Sales Commissions and Incentives

[MARKH789]

I have been around the sign industry for over 20 years and have seen several different sales commission structures. I would like some folks to chime in on what has worked best for their sign shop. Usually 10% of gross plus some incentives is common, but does anyone have any other programs that have been sucessful? I am trying to be competitive in my marketplace and don't feel I have the knowledge of what works best for both parties, any input would be appreciated. Thanks So Much, Mark

[alltex]

Mark, I ran sales for years, as well as being as salesman in the electric sign biz. IMO a fixed 10% doesn't give you the flexibility in your pricing. A lot of factors come into play. For instance, how much support is needed for your salesperson? Are they clogging up the graphics folks with excessive drawings? Are they putting enough time in the job to handle their customers? Are they out in the field peddling for business, or are you supplying leads from your advertisements? I still sell, and run the company. IMO no salesperson should ever get a base salary after 3 months. At 3 months, either they are going to make money, or they won't. Salespeople get paid when I get paid. When I get a 50% deposit, they get 50% of their commission. When I collect the balance, they get their balance.

For a salesperson to be successful with me, they need to put the time in, 40+ hrs a week. They need to be able to look at a sign location as an installer.They need to understand fabrication, and city codes. They need to be out of the office and selling signs 50% of the time. They need to handle their business with nominal company support. If they meet this criteria, here's what I believe is fair compensation. $600 a month car allowance, company phone, Health care, paid holidays, and vacation (based on their yearly income level).

10% commission = selling the job at company standard pricing, with all mark ups at full ratio. When the price drops, so does the commission percentage.

For salespeople who need a lot of office support 8% at full pricing. Then drop rate as price falls.

[MARKH789]

Hi Mark, this is invaluable, This is the first time in over 20 years I have had any feedback on the salesman. I have had my salesman on commission only, but I raised it to 15% of the gross to cover all the other benefits such as gas, insurance, holidays, etc... And I havent given them quota's to meet. I feel I have to look at the way you are presenting the commission structure to get more out of them. Thank you so much for your input. Best Wishes And God Bless, Mark H.

[sunshine]

It'll be interesting to see if anyone else posts an answer to Mark's question. I asked a similar question awhile ago and didn't get one response, so I also appreciate Mark's (from Alltex) input. Thanks!

[Quick]

Good morning! I have to agree with what was said concerning commission percentages going down as the price goes down. There are several ways to handle that. One we are putting into practice is paying a percentage of the profit instead of a percentage of the ticket. Obviously the rate has to go up in order for the salespeople to be able to make a living. 20% of the actual profit is usually pretty close to 10% of the total ticket sale. We have run into problems paying commssions on big number sales that don't carry a big percentage of profit. The salesperson could possibly make more than the company in a scenario like that. Not good. On the flip side, paying a percentage of actual profit motivates the salesperson into keeping a healthy profit margin as their pay is based on such.

[TheSigntist]

I just had to chime in here, as this is a topic I had looked for in the past quite a bit.

In years past I had a few plans set up:

$24k a year plus 5% commission

$16k a year plus 8% commission

$12k a year plus 10%

Straight 13% commission (with benefits)

Straight 15% commission (no benefits)

Another company I know pays $80k a year plus 3%, but the next year's base is 10% of total sales from previous year. Low guy is let go and replaced with a new person. (seems a little harsh, but it is a business!)

I'm in sales full time now, after 23 years as an owner. I'm on the 15% plan, provide most of my own designs, and I have a huge pipeline of business.

I think when you get a guy started, you have to make sure he can eat, and put gas in the car. I used to give my salespeople the opportunity to move up the commission ladder, but only after they did their time in the position they were at. ie: if they were on the 24/5 plan for 6 months and wanted to change, they had to put in another 6 months at that rate before they could move up. This kept them from sandbagging, and they would have to continue to earn at the lower rate until "we were even".

I hope that info helps! Wish I had found it 20 years ago. :)

Vern Harris