Salesman Commission

 
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Old 12-10-2017, 09:11 PM   #21
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Re: Salesman Commission


Everyone, thanks for all the great input! I've decided to keep it simple, take away the salary pay entirely and give him 20% of Profit. That equates to just about what he made last year ($30K salary plus 10% profit) However now he will be more motivated to close out future sales, and I will no longer care if he works 40hr weeks or not. I'm still providing him with a vehicle and paying for all the expenses.
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Old 12-11-2017, 11:22 AM   #22
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Re: Salesman Commission


Are you setting a par price that he can't go under?

If not, you can guarantee he will undersell to make sure he gets the jobs, rather than hone his sales presentation.

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Old 12-11-2017, 07:45 PM   #23
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Re: Salesman Commission


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Originally Posted by FFlooring View Post
Everyone, thanks for all the great input! I've decided to keep it simple, take away the salary pay entirely and give him 20% of Profit. That equates to just about what he made last year ($30K salary plus 10% profit) However now he will be more motivated to close out future sales, and I will no longer care if he works 40hr weeks or not. I'm still providing him with a vehicle and paying for all the expenses.
Never heard of a business owner paying 20% of the company's profit. Does the worker get to pay you back for 20% of any losses?

So, when your employee accepts your offer of 20% of the profit he can never pre-calculate his current earnings, accurately, and is at your mercy and has to hope that you are an honest boss who will give him an accurate breakdown for showing how you arrived at what the profit is. Now, that is a joke because a very high percent of business owners cannot calculate their profit on-the-fly. Especially, when it comes to calculating overhead costs, direct labor, etc.. And, I have to ask you if you are going to ask you; when calculating 20% of the profit, are you going to factor in overhead? Then, with your system, you have to open your proprietary books to your employee and develop a system and take the time to explain the accounting for every sale. This opens yourself for several problems and arguments.

Don't call him an employee, anymore. Call him a BUSINESS PARTNER! Employees work for the business owner because they don't want the hassle of anything that pertains to running a business. They only want to do their thing, know how much they earned and pick up their pay check. What type of employee wants to worry about profits, wait to see the final breakdown and then have to hassle cross-checking the numbers to make sure they are not getting the short end of the stick. With your system, you are putting the employee on-the-line to make sure your jobs turn a profit and maybe if the jobs don't bring in good numbers it is due to your faults and the way you run your business. I've seen that argument with employees many times (personal experiences).

8% of the gross sales seems to be the consensus from other CT member and the CT members have a lot of experience.

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Old 12-11-2017, 09:14 PM   #24
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Re: Salesman Commission


You should elimate the salary and only have him commission based. I pay 8% of the gross sale if sold at par plus vehicle, etc. Anything sold over par, we split the profit. (Job needs to be sold for 10k but he sells for 10,500 - he gets extra $250.00 on top of 8%).

Pay more for leads they bring in on their own.

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Old 12-11-2017, 10:14 PM   #25
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Re: Salesman Commission


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You should elimate the salary and only have him commission based. I pay 8% of the gross sale if sold at par plus vehicle, etc. Anything sold over par, we split the profit. (Job needs to be sold for 10k but he sells for 10,500 - he gets extra $250.00 on top of 8%).

Pay more for leads they bring in on their own.

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If I was going to sell this is the only way I would want to sell.

If I hired a Salesman, which I would not for what I do, I would pay the same way.

Do you pay for their truck and gas?
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Old 12-11-2017, 10:18 PM   #26
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Re: Salesman Commission


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If I was going to settle this is the only way I would want to sell.

If I hired a Salesman, which I would not for what I do, I would pay the same way.

Do you pay for their truck and gas?
Company vehicle with company gas. He also gets to take the vehicle home.

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Old 12-11-2017, 10:44 PM   #27
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Re: Salesman Commission


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Company vehicle with company gas. He also gets to take the vehicle home.

