Sales Commision Rates

pbeeson

With the recent hailstorm, I've hired 5 salesmen to help me out and have been having a difficult time with some of them as to a fair wage and their job duties. I have been giving 30% profit per job and required them to sell,negotiate w/insurance, run materials and collect checks. I hired runners at first, but thought it would be best for the salesman to run there own shortages to teach them to estimate more accurate because the ruuners kept chasing cap, 1 bundle, plywood constantly. I have an employee who does all chimney counterflashing and final inspections. Does anyone have any recommendations for a fair wage and job description for salesman as employee's versus independants?

Tscarborough

Salesmen sell, which they are not doing if they are running materials. If you want to teach them, then make sure your accounting processes take into consideration time/money wasted on poor estimates.

AaronB.

All salesmen know is $$$$$$$$ penalize them for shortages. They will get the picture quick.

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marc

I would let the salesmen sell only. When they have other things to worry about they start losing sales because of it. I would pay them a straight 10% commision and if they are under it would come out of their commision.

AaronB.

What I am saying is that if they have to determine the materials needed for a job in order to bid it, then they better be right, or $$$$ lost for them.

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pbeeson

So what is the incentive not to low ball a job or to upsell if giving a straight 10% even if material list is right? lowballed at 165,175,200 per square could equate into a margin where 10% of gross sale is between 20%-60% of total profit.

The reason I'm having them run their own materials is to teach them a little more about the roofing process, and to have a better understanding of the roof system and the whole installation process. It will make them better and more effective salesman in the long run, but for now I am making them run their own shortages or misc.

What is a fair wage for a salesman if the only thing they do is sell?

marc

10% commision if they are only selling.
The insentive to not low ball is the money comes straight out of their commission. You set the prices. Lets say they bring in a deal for $10,000 (Their commision $1,000) but after reviewing it you discover that it should have been sold for $10,400. The $400 comes straight out of the commision so they make $600 instead of $1,000.
How many times do you think they will make that mistake.

I don't see any bad side to upselling. Unless it's really high. Quite frankly I find salesman want to sell at the lowest price they can so I just haven't seen this problem very often. You could always go see the customer after the job.....Tell them that this or that was figured a little high and give them some money back. That would get you so many referrals you wouldn't know waht to do with them all. They would tell their friends how honest you are and you could have ripped them off but you didn't.

My only point was that if they only need to focus on sales they will do a far better job at it. Let's face it......If you need to deal with every problem that comes up it makes it tough to have the right attitude to sell.

Zatol

Structure their commission to be based on net profit of each job sold.

AaronB.

Just remember that the salesmaen are the number one reason companies go out of business.

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stangit92

Few ways i determine rates

either 10% off the top

or

I take 10% off the top for the company
then pay my labor and materials
and split the rest 50/50 with the salesman

Public adjusters usually charge me 10% off the top for work
Insurance adjusters usually ask for $1000 or more depending on the job.

so i guess it all comes down to the sourcing out different methods of sales

dougchips

I pay 10% of the job to the salesperson. I am testing a new program..If they generate the lead, they get 50% of the profit, and it follows to all other jobs that come from the first one.

mdshunk

I worked for a spell under a system that had "lead pay", "appointment set pay" and "sale pay". If you generated the lead yourself, set the appointment yourself, and sold it yourself, you got the whole shebang. If not, you got whatever portion you did.

dougchips

MD< how did it work for you?

I can not see any downfalls, my overhead is covered, production stays busy, I am making profit that I would not of seen, and it turns my sales people into marketing people on their own dime.

mdshunk

I was actually working under that system. It was not my system. It seemed to keep salesmen thinking about generating leads rather than just running sales calls or sitting around complaining about lead quality, which is a good thing, IMO. It also let one salesman set an appointment for another salesman, but that seldom happened. It was most helpful if a salesman had a call scheduled and he had some conflict... he could pass it off to another in order to keep the appointment, and still make a few sheckels anyhow.

talos4

OK, Here's a question. Why pay a commission?

Seriously, Pay a flat salary and then figure a quarterly, semi or annual bonus and pay raise based on amount sold and gross profit.

That's how I'm working and have been for several years. I get an annual bonus and pay raise, based on...

Did I meet my sales goal? Did I meet my GP goal. and of course intangibles.

I take my leads from cradle to grave. I don't run materials.

If I'm short on an estimate, It's my fault and affects my profitability. The field is responsible for running materials. I have to make sure that my estimate is right.

Too many jobs in the hole and I won't have to worry about how much my bonus and raise will be at the end of the year.

RidgeWalker

There are several factors to consider what percentage a salesperson is worth. Prior experiance, no experiance, little experiance, etc. etc.

I sold for several years before owning my own company. So I've been on both sides of the fence.

It's my suggestion that if your hiring new or newer people to industry you should start them out at 10% off the top of the contract amount and 22.5% of the profit, for the first few jobs. Pay them accordingly once they get more experianced at scoping a job and getting agreed pricing with the insurance company. Personally I'd never pay more then 35% of the profit to any salesman. Another poster said he pays 50% of his profit, that's ok if it works for him. I just don't see paying some one like they are a full fledge business partner without having them take any of the risk's or resonsibilities of owning a business!

The off the top commission structure doesn't really work well for two reasons. There is no incentive for the salesman to get more money for the job becuase he's only getting 10% of the extra. If he gets for example, $500 more he's only making about $50 more. I know I used to think to myself, why would I spend any extra time to earn a piddly $50 in commission which is pure profit and let my boss pocket $450! There's no incentive for the salemen there.

Another pitfall is collections, if the salesperson has collected all but $1000 or less on a job, to him it's $100 of his commissions. He's less likely to stay on top of that job and concentrate on more pressing issues with other clients. I know I used to do that when I was selling. = )

But if he's worked his way up to 35% of the profit it's $350 out of his pocket, he's more likely to make sure that job is collected in a timely manner.

Hope this sheds some light on your question.

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Grumpy

Do you want a salesman or a project manager? I find a project manager that does his own sales usually runs the job well and deserves top dollar. These kinds of guys usually sell on their expertise and know very little about "closing"... I find I do much much better with project managers.

Then you have salesmen who do what it takes to close the sale, but often times know nothing about what they are selling. I find they usually close more sales, but I usually have more problems and shortages on the jobs sold by salesmen.

I'd prefer to do business with a project manager with a slightly less closing ratio but also less problems per job than with a salesman who doesn't know what he is doing but has a higher closing ratio.

BTW you asked about commissions. I was paid 25% of gross profit at my last company plus a $250 a week salary, company cell phone, company truck, and all fuel paid for. I pay my salesmen by the following break down: http://www.reliableamerican.us/corpo...mpensation.htm However we seldom run on shortages because I also pay a production manager to remeasure and verify each job becore the downpayment is cashed and the job scheduled. If it's short, they get to re-sell it.

For commercial sales, I pay a flat 25% of gross profit commission and I do excpet some degree of project management.

OK to summarize, I feel SALES reps should be paid on net revenue and PROJECT MANAGERS should be paid on gross profit.

boman47k

Grumpy, glad to see you back.