When to pay commission?

[cdiesel]

For those of you who have commissioned sales people, what determines a commissioned sale? For instance, we have many clients that have been around for awhile. I've developed them, Jason's developed them, but sometimes others take orders. Would they be entitled to the commission at that point? Would I then be entitled to not pay them commission if I take an order for one of the clients they've developed?

We're struggling to define the roles of our team members as we grow, and this is part of the problem. Half the time our sales people end up being project managers. I think we first need to hire/appoint a dedicated project manager so our sales people can concentrate on sales.

 

[MikePro]

imo, project management entitles commission.

long-standing clients with flip-n-deliver orders need nothing on the salespersons end except to write out a ticket and that should be considered part of their existing salary.

 

[ddarlak]

who ever initially brough in the client should get the commission until they leave.

project management shouldn't be commisioned, i guess if you want to throw more money around, project management could be bonused....

 

[HulkSmash]

who ever initially brough in the client should get the commission until they leave.

project management shouldn't be commisioned, i guess if you want to throw more money around, project management could be bonused....

So if your sales rep bring in a company to do business with you. And that same company comes back 7 months from now comes back to the business directly to do another job - the original sales rep makes commission on that job? I dont think so...

 

[Bigdawg]

So if your sales rep bring in a company to do business with you. And that same company comes back 7 months from now comes back to the business directly to do another job - the original sales rep makes commission on that job? I dont think so...

Yes... if that salesperson is still working there he absolutely deserves the commission. Half the people who order don't bother with a sales rep and will call the company directly after initial contact...

 

[mark in tx]

That kind of order taking is usually covered by the Salary, if you pay salespeople salary + commission.

Anyway, my definition of a commissioned sale is;
Customer was developed by the sales person.
All orders from that customer are paid to the original sales person.
Doesn't matter if me, the owner, takes the order. Doesn't matter if other sales person takes the order. Doesn't matter if Scruffy the janitor picks up the phone and takes the order. The commission belongs to the original salesperson that developed the customer.

The hard part of delegating sales to all of your sales staff is being fair.
You have to segment the product line at some point, and distribute the high and low profit customers and products as evenly as possible.
It is still up to the sales people to turn low profit customers and products into higher potential.
You just can't give the appearance that you push all the good profit customers to "Bob", and all the crap products to "Sally", and all the highest profit customers for yourself.
Even if that is what you do, you will just lose salespeople in the end.

 

[HulkSmash]

Yes... if that salesperson is still working there he absolutely deserves the commission. Half the people who order don't bother with a sales rep and will call the company directly after initial contact...

our sales rep works solely off commission. his job is to get new customers. Once he gets those customers. They belong to the company. not him. Since i'm a fair person i'll give him 2% on returning customers. But one is not entitled to it.

 

[Border]

Perhaps a higher commission rate for initially landing the client and then a smaller one for all future orders?
Or maybe even split the commission on the future orders between the original salesperson and whomever is currently handling that client.

 

[megacab]

So if your sales rep bring in a company to do business with you. And that same company comes back 7 months from now comes back to the business directly to do another job - the original sales rep makes commission on that job? I dont think so...

IMHO, he/she sure does deserve that commission. he/she is the one that got the customer through the front door in the first place. all subsequent sales to that customer should result to commission being paid to said sales rep. some customers are only gonna use you once a year. that's just the nature of the game. but them coming thru that door with an order in hand is a direct result of the sales rep's initial sale/sales call to them.

to the OP. a structured layout of who does what in the company is part of the growing pains. a real structure would have outside sales reps that take care of and go after accounts that need that kind of attention. he/she will pass on some of the work to be done in the office to an inside sales rep to help out. the inside sales rep will take care of "house" accounts and walk ins. people that are one time users or just don't require alot of special attention. pay structure, again IMHO, should be as follows:

outside sales reps- small guaranteed salary and commission based on sales performance

inside sales rep-guaranteed salary on a larger scale than the outside rep with no commission money involved

you/owner- babysit all of this to make sure it runs smoothly and that nobody feels like they are getting thrown more work than the next guy for alot less money

there just absolutely has to be an incentive for outside sales reps to go out and make cold calls on customers to get them through the front door. no matter how many times they use you after the initial sale.

 

[Bigdawg]

I don't know any salesperson that would work like that. You are lucky if you find one that you only pay for initial contacts on. Not the norm...

 

[BigfishDM]

our sales rep works solely off commission. his job is to get new customers. Once he gets those customers. They belong to the company. not him. Since i'm a fair person i'll give him 2% on returning customers. But one is not entitled to it.

Thats gotta be tough on your sales reps.