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Serious problem with taking home the company vehicle. According to worker comp and general liability laws (if they really had their own laws) when your employee takes the company vehicle home he is legally working 24/7 and you are liable when he makes a liquor run at midnight, gets smashed by a tractor trailer on his way to work, or kills someone.

In California, about 40 years ago, a Dipsey Doodle ice cream truck driver was driving his personal car home from work. He killed someone with his personal car, the ice cream company got sued and the plaintiff won several million dollars. You might be safer by making your employees take a bus to work and back.

I had an employee who was supposed to park my company vehicle in my shop's yard at night. On a payday, he decided he would stop at a bar for a few drinks. At 2:00 am in the morning I got a telephone call from the police telling me my truck was literally upside down on its roof. The employee hurt his leg, sued my insurance company and won $50,000 even though he went to jail for drunk driving.

I would never split the difference of the amount above my sticker price because it is a brew for greed and dishonesty. Good sales people are automatically striving to increase prices and their reward should already be built into the 8% they are promised.

Can't remember what the book's name was that I read a few months ago that addresses the problem when employees charge more than the sticker price, but the book made it very clear that you should not have unscrupulous sales people burning your customers and then causing those customers to bad mouth your company.

The sale to every customer should be clean and consistent across the board. If I go to your house and then to your neighbor's house you will both be quoted the exact same price based on my company's price book. There is nothing wrong with constantly raising your prices, but to give an employee 50% of the booty would not set right if the customers knew they were paying $*** more because the employee got 50% of the booty.

I guess the answer is, "Buyer Beware!"

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Old 12-11-2017, 10:53 PM   #28
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Re: Salesman Commission


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Serious problem with taking home the company vehicle. According to worker comp and general liability laws (if they really had their own laws) when your employee takes the company vehicle home he is legally working 24/7 and you are liable when he makes a liquor run at midnight, gets smashed by a tractor trailer on his way to work, or kills someone.

In California, about 40 years ago, a Dipsey Doodle ice cream truck driver was driving his personal car home from work. He killed someone with his personal car, the ice cream company got sued and the plaintiff won several million dollars. You might be safer by making your employees take a bus to work and back.

I had an employee who was supposed to park my company vehicle in my shop's yard at night. On a payday, he decided he would stop at a bar for a few drinks. At 2:00 am in the morning I got a telephone call from the police telling me my truck was literally upside down on its roof. The employee hurt his leg, sued my insurance company and won $50,000 even though he went to jail for drunk driving.

I would never split the difference of the amount above my sticker price because it is a brew for greed and dishonesty. Good sales people are automatically striving to increase prices and their reward should already be built into the 8% they are promised.

Can't remember what the book's name was that I read a few months ago that addresses the problem when employees charge more than the sticker price, but the book made it very clear that you should not have unscrupulous sales people burning your customers and then causing those customers to bad mouth your company.

The sale to every customer should be clean and consistent across the board. If I go to your house and then to your neighbor's house you will both be quoted the exact same price based on my company's price book. There is nothing wrong with constantly raising your prices, but to give an employee 50% of the booty would not set right if the customers knew they were paying $*** more because the employee got 50% of the booty.

I guess the answer is, "Buyer Beware!"
I am not sure about vehicle liability- only my top guy who is a partner takes his home, rest take to the shop. My ass. Super will get to take.his home when he is a super and my insurance is ok with it . We have done before

But on the split- that's b.s.. imo.

If the salesman knows the docket is full and you don't need the work there is nothing wrong with adding additional profit for work that is not needed. If the homeowner is not like the price they can say no. Supply and demand.

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Old 12-11-2017, 11:57 PM   #29
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Re: Salesman Commission


Sounds like you have some stuff to figure out there daffy. A clearly written vehicle policy statement signed by the employee elimates the problem. That's what bailed me out when I had an employee take a vehicle after hours, get drunk and total my truck and trailer. He was fortunate I am an easy going guy and didn't report it at stolen as I was advised to do by the police.

