Taking on a salesman - commissions, salaries etc
Discussion
I've been thinking about doing this for some time - I'm just a one man band, I don't do any proactive sales at present (just what falls in my lap, which keeps me busy, but isn't the most lucrative work), and I'm not a natural sales man. Trouble is it's always been a bit chicken and egg - I can't afford to pay someone straight away, but they ought to be bringing in enough to cover their income reasonably quickly. It probably wouldn't need to be full time, and I'd thought about commission only or something. You often see sales jobs advertised with an OTE income, not sure how realistic they ever are?
However, an opportunity has now arisen - someone I know (not really well, but well enough to trust), is very keen to take on this role. We've had preliminary discussions, and he's still keen, next we need to thrash out some rates/terms. Now, on the one hand I don't want to pay too much salary/not enough commission, and leave him with no incentive to make the sales. On the other, I don't want to do commission only, as I can see that putting him right off if he has a bad couple of days. It needs to be enough to keep him interested, but perhaps with potential to increase either wage or commission if things go well. I genuinely don't know what the potential is for a dedicated sales role in my business, but my gut feeling is that it's pretty good.
He was hinting at 10% commission (and we hadn't even discussed basic salary at that point, but I guess he's expecting min. wage at least). Does that sound reasonable as a starting point? I don't want to take advantage, I know his living costs are pretty low, so he could work for very little in theory.
I could probably afford to pay a bit more commission than that on most of our products (at least up to 20%). The main product sells for about £2000+vat, and I'd kind of hope that he could sell one of them a week/fortnight, based on 1 day per week. Should we be setting targets at this stage?
The other consideration is whether I take him on as an employee, or if he works as a self employed. If we were to agree on a basic salary of less than min. wage, I guess it'd have to be the self employed route, even though he probably should be an employee in reality.
It's really a field based sales job (as I see it), so I'd provide a mobile phone and pay mileage rates. He'd probably have to use his own car to start with, buying, taxing, insuring, maintaining another car is probably a bit too much of a gamble at this stage. He want to do some telesales as well, I don't think that'll work very well for my business, as it's mostly based on face to face transactions. I reckon he'd do better to spend a day in the field and hit a town/area cold calling and actually visiting people - that way at least you can leave a business card/leaflet for future reference. Once someone says they're not interested on the phone, you don't have that option.
What ever we agree on we'll need some form of contract/terms in place. Are there off the shelf documents tailored to this kind of thing, or is it going to be a complicated custom job?
However, an opportunity has now arisen - someone I know (not really well, but well enough to trust), is very keen to take on this role. We've had preliminary discussions, and he's still keen, next we need to thrash out some rates/terms. Now, on the one hand I don't want to pay too much salary/not enough commission, and leave him with no incentive to make the sales. On the other, I don't want to do commission only, as I can see that putting him right off if he has a bad couple of days. It needs to be enough to keep him interested, but perhaps with potential to increase either wage or commission if things go well. I genuinely don't know what the potential is for a dedicated sales role in my business, but my gut feeling is that it's pretty good.
He was hinting at 10% commission (and we hadn't even discussed basic salary at that point, but I guess he's expecting min. wage at least). Does that sound reasonable as a starting point? I don't want to take advantage, I know his living costs are pretty low, so he could work for very little in theory.
I could probably afford to pay a bit more commission than that on most of our products (at least up to 20%). The main product sells for about £2000+vat, and I'd kind of hope that he could sell one of them a week/fortnight, based on 1 day per week. Should we be setting targets at this stage?
The other consideration is whether I take him on as an employee, or if he works as a self employed. If we were to agree on a basic salary of less than min. wage, I guess it'd have to be the self employed route, even though he probably should be an employee in reality.
It's really a field based sales job (as I see it), so I'd provide a mobile phone and pay mileage rates. He'd probably have to use his own car to start with, buying, taxing, insuring, maintaining another car is probably a bit too much of a gamble at this stage. He want to do some telesales as well, I don't think that'll work very well for my business, as it's mostly based on face to face transactions. I reckon he'd do better to spend a day in the field and hit a town/area cold calling and actually visiting people - that way at least you can leave a business card/leaflet for future reference. Once someone says they're not interested on the phone, you don't have that option.
What ever we agree on we'll need some form of contract/terms in place. Are there off the shelf documents tailored to this kind of thing, or is it going to be a complicated custom job?
There are a couple of other things it would be useful to know. Is this person already employed? How much are they earning at the moment? What are their realistic earnings expectations? What difference could a good salesperson make to your business?
It sounds to me that both parties are taking a bit a risk here and venturing into the unknown. As a rule if a salesperson is entering a greenfield situation where there is no existing prospect pipeline then it's customary to offer some form of earnings guarantee while they start building their own pipeline. After this period they can transition onto whatever the full compensation plan is. So I would advise against a heavily commission weighted arrangement to start with to avoid the person becoming turned off too soon if it's difficult in the start-up period. Equally you want to discourage the wrong behaviours should they get desperate to make a sale. Therefore I'd agree something like a three month trial on a guaranteed earnings basis at which point incentive plan is agreed/negotiated.
It sounds to me that both parties are taking a bit a risk here and venturing into the unknown. As a rule if a salesperson is entering a greenfield situation where there is no existing prospect pipeline then it's customary to offer some form of earnings guarantee while they start building their own pipeline. After this period they can transition onto whatever the full compensation plan is. So I would advise against a heavily commission weighted arrangement to start with to avoid the person becoming turned off too soon if it's difficult in the start-up period. Equally you want to discourage the wrong behaviours should they get desperate to make a sale. Therefore I'd agree something like a three month trial on a guaranteed earnings basis at which point incentive plan is agreed/negotiated.
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