility of a well-stocked local distributor.

Larger distributors, on the other hand, are challenged with retaining the loyalties of the best technical salespeople who, by nature, are entrepreneurial. Since these people are the heart and soul of good customer service, their retention is vital.

One way to combine the advantages of the small entrepreneurial distributor or rep with the resources of a larger distributor is to utilize the Subchapter S Corporation or the Limited Liability Corporation. This allows sales professionals to own a part of the enterprise while it develops the scale to offer the services and competitiveness of the large specialty distributors.

Often succession poses a problem to privately held companies. When the founding partner or the second-generation successor is ready to retire, there may be no heir, or logical successors cannot raise the necessary funds. These corporate structures address this problem.

Succession is assured when the sales professionals buy in over their entire careers and retiring owners are cashed out with the funds accumulated from the purchases and retained earnings. When succession is secure, vendors are more comfortable with long-term relationships and rely more heavily on the distributor. This may create opportunities for greater area or account coverage and increased sales.

The sales force proudly announces that they are owners of the company, which raises the customer's confidence level. Customers expect, and receive, excellent service from sales entrepreneurs who are highly motivated and dedicated to solving problems. The long-term relationships are important to them, as they have a direct interest in the success and profitability of the distributorship, not just the sale.

Tencarva has successfully followed this model. Founded in 1978 as an employee-owned company with 10 branches in four states, we have grown to 23 branches in eight states and have exceptionally low employee turnover.

We also successfully compete with Fortune 500 companies and well-known commercial equipment manufacturers to recruit the relatively few engineers who understand the attractiveness of a sales career. Industrial distributors are not as prestigious, but they may more readily recruit entrepreneurial spirits by offering a path to ownership. Many of our sales engineers point to the ownership opportunity as the reason they gave us a chance.

Employee stock ownership creates a high level of loyalty and dedication within a privately held company with no outside investors. In these days of high turnover and disinterested employees, employee ownership has been a tonic for our success.