How Do You Pay Your Sales Staff?

jlomama

We are looking to hire our first sales person and really have no idea how to pay this person.

How do you pay your sales staff? Hourly plus commission, salary only, salary plus commission, commission only. If you use a commission based salary what type of commission do they get and what is it based on - sales or profit? Do you pay it out per job, monthly, quarterly. Any help you can offer with this would be appreciated!

Also, how do you make your sales staff accountable other than the obvious. Do you require them to have certain office hours or keep some sort of log of their sales calls?

Grumpy

Residential sales 11% of the sale, pplus bonuses for hitting various monthly sales targets. I also reimburse for vehicle expenses and other expenses. Our average sale is between 5-6k.

They are paid after completion since it is their responsibility to collect. Pay is every other week.

Once I set the rule that alls ales reps must visit the office at least 4 times a week, one of my sales guys quit. I made the rule because of him. He had this grand idea of working remotely from home even though I told him when I hired him (and he asked about this) that is wouldn't be possible. It's funny when you hire someone and tell them what you expect from them but then for some reason at some point they want to change yoru company to suite them. Bye Bye.

Before any job is scheduled someone from the production department reviews all bids to ensure pricing and measurement accuracy. If the price is not accurate the sales rep has to resell it or take a break in commission so that we can bring the job in on budget.

I provide the leads to my sales reps. I also provided bonuses for self generated leads (leads that they generate). I keep track of their monthlys ales volume and have set minimum sales volumes. If they don't hit their targets within a set ammount of time I have to either fire them or invest my own time retraining.

CBCron

The best approach I've seen is to pay salesmen 100% commission based on gross profit of the total work sold. A 20% commission rate isn't unusual with this arrangement.

This compensation plan works brilliantly as it aligns the owner's and the salesperson's financial interests: win-win if you will.

It really motivates salesmen to go after the highest price possible instead of settling for a lower price to land work thereby protecting their revenue based commission.

A couple of fine-tunings are required.

Most salesmen will demand some sort of guaranteed income. That becomes something of an advance. Until their earned income (via GP commissions) exceeds their guaranteed income, they don't make any extra money. If they fail to earn their guaranteed income within a reasonable time period (often set at 12 months) they should be let go.

Pay the earned commission out quarterly with 10% held back until year end.

This approach will make a driven salesmen a huge amount of money, far more than your competition is probably willing to pay. But they would be short sighted.

I ask you, would you pay me $20 to make you $80 guaranteed? That's really how the plan works.

Best of luck.

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Grumpy

very good point, although wow 12 months is too much credit for me. In my business if I start someone inFebruary and have them trained for the March madness, then by the July lull they aren't in the black, it's time to let them go. I have to get someone else trained before the fall rush hits us because this person can't cut it.

Obviously exceptions have been made but 12 month of "guaranteed income" for no return would kill me.

I too am also a fan of profit based commissions however it's hard to find sales people willing to share the risk with you. The #1 complaint you will get: "I can't control the profit if the crew messes up." So really you have to have a good crew working for you and the sales rep needs to know their capabilities and in-capabilities to trust them with HIS money.

Jake Stevens

When I worked for other companys I was always commission only and I like it. But in these times everyone wants a guaranteed income. I have paid base on profit and gross sales. On profit they really need to know more about my business then I want to give out unless it's base on gross profit not net profit. What I ending up doing is paying a base salary, which requires time in the office, company vehicle, benefits, and 3% to 4% of gross sales. I've had no turnovers in salespeople for 7 years. Which is a big help not having to train new people all the time.

BreyerConstruct

I gotta say, I think I'd enjoy being handed enough leads, given a company truck, provided a little office space, a cell phone, and 8-12% of gross!

I know what I sold last year, and I think I know what I could sell if I had more leads...

That just sounds way easier than owning the company!

~Matt

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Stone Mountain

For many years I paid $400/month car allowance, plus 6% of the sale price for fences and 8% of the sale price for decks and "structures" I.E. anything but fences.
I've had many sales people, but they always did OK. Back in 1985, when I had my first sales person, he sold about $400,000, which today would be the equivilent of about $700,000 because of sale price increases. For the next dozen years, all the first year people would average about $350,000 to 400,000 from April to October. Only a couple stuck, because of lack of winter work. My best guy did $800,000 in 1989, but the recession in '90 brought him way down. He left, went on his own, and came back 18 months later, but left again after we "had a problem". He came back again for a year, but then fell into a great desk job.
Anyway, a couple of years ago, I changed it to 10% across the board, subject to having correct markups, plus $125/wk car allowance and $50/month for cell phone. After 6 months I'll pay 1/2 of medical.
Problem is, they think they should get 10% reardless of whether the markup is there, or if it's sold at a loss. I explained at the outset that the job had to be properly sold, or the commission rate would be lower.
Results: I let 2 of the 3 guys go. My son's sales dropped by $75,000, mine remained steady at about $900,000, and the remaining guy did a little under $200,000.
This year, the commission will be based on a percentage of the gross profit in each job. 30% of the gross, dwindling to 0% if the margin isn't there or they make a huge boo boo.
Also, I am spending a lot more time training.

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Grumpy

Are they provided with a price list? If so how could there be any question if it is properly sold or not?

Sounds like a loser I had working for me once. He wanted ME to take a cut in MY profit for HIS Uncle's roof. He said to me "Realistically how low can you go?" I told him: "The same thing for any other customer. Bid it to the price list, subtract 5%. That's THE lowest I can do the job for. Any less and it's just not worth it." I then asked him, "THis is for your uncle, why not cut YOUR commission so that you can lower the price?" That was just out of the question for him. No way he was going to cut HIS commission for HIS uncle. No, in his mind it was MY responsibility to give his uncle a free roof.

kbg1kbg1

The Contractor I have worked for about a decade, does not pay his "salesmen" Commission. He tried it once - poorly -in one department, by offering 5% for all sales on top of regular salary??? - after seeing his salesman was complaciant and did not try to increase his sales.... he took away the commission........
Every Salesman I have ever talked to has given the same response..... " if they dont work on Commission then they are just estimators - not salesmen"
He also has a problem seperating Sales and Production......
I worked in the production side for him for several years, and never had a problem reveiwing a new job sold by someone else, doing my own take-off and pricing the job to see if it was accually priced correctly, and then passing that info along to the owner when running and/or billing the job.
But the owner strongly feels that his "salesmen" should also RUN the awarded jobs as well - since he feels the "hand-off" from sales to production causes to many "problems" - So what happens when the jobs come in and the "salesmen" get busy running jobs?....... you would think that time spent on sales would decrease.....and what about when a job was bid incorrectly? - with the salesman running the job most F-up's are hiden by the salesman running the job.....and what incentive does sales have if they are getting their weekly salary check wether they sold $10,000.00 that month or $10.00?

Does anyone else besides me feel this is a highly disfunctional way to handle Sales and Production?

Pro Builder

For aquiring bonafide leads and following up on sales, but no placing actual bids (I feel the real General Contractor needs to place bids for reasons already mentioned), I am offering $500/week salary plus 4% of gross for every job completed. There is no allowance for transportation or any benefits, but there is a possibility that I will offer that in the future.

Is this a competitive pay scale?

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Pro Builder

How much was the salary?

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New York Marketing
San Luis Obispo Advertising
I love to barter. If you offer a product or service and would like to increase your sales, contact me and let's make a deal.