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Outside Electrical Sales Commission Structure - Advice Needed

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Old 11-12-2014, 03:33 PM   #1
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Outside Electrical Sales Commission Structure - Advice Needed


A lighting and electrical supply company that I work for is in the process of setting up an outside sales distributorship in which compensation is based strictly on commission. The company specializes in lamps (HID, LED, CFL's, etc.), commercial lighting fixtures, and all electrical supplies.

I was hoping to get some input on the standard commission structure for outside sales representatives in the industry. I have read posts that have stated that 5-15% of revenues is usually a fair commission base for outside sales reps. But I am not sure for the electrical industry. For example, let's say our company had a 7% commission on revenues. If a sales rep sold $1,000,000 worth of material for the year he would receive $70,000 in commission. Is this a fair compensation for the electrical and lighting industry? Or would you recommend a gross margin commission structure? What is the most appealing?

Also, the outside sales rep would be responsible for pretty much everything. They would be in charge of gaining leads, closing sales, maintaing client communication, using their own car and cell phones, counseling the client on certain products etc.

Also, would it be a good strategy to have a tiered commission structure for the outside sales representatives? For example, 5% commission for sales up to $500,000 and then 7% commission for sales from $500,000 - $1,000,000.

Any advice would be helpful.

Thank you for your suggestions.
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