As far as sales, I want the salesmen to be motivated to sell for more. If the homeowners agrees to it up front, I don't see the problem.

Edit - to add, we never are able to quote the same price for a neighbors house. In my work, everything is different from one to another.

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Old 12-12-2017, 07:55 AM   #30
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Re: Salesman Commission


Sounds like you're being cheap. And if you're not satisfied with the sales he's making from the incoming calls, you should put together a cold call/canvassing schedule with him.
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Old 12-12-2017, 10:12 AM   #31
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Re: Salesman Commission


A lot of different ways to look at pricing and dependent on what you offer as a company (i.e. - custom, commodity, etc.), and who your customer base is...

That said, on the surface, inconsistent pricing using above par splits just because the customer agrees to it is easily justified looking at it that way, but has the potential to foster the stereotype of the rip-off salesman and you have to weigh that short-term gain against a long-term run... can cause huge issues within a referral network if you sell the same product within a community...

Costs increase during certain parts of the year and not in others, which is why consistent pricing is an asset to a company coupled with Capital Reserves and Emergency Fund...

The bigger question might be if your customer base can support 50/50 (or whatever percentage) splits above par, did your services actually increase in value just because it does, or is it just that your salesman is that persuasive? People get pissed because their neighbor, co-worker, whomever got a better deal on a monthly internet charge for the same thing and argue for it to be the same... There's an underlying premise to that...

I'm against par splits as it is a tool... but if your salesperson was selling your service to people you personally know (as we end up knowing a lot of our customers over years anyway), would you be OK with that pricing structure? If so, your golden, if not, well...

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Old 12-12-2017, 02:58 PM   #32
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Re: Salesman Commission


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I'm not against par splits as it is a tool... but if your salesperson was selling your service to people you personally know (as we end up knowing a lot of our customers over years anyway), would you be OK with that pricing structure? If so, your golden, if not, well...
Oops... FIFM because editing period expired...
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Old 12-12-2017, 06:57 PM   #33
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Re: Salesman Commission


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Sounds like you have some stuff to figure out there daffy. A clearly written vehicle policy statement signed by the employee elimates the problem. That's what bailed me out when I had an employee take a vehicle after hours, get drunk and total my truck and trailer. He was fortunate I am an easy going guy and didn't report it at stolen as I was advised to do by the police.

As far as sales, I want the salesmen to be motivated to sell for more. If the homeowners agrees to it up front, I don't see the problem.

Edit - to add, we never are able to quote the same price for a neighbors house. In my work, everything is different from one to another.

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I done started figuring it out more than 50 years ago. No written company policies nor statements by an insurance company will steer you clear from a lawsuit when your employee is injured, kills himself, or kills someone else. Anybody and everybody has the right to sue you for every and any reason they want. The only thing you can do with your company policies and insurance company statements is show the papers to the court and tell the judge what your insurance company told you AFTER you are served with lawsuit papers and after you pay thousands of dollars to retain an attorney.

I have had more employee-related lawsuits than many company have ever had employees and the lawsuits are not due to running a bad business. I've had several lawsuits when I allowed employees to take their vehicles home and I have been sued by both the employees and the people they crashed into. I had several lawsuits where employees had accidents when they were drunk and several of the drunk employees sued my company (my insurance company), but if someone gets killed in an accident then my company will be liable for what the insurance company does not pay.

There is no such thing as an employee having the authority to release you of liability. That is a decision only a court (and maybe a jury) decides and the cost to litigate what the insurance company will not pay can cost an easy $100,000. Believe me! I have an ex-employee who just files a wrongful termination lawsuit and if the case goes through the court I was quoted a price of $80,000 to $100,000 of my money. Even your own lawyer does not care whether or not you bear the liability and the only time you will be free of liability, even when you are not liable, is after you have spent thousands of dollars for attorney fees. At the end of your trial is when you find out whether or not it is a good idea to let employees take their vehicles home.