 

[Fred Weiss]

The first question is: What is the goal of your sales program? Is it to maximize sales while paying out as little as possible or is it to have a well motivated smooth running sales staff that maximizes sales for you with little additional effort from you?

If the latter, then creating territories is, IMO, the best way to go. I would further recommend that you do not compete with your sales reps by having any house accounts. Any leads that come in go automatically to the territory sales rep to turn into customers. Now you have provided the sales rep all the motivation needed to go out and develop the territory for you and you have defined your costs as a percentage to accomplish the sales/customer service function. Repeat and future orders from customers in the territory are commissionable for the sales rep even if they took no more effort than you answering the phone and taking the order.

 

[BobM]

+1 for what Fred said plus commisions only paid when work is paid for.

 

[HulkSmash]

Thats gotta be tough on your sales reps.

These were his terms. we agreed.

 

[HulkSmash]

The first question is: What is the goal of your sales program? Is it to maximize sales while paying out as little as possible or is it to have a well motivated smooth running sales staff that maximizes sales for you with little additional effort from you?

If the latter, then creating territories is, IMO, the best way to go. I would further recommend that you do not compete with your sales reps by having any house accounts. Any leads that come in go automatically to the territory sales rep to turn into customers. Now you have provided the sales rep all the motivation needed to go out and develop the territory for you and you have defined your costs as a percentage to accomplish the sales/customer service function. Repeat and future orders from customers in the territory are commissionable for the sales rep even if they took no more effort than you answering the phone and taking the order.

Good advice Fred. with my experience some sales reps would just ride on existing customers and not branch out to find new ones. It's hard to find the right people for the job...

 

[Fred Weiss]

Good advice Fred. with my experience some sales reps would just ride on existing customers and not branch out to find new ones. It's hard to find the right people for the job...

I agree and would always have realistic performance standards in place to keep one's job. If territory A is growing by 10% a month and territory B by 8% while territory C is stagnant, then territory C's rep has his job on the line if he or she doesn't get it moving.

 

[Jim Doggett]

For those of you who have commissioned sales people, what determines a commissioned sale? For instance, we have many clients that have been around for awhile. I've developed them, Jason's developed them, but sometimes others take orders. Would they be entitled to the commission at that point? Would I then be entitled to not pay them commission if I take an order for one of the clients they've developed?

We're struggling to define the roles of our team members as we grow, and this is part of the problem. Half the time our sales people end up being project managers. I think we first need to hire/appoint a dedicated project manager so our sales people can concentrate on sales.

Ask your sales people what they need to be more sucessful. You get the lion's share. So anything that makes them more successful makes you more money still. Just a thought.

 

[cdiesel]

Let me clarify a little bit. Our sales staff is salary (a nice salary, actually) plus commission, with bonuses for reaching incremental weekly sales goals. Ideally, they would concentrate on outside sales, going after new clients and growing our overall customer base and sales.

Right now, our "outside sales person" mostly handles new incoming inquiries, setting up meetings, and light project management on what they sell.

We have no problem motivating our staff, and ultimately would like to create a machine that runs on its own with less and less interaction from Jason and I. As we grow, we're finding that our (owner's) time is occupied with more day to day management of the company rather than management of our orders or clients.

It sounds like the answer is to pay commission on every sale from clients that the sales people bring to the table, no matter who takes the order. Likewise, they would not be paid a commission on any orders they take that are from existing clients belonging to other sales people.

 

[wetgravy]

our sales rep works solely off commission. his job is to get new customers. Once he gets those customers. They belong to the company. not him. Since i'm a fair person i'll give him 2% on returning customers. But one is not entitled to it.

+1 to that! There is a reason why sales people who quit or are fired generally are giving a non-compete to get a severence package. If I ever get to that stage where I need a sales person / office manager again they will get a small commission on repeat customers that they didn't directly sell to but they developed. In the end the shop is out to make money and your help is hoping to profit as well, can't dink over one sales person because of customer loyalty. If a sales person devotes all the time and energy to a sale (no matter how small) they should receive the majority of the commission.

 

[Fred Weiss]

Your sales team will not mind handling a client for another team member as long as they feel like the same courtesy will happen in return.

Many moons ago I had a territory sales job for a very successful giftware line. I was doing very well from all appearances. I would call on existing clients and open new ones along the way at an enviable pace. The problem came with the second call. Half the time the customer would be angry with me because my sales manager was selling the same merchandise to someone like an Albertson's store in the same plaza ... and without my knowledge. The smaller gift shop survived on having what others did not have and it was equivalent to a breach of trust in their eyes.

My point is that house accounts can easily become problems for the territory rep and can cost them money and affect their morale.