[scott Hartman]

what is the industry standard for hiring sales reps?

 

[Teetorbilt]

Find a salesperson!
Right now I know of about 6 that could sell ice to Eskimos or make you a deal on your shoes while you are standing in them. I married one (in house deal).
Industry standard is if they make you money, you keep them. If not, they're out the door.
Good luck! IMHO ther's no "standard".

 

[Grumpy]

I know in my area the roofing sales are paid 10%. I like Teetor's description, because it's true. If they can sell keep em, baby them. if they can't sell replace em.

I have talked to a few old timers who have been fired because they were top producers and ended up making more money than the bosses. In my opinion you pay a guy like that more so he will produce more, because for every penny he makes you bet I am making more money too.

 

[Mike Finley]

I have talked to a few old timers who have been fired because they were top producers and ended up making more money than the bosses. In my opinion you pay a guy like that more so he will produce more, because for every penny he makes you bet I am making more money too.

That is the cancer that is more common than you think in owners of companies minds who started the company from nothing and did the sales for it until it got bigger and they moved into just managing it. These people look at a salesman making $200,000 a year and think that something is wrong here, because when they did that job they capped out at $90,000. They know what the industry average is for that position and start thinking they are overpaying, because they are falsely comparing industry averages with an exception persons abilities. They start changing pay plans to react to their top producers. The top producers usually are so good that even after the pay plan is cut they work smarter and harder and are right back at that $200,000 within a year or so even at the reduced commission sturcture. Then of course there is a whole new round of readjustments.

The real problem with doing that, is when the top producers finally leave and go to another company you are forced to fill their position and the new people coming in rarely have the abilities of who they are replacing and struggle to make a living at your now ridiculous 30 page pay plan that was geared towards keeping the cream from rising and spilling over the top. Owners with that mentality often find their business struggling for three or four years because of their own doings. That is usually when they start thinking about retiring and selling the business. Unfortunately I've seen it way too many times. It is a rarity to find an owner that will allow a salesperson an unlimited income.

 

[Grumpy]

As long as the sales person is produccing me a profit I am comfortable with he is free to earn as much as he wants.

I've thought long and hard about how to pay my sales reps, once I hire them. I came up with three possibilities.

1) Straight 10% off the bottom line, assuming the job clears a profit.
2) 8% starting off the bottom line with bonuses based on monthly sales volume to a maximum of 14%.
3) Profit based, 25% of the profit after overhead.

I'll cross that bridge when the time comes.

 

[TimWieneke]

Having been in sales for years I'm biased, but I will say nothing makes money for a contractor like a limitless sales income.

Grumpy,
Consider starting with a base plus draw movign to 100% commission based on the amount of markup on projects sold (within respect of the law regarding markup to senior citizens).

Tim

 

[Teetorbilt]

I have a friend who went into construction late in life and was doing OK until he hired a salesman. He retired and sold the business 7 yrs. later, bought waterfront in the Keys and you can see him in the sailfish pic that I posted (bald guy).
A good salesman can turn your life around.
Three firefighters bought the business and kept the salesman, all four are multi millionaires now.

 

[Grumpy]

Tim I've always thought draws are credit the employer issues to the employee to be deducted from future commissions. I don't see how the draw system would make that much of a difference.

While I am not as good as the salesman teetor mentioned above, I single handedly pulled my ex bosses company from the brink of bankruptcy to a a million plus per year.

 

[Mike Finley]

Base plus draw - means you have a base salary + commission. The draw is usually on the base salary, however it depends on the pay plan. Example is $20,000 a year salary base + commissions. Every company should have projected sales expectations so they would usually then say $20,000 base + $60,000 in commissions based on quotas, reading between the lines means if you ain't making $80,000 a year within a certain amount of time, you won't be working here.

It isn't unusual to have what is known as a bridge program for companies who have long sales cycles where you could start working in January and not close your first deal until December. The bridge program 'bridges the gap, it would be paying you monthly based on your $20,000 base + $60,000 sales quota but usually a reduced percentage of the commission part, so if you they might pay you $20,000/12 or $1600 a month + maybe 1/3 of your sales quota or $60,000/3 = $20,000/12 or another $1600 for a total of $3200 a month, then once you start selling you will be paying back your bridge salary before you get any more dough.

Traditionally professional sales people in sales positions that require more than street smarts and aren't given to people without maybe 10 years of proven similar sales records are always going to be in jobs that pay base + commission. 100% commissions are typical for less sophisticated sales positions, such as car sales ect...

 

[TimWieneke]

Might want to also consider a base plus draw so that the salesman "pays for himself" while ramping up to higher numbers.

Tim

 

[Grumpy]

Never pay anyone in sales a salary. That's my opinion.

 

[TimWieneke]

That's a valid opinion (I happen to agree in principle) but in a market where good salesmen can start with a base salary of anything between 30 and 50 thousand dollars plus commission, you won't get the best of the best. It's better to have a program where salesmen work their way towards 100% commission with a serious potential of a six figure salary once they go full commission.

You have to think of it this way. When the company's sold, they don't get a dime. When the company's in operation, if they're 100% commission, they are putting alot on the line. For that level of risk combined with no equity in the company, they have to be compensated accordingly.

Tim

 

[Grumpy]

30 and 50 thousand dollars plus commission,

I whole heartedly disagree!

I have found the cream of the crop, that I have met, almost always are paid based on commission only. Occassionally they are able to draw on future commissions during the slow times like when they just start and the winter months.

