sales commission
Discussion
How much would you expect to pay (%) a sales person who was either
a) commission only
b) part salary or fixed fee, part commission
I know that is a very vague question but what comes into the mix?
I presume such things as;
the margin you have in the product yourself which controls how much you can afford to pay
whether it requires travelling to see potential customers against less time intensive sales such as tele sales
Expected conversion rates ( I have no idea)
The type of product in terms of what the sector expects as a commission (it is a web based tool)
Any deal on commission on future sales to that customer
The difficulty involved in geting access to the person making the buying decision
The type of sale (it is an initial set up followed by subsequent charges for data processing)
I am after a ball park % starting point as I may within the next 9 months need to have someone selling direct for me. I was thinking about a start up period of part fixed fee/salary and part commission moving to commission only or vice versa?
Issue around self employed status too as the person I have in mind is currently self employed but with a company car and works for only one company which to me sounds more like she is an employee. If I can get away with it I don't want her as an employee and that would probably suit her (as it seems to now).
ds....but thats another storyIt's difficult.
And even the big companies get it wrong...
I was working on commission of 5% and was headhunted by a local company where I expected pretty much the same terms but the job suited me because it was based only a few miles away.
The terms were the same until we got to commission, "So Mr. Wilson, commission then...How does 15% sound?"
Needless to say I wentr to work for them.
If I was working it out, I'd look at the OTE of similar jobs and make some calculations based on that.
And even the big companies get it wrong...
I was working on commission of 5% and was headhunted by a local company where I expected pretty much the same terms but the job suited me because it was based only a few miles away.
The terms were the same until we got to commission, "So Mr. Wilson, commission then...How does 15% sound?"
Needless to say I wentr to work for them.
If I was working it out, I'd look at the OTE of similar jobs and make some calculations based on that.
what commission should i offer on a product worth £7200, with a £1200 margin ?
i was thinking 10% commission only ? £720 which means 2 sales per month has the salesperson living the high life.
or would %5 be better ( £360 ) to keep them working hard?
i was thinking 10% commission only ? £720 which means 2 sales per month has the salesperson living the high life.
or would %5 be better ( £360 ) to keep them working hard?
Edited by SystemParanoia on Wednesday 7th May 09:32
With this you just have to work out the likely scenarios and make sure:
1) Your lazyish sods can still trundle along along as they still make you decent money
2) Your really lazy or crap guys don't earn enough and go elsewhere
3) Incentive enough for the people that really make you money stay with you.
The way to do it, is more out how much they earn you and arrange their incentives which will specifically promote this.
For example, lets say including costs and a small basic, they get £500 per month. If they bring you in a sale with only £500 profit its not worth them being there, secondly their leads could have gone to someone decent. On the other hand, if you could give that lead to a really good, hungry guy, you make more money.
A good idea is to have an increasing rate per sale, or turnover, that way you both are happy. For example, 10% for sale 1 in that month, 11% for sale 2 and so on. That way, (up to a point where it should be capped) they are more and more hungry that month, rather than thinking that have 'done enough'.
1) Your lazyish sods can still trundle along along as they still make you decent money
2) Your really lazy or crap guys don't earn enough and go elsewhere
3) Incentive enough for the people that really make you money stay with you.
The way to do it, is more out how much they earn you and arrange their incentives which will specifically promote this.
For example, lets say including costs and a small basic, they get £500 per month. If they bring you in a sale with only £500 profit its not worth them being there, secondly their leads could have gone to someone decent. On the other hand, if you could give that lead to a really good, hungry guy, you make more money.
A good idea is to have an increasing rate per sale, or turnover, that way you both are happy. For example, 10% for sale 1 in that month, 11% for sale 2 and so on. That way, (up to a point where it should be capped) they are more and more hungry that month, rather than thinking that have 'done enough'.
I think the product will have a price of £400-£500 for the off the shelf version and £700-£1000 for the fully customised version.
We would then sell usage in blocks of 100 at about £7-£12 per use ( fo £700-£1200). So an initial sale might be a basic set up of £500 plus 100 units at £12, so £1700. That would bring them £255 at 15%, so I guess they would have to sell two or three a week to make a living.
It is a new product in a new market really so they won't have competitors as such but the customer may have to be persuaded to give it a try.
Would you expect then to pay commission on any subsequent sales which were on a re-order basis or would you insist that to get that commission the sales person took and put in that order so you knew they were servicing and contacting the customer to sell more?
We would have some added value bolt on products such as data preparation and report writing, and a fee to hold open particular longer term projects. Again, I am happy to share that money with the sales person if they brought the work in.
Their tasks would be to get in to sell a basic set up, then maximise usage and the use of customised versions and sell bolt on products. Margins are highest on the set up and basic usage as the bolt ons require an input of our professional time whereas the basic set up is to a template and could be done by anybody with basic IT skills.
Would you normally set a firm price or allow them some latitude to or discount? If so, would you let the sales person share in that discount if they were able to sell without any discounting? My experience of discounting in the past has been that it can undermine the price in the longer term and I have tended to set a price and stick to it, mainly because our costs rose with volume. With this product our costs increase very little whether it is 100, 200 or 1000 units they buy, so we could afford to allow some latitude to the sales person in order perhaps to secure an intial set up and trial but I think that allowing discount should cost them money too, to prevent them discounting me to death?
We would then sell usage in blocks of 100 at about £7-£12 per use ( fo £700-£1200). So an initial sale might be a basic set up of £500 plus 100 units at £12, so £1700. That would bring them £255 at 15%, so I guess they would have to sell two or three a week to make a living.
It is a new product in a new market really so they won't have competitors as such but the customer may have to be persuaded to give it a try.