Everyone has their own ideas regarding what is good or better when it comes to prices and closing sales. Maybe, an easier way to say it is; my business has already created a price list with specific price ranges. The employees should not have the authority to increase those prices on-the-fly. Otherwise, everyone in the company should be allowed to charge whatever they want and whenever they want. If you gave your employees a price range, then that is what they should be charging the customers and there should be no reason for a 50/50 booty split.

If you want the increased revenue, then increase your price and there is no booty split for the sales person because he is already earning his booty from the increased price. Maybe, not 50%, but 8% across the board could be significant.

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Old 12-12-2017, 10:16 PM   #34
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Re: Salesman Commission


14 full time installers sounds like a lot for $1.2 million in annual sales...
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Old 12-12-2017, 10:19 PM   #35
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Re: Salesman Commission


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Oops... FIFM because editing period expired...
If I gave a professional salesperson a task to sell to a someome i knew (friends and family i dont charge or dont do the work) then yes, whatever he normally would sell for whether that is a higher than normal rate because of business book or whatever, then I would be okay with it.

Personally I would probably make the sale myself if it was somebody I knew. You were wasting the time of the salesman who could be getting the split on another sale and you expect him to not go for what the job is worth on that particular day. To me in a commodity driven business such as Roofing that changes often.

I would certainly make clear what is acceptable and what is not acceptable as far as an upcharge. I am not interested in doubling a price or anything of that nature, I'm talking about simple economic decisions within your business of selling a commodity

If you do not value others time the same way you value your own I do not see how that would be successful or tenable in the long run

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Old 12-13-2017, 09:02 AM   #36
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Re: Salesman Commission


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If I gave a professional salesperson a task to sell to a someome i knew (friends and family i dont charge or dont do the work) then yes, whatever he normally would sell for whether that is a higher than normal rate because of business book or whatever, then I would be okay with it.

Personally I would probably make the sale myself if it was somebody I knew. You were wasting the time of the salesman who could be getting the split on another sale and you expect him to not go for what the job is worth on that particular day. To me in a commodity driven business such as Roofing that changes often.
Not following you here... if you are OK with your salesperson upcharging past par for a split of higher commission for him and increased profit for you, meaning you get a percentage as well as the salesperson, why would you need to personally make the sale and how would it be wasting the salespersons time for to do so? A sale is a sale...


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I would certainly make clear what is acceptable and what is not acceptable as far as an upcharge.
While I am not against par splits as it's a tool, it's just not the way we approach it because there are too many downsides to make it tenable for us... we know what we need to charge to be in business and profit... if we want to increase our profit margin as a company, we build it into the pricing and thus also increases the commission...

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Old 12-13-2017, 09:25 AM   #37
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Re: Salesman Commission


Quote:
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Not following you here... if you are OK with your salesperson upcharging past par for a split of higher commission for him and increased profit for you, meaning you get a percentage as well as the salesperson, why would you need to personally make the sale and how would it be wasting the salespersons time for to do so? A sale is a sale...




While I am not against par splits as it's a tool, it's just not the way we approach it because there are too many downsides to make it tenable for us... we know what we need to charge to be in business and profit... if we want to increase our profit margin as a company, we build it into the pricing and thus also increases the commission...
It sounds like you are concerned with how your business is perceived and overly concerned with how people will view what you are charging. I don't worry about it because the phone keeps ringing and all of my work is from referrals, so something is going right. And we have raised rates many times. If someone says I heard you only charged X percentage to build Susan's house why are you charging me y to build mine, I just say I charge y now. LOL

I think the split is a good way to motivate a good sales person. I would not want a sales person who wanted to be on commission I don't think. I would certainly make sure there was not anybody gouging



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Old 12-13-2017, 09:28 AM   #38
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Re: Salesman Commission


I doubt clients sit around talking about the sq price of their roofs lol.