We are either talking about different industries or we just know different people. I don't know of a single major residential roofign company in the Chicago area that offers a salary of ANY kind, and I have researched them all.

I have also discussed this exact topic many times over on many forums, and I'll never pay anyone in sales anything other than commission; based on my own beliefs, expeirence and research.

Salary breeds laziness in sales. Just like unions breed laziness in production.

 

[Mike Finley]

Salary breeds laziness in sales. Just like unions breed laziness in production.

Sorry dude, that is a huge generalization based on a specific example.

Pay plans are solely dependent on the industry norm and the local market, not on personal credos.

 

[Bill46]

My top salesman earned more than I did last year. I'm perfectly fine with that. Heck, i'd be happy to pay him 1000x more than I make because it still means more money for my company and more work for my employees.

 

[Grumpy]

Mike I talk about the only industry that matters, the only industry that should be discussed in a forum called contractor talk. I also brought mention to industry in my above post. See below:

We are either talking about different industries...

Obviously I recognize that sales compensations vary from home improvement to refurbished business machines. You're trying to compare apples to oranges.


Regardless I have spent alot of thought trying to figure out how to pay ALL employees based on actual production. I would if I could but some employees just can't be paid based on their work volume and quality, unfortunately.

I'd also like to make one more addition to my above comment. I'd pay bonuses for hitting target numbers in addition to commission.

 

[TimWieneke]

It must be different for roofing sales then. My sales background in general remodeling as well as recently construction staffing has always had a base plus commission. However there is a good lag time from sale of an addition to full completion of an addition. A roof replacement is much less of a lag time.... The bonuses thing varies widely among contractors. It's good that you do them. They are very motivating.

"I would if I could but some employees just can't be paid based on their work volume and quality, unfortunately." It would be nice...like drywallers.

"it still means more money for my company and more work for my employees." Exactly. It'll come in nice when you need financing or it's time to sell. :Thumbs:

Tim

 

[Mike Finley]

As pointed out we are talking about construction, and even if we aren't that's even better. Having a broad base of knowledge in diverse businesses might be seen as an advantage, since you would be able to copy successful traits and apply them in a field where the competition is still in the dark.

A perfect example is how you yourself use your web experience and apply it to roofing, it gives you and advantage for a while until the rest of the industry catches on. The more you can do stuff like that the better.

Sorry, saying salary just breeds laziness in sales is a broad genralization. I could easily make the argument that lazy salespeople are a direct result of lazy owners or managers thinking all they need to do is throw money at somebody to motivate them. Any owner or manager that sets up a pay plan based on what they were capable of when they did the job is an idiot. Owners who say "what the hell, everybody sucks that I hire! I set them up with a commission plan where the sky is the limit and they can't even do 1/2 of what I did when I was in sales!", is trying to fit square pegs into round holes and is too hard headed to realize it.

To maximize ROI with your salespeople it is a bit wiser to set it up based on the capabilities of the pool of talent you will be hiring from. Try getting a sales person to work for 100% commission in a small town of 10,000 people, you will be continually pissed off at everybody you hire because nobody will live up to your expectations, and your salespeople will be continually quiting because they can't survive long enough to learn how to make a living at 100% commission.

If the norm for Chicago roofing salespeople is 100% commission you will certainly have no trouble getting salespeople to work for you with the same pay plan. However, that doesn't mean that everybody else in the country or in different construction industries in Chicago should be looked at as less then brilliant or in the process of creating lazy salespeople just because they aren't on the 100% commission program.

In a seasonal industry 100% commission pay plans can be even worse on a company in the long run. Salespeople traditionally don't save for rainy days. Good managers know that they either have to save for the salespeople or they risk the loss of their best guys every year when it slows down and then they have to start all over again, hiring and training in the spring.

 

[PipeGuy]

If the norm for Chicago roofing salespeople is 100% commission you will certainly have no trouble getting salespeople to work for you with the same pay plan.

Question...do payplans that are based on the 'norm' get you talent that is on par with the norm or do they get you premium talent. It would seem to me that the 'norm' = run of the mill and that really talented guys are looking for the latest, greatest, most innovative compensation packages. Am I wrong?

 

[Mike Finley]

Pipeguy - when you say based on the 'norm' I think you are reffering to 2 things.

The norm I was speaking of is a similar compensation structure - such as 100% commission. I think when you are referring to 'the norm' you are referring more to the actual amount of compensation possible.

A person can make just as much on a 100% commission plan as a base + salary plan, it all depends on the specifics of the plan.

If your pay plan no matter what the scheme, full commission or base + salary or whatever is set up in a way that shows the applicant that he can make more money with you than where he is or at other places he is looking at you will stand a better chance of attracting better people.

What attracts the best talent usually has little to do with the pay plan. Don't get me wrong, you have to have a good pay plan, that is a given, but what usually makes people seek you out is the opportunity to make more, a better work environment or more perks. Any combination of the three is going to attract talent. Work environment can be really heavy for some people, money is more attractive for others and still perks mean a lot to others.

In my experience guys who fit the description of "talented guys are looking for the latest, greatest, most innovative compensation packages." are hard to manage long term. They can make you a lot of money in the short term, but they tend to poison the rest of the sales force and create lots of problems, they are basically high maintenance. They won't be with you for long, they tend to get themselves into trouble with creditors and finaces and are always looking for the next sign on bonus or cash perk and don't work well if you are trying to build a really solid team.

However, if your sales force is really asleep at the wheel, bring in one of those types of guys and he will shake everybody up in no time and create so many problems for his co-workers, sometimes that is just what the doctor ordered.