Would you expect then to pay commission on any subsequent sales which were on a re-order basis or would you insist that to get that commission the sales person took and put in that order so you knew they were servicing and contacting the customer to sell more?
We would have some added value bolt on products such as data preparation and report writing, and a fee to hold open particular longer term projects. Again, I am happy to share that money with the sales person if they brought the work in.
Their tasks would be to get in to sell a basic set up, then maximise usage and the use of customised versions and sell bolt on products. Margins are highest on the set up and basic usage as the bolt ons require an input of our professional time whereas the basic set up is to a template and could be done by anybody with basic IT skills.
Would you normally set a firm price or allow them some latitude to or discount? If so, would you let the sales person share in that discount if they were able to sell without any discounting? My experience of discounting in the past has been that it can undermine the price in the longer term and I have tended to set a price and stick to it, mainly because our costs rose with volume. With this product our costs increase very little whether it is 100, 200 or 1000 units they buy, so we could afford to allow some latitude to the sales person in order perhaps to secure an intial set up and trial but I think that allowing discount should cost them money too, to prevent them discounting me to death?
JustinP1 said:
With this you just have to work out the likely scenarios and make sure:
1) Your lazyish sods can still trundle along along as they still make you decent money
2) Your really lazy or crap guys don't earn enough and go elsewhere
3) Incentive enough for the people that really make you money stay with you.
The way to do it, is more out how much they earn you and arrange their incentives which will specifically promote this.
For example, lets say including costs and a small basic, they get £500 per month. If they bring you in a sale with only £500 profit its not worth them being there, secondly their leads could have gone to someone decent. On the other hand, if you could give that lead to a really good, hungry guy, you make more money.
A good idea is to have an increasing rate per sale, or turnover, that way you both are happy. For example, 10% for sale 1 in that month, 11% for sale 2 and so on. That way, (up to a point where it should be capped) they are more and more hungry that month, rather than thinking that have 'done enough'.
I like the sliding scale idea. Are they ibnclined to hold off reporting sales towards a month end to get more in one month! I probably would.1) Your lazyish sods can still trundle along along as they still make you decent money
2) Your really lazy or crap guys don't earn enough and go elsewhere
3) Incentive enough for the people that really make you money stay with you.
The way to do it, is more out how much they earn you and arrange their incentives which will specifically promote this.
For example, lets say including costs and a small basic, they get £500 per month. If they bring you in a sale with only £500 profit its not worth them being there, secondly their leads could have gone to someone decent. On the other hand, if you could give that lead to a really good, hungry guy, you make more money.
A good idea is to have an increasing rate per sale, or turnover, that way you both are happy. For example, 10% for sale 1 in that month, 11% for sale 2 and so on. That way, (up to a point where it should be capped) they are more and more hungry that month, rather than thinking that have 'done enough'.
SystemParanoia said:
what commission should i offer on a product worth £7200, with a £1200 margin ?
i was thinking 10% commission only ? £720 which means 2 sales per month has the salesperson living the high life.
or would %5 be better ( £360 ) to keep them working hard?
Work out commission on your margins, rather than the price the goods are sold for. Otherwise the salesperson has no disincentive to discount the goods.i was thinking 10% commission only ? £720 which means 2 sales per month has the salesperson living the high life.
or would %5 be better ( £360 ) to keep them working hard?
With your way, if you had to discount to get a sale and ended up getting £6500, you'd be making a loss after paying the commission.
Margin is Gross.
ATM costs are Negligible as i trade from home. but once i sort out my sales teams, then expansion will be "hopefully" quite rapid.
lets see..
predicted costs
1000 sq ft lockup = £7200 PA
Rates = £3000
Phone = £880 ( £100 connection + £15 p/m + calls ... £50 p/m )
Minibus = £2880 ( £240 p/m )
Insurances = £2500
Internet access = £240
Leccy = £1000
Fuel = £480
Stationary = £500
Total Costs = £18,680
Summary =
15 new clients per year needed to break even @ £1200 Margin
23 new clients per year needed to break even @ £800 Margin
32 new clients per year needed to break even @ £600 Margin
ATM costs are Negligible as i trade from home. but once i sort out my sales teams, then expansion will be "hopefully" quite rapid.
lets see..
predicted costs
1000 sq ft lockup = £7200 PA
Rates = £3000
Phone = £880 ( £100 connection + £15 p/m + calls ... £50 p/m )
Minibus = £2880 ( £240 p/m )
Insurances = £2500
Internet access = £240
Leccy = £1000
Fuel = £480
Stationary = £500
Total Costs = £18,680
Summary =
15 new clients per year needed to break even @ £1200 Margin
23 new clients per year needed to break even @ £800 Margin
32 new clients per year needed to break even @ £600 Margin
Edited by SystemParanoia on Wednesday 7th May 10:42
SystemParanoia said:
What kind of salary would the average sales person be after ?
12k - 15k basic ?
or less ?
i know some safestyle windows sales agents get £60 p/wk wage + commission
Which suggests that if they work more than say 10 hours a week and sell nothing then the company is in breach of Minimum wage laws ? 12k - 15k basic ?
or less ?
i know some safestyle windows sales agents get £60 p/wk wage + commission
Personally as an Enginer I find the whole idea of commission based selling totally alien. I've dealt with automation sales men who were on commission, so they tended to underprice the jobs they were quoting, such that the design team, found it dificult to stay in budget and to timescale. A more appropriate measure of performance would have been to link Project Profitability into the account managers salary, but also the project team's salary.
The trouble sliding scales and commision is that if you are niave (as my last meplyers were) and don't factor in that the sales person needs their basic upping once they've hit tragets they will walk away.
Like 10p says any commission should be based on gross profit and only paid when you get paid :-)
Like 10p says any commission should be based on gross profit and only paid when you get paid :-)
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