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Old 12-13-2017, 09:38 AM   #39
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It sounds like you are concerned with how your business is perceived and overly concerned with how people will view what you are charging.
Anyone who has read my posts over the decades across different forums know I am not overly concerned... quite the opposite... not everyone is your customer and you need to charge what you need to charge to be in business...

We are mostly referrals as well... whatever works for you...


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I don't worry about it because the phone keeps ringing and all of my work is from referrals, so something is going right. And we have raised rates many times. If someone says I heard you only charged X percentage to build Susan's house why are you charging me y to build mine, I just say I charge y now. LOL

I think the split is a good way to motivate a good sales person. I would not want a sales person who wanted to be on commission I don't think.
What do you think a split is? It's not salary...


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I would certainly make sure there was not anybody gouging
Par is what it costs to be in business and make a profit... hard to see how you then define what's "gouging" when you go passed that other than your personal opinion which just ends up being another superfluous par because you set a cap you think is not gouging...

But it'd be interesting to hear how you would determine what you would consider gouging once you've passed par and what the new cap would be...

But then again...
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Not following you here... if you are OK with your salesperson upcharging past par for a split of higher commission for him and increased profit for you, meaning you get a percentage as well as the salesperson, why would you need to personally make the sale and how would it be wasting the salespersons time for to do so? A sale is a sale...

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Old 12-13-2017, 10:32 AM   #40
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Re: Salesman Commission


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Anyone who has read my posts over the decades across different forums know I am not overly concerned... quite the opposite... not everyone is your customer and you need to charge what you need to charge to be in business...

We are mostly referrals as well... whatever works for you...




What do you think a split is? It's not salary...




Par is what it costs to be in business and make a profit... hard to see how you then define what's "gouging" when you go passed that other than your personal opinion which just ends up being another superfluous par because you set a cap you think is not gouging...

But it'd be interesting to hear how you would determine what you would consider gouging once you've passed par and what the new cap would be...

But then again...
I meant to say I would not hire a Salesman who would did not want to work on commission. Typo. I have stated many times I do not believe in salaried salespeople.

There is no difference to me from someone who charges $100 an hour to siding to raise their price to 125 an hour, not because their business expenses went up but because the market is hot and the demand is up. That is how business works. It is not a sin to make profit.


The above par money is no different to me. It changes on a daily basis for some companies, I would imagine service companies and roofing companies that need 5 roofs a week or 40 service calls a week may change their prices when they have a book schedule. There is nothing wrong with that.

I do not do a service-based business, our turn around as much longer. I have however raised my percentages which are visible to the client many times and my labor rates many times. That has been asked about, you did Sally's job for X percentage, this is y%? And I respond honestly, I charge y now. Not that hard

I think it all depends on the personality of the business owner, the type of business they run and the way they handle business. From what we have discussed on this forum my clients would not dig your style of business and yours would not dig mine. It does not mean that yours would talk bad about you or mine would talk bad about me. Just different styles

To be clear if I lived out of state and someone I knew through reputation did my mom's roof on my referral because I could not get there and he charged more than then he had previously and I asked him about it and he said that he raised his prices due to being booked for a couple months I would not look un kindly on that. I also do not get mad at the gas or oil companies for raising their prices during a boom for the most part. It is supply and demand, the basis of any business

As far as what I consider gouging, it is just that. Is what I consider gouging. I would direct my sales person like anyone else on my staff or under my direction, and be clear on what is acceptable and what is not.

Doubling a roof price because you think that the person will pay it is not okay with me for instance, adding 10% to the cost because you are booked is not something I think is a bad thing. But that is for the individual business owner to decide

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At DrywallTalk.com we cater exlusivly to professional contractors who make their living as a contractor. Knowing that many homeowners and DIYers are looking for a community to call home, we've created www.DIYChatroom.com DIY Chatroom is full of helpful advices and perfect for DIY homeowners.

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