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| The Marketing, Channels/Partnership & Sales Execs Network is not currently active and cannot accept new posts | Ideas on how to build a strong commision only sales force! | Views: 3053 | May 31, 2005 12:40 am | | Ideas on how to build a strong commision only sales force! | # | Matt L. Downer | | I am gearing to build up a large commision only, most likly 1099 sales force to push products and installation for 2 differant companies. What works? What doesn't? I have deciced to start out with offering a 30% of proffit commision. I have assembled 3 packages that include all the equipment and labor, then I mark them up and see my total proffit minus the 30% to the closer. What is your opinion on this method? I am open to any an all recomendations as this is a starting ground and can be modified threwout until we formulate a succesful medium.
The reason for commision only, is dur to past hires that just seemed to be dead weight and had little drive.
What job postings have you seen that are really geared to commision only structures. In the past I stated "Commsion Only" but was flooded with question like "What is the the base pay?" Do potential candidates simply not understand that "Commision only is?" Or is it me that is not stating it properly....... Is there a better term?
thanks in advance. matt Private Reply to Matt L. Downer | May 31, 2005 1:03 am | | re: Ideas on how to build a strong commision only sales force! | # | Andrew Kraft | | Frankly, I've never met a good salesperson willing to work commission only unless he/she saw it as an investment in the company, was also getting some major stock and the promise of a future executive-level position once the company got off the ground.
I've never met a good salesperson willing to work commission only for a company already off the ground.
Why? Because good salespeople CAN get jobs with large base salaries + commission... why would they go commission only?
Andrew
Private Reply to Andrew Kraft | May 31, 2005 2:39 am | | re: Ideas on how to build a strong commision only sales force! | # | Tom "Bald Dog" Varjan | | Personally I think it is impossible. If money is the main motivator, you'll get a bunch of "business whores", not a cohesive team.
You can read more on this "comission" topic at http://www.sales-marketing-system.com/sales-commission-problems.html.
You won't find great salespeople for commission only for obvious reasons.
Cheers
TomPrivate Reply to Tom "Bald Dog" Varjan | May 31, 2005 3:24 am | | re: re: Ideas on how to build a strong commision only sales force! | # | JON SILVERMAN | | I would strongly agree with Andrew. I have been in hi-tech/industrial sales for 16 years. The more seasoned sales guys (7-10 plus years) look at commission only / 1099 as a position that may not be worth their time since you have no committment in their efforts along the path to the sale.
I am not sure what you are selling and what the typical sales cycle is for your line. You have to consider this when making up your compensation plan.
Hiring the right salesperson takes alot of careful screening as well as having very clear goals for the position. It is very important to get an idea of what the competition is paying their guys as well.
Best wishes,
Jon Silverman, MBA Solutions for Automation Pleasanton, CAPrivate Reply to JON SILVERMAN | May 31, 2005 4:18 am | | re: re: Ideas on how to build a strong commision only sales force! | # | Mahesh Deshmukh | | Hi,
I am in to sales since last 11 years & I would not want to work for Commission ONLY business for following reasons..
1. I have option of jobs with fixed pay + incentive, which means I need to take extra risk if I were to go for "Commission only"
2. This risk, is it justified, not really when I look in to the fact that I as a sales person, do not control rest of the parameters of business fully (like deliveries on time, quality, overall marketing & promotion strategy etc.) in short if I do not call the shots why should I pay for some one else's mistakes by getting lower commission.
3. If I were to take risk then it makes more sense to go for own business than "commission only" way
4. If I had enough guts to take this risk I would started my own business long back, the fact that I am still an employee, isn't it obvious that deep within me there is a person who is not willing to take as much risk. (I agree that as a sales person I am more willing to take risk than some other professionals, but certainly not of owning the business)
5. Every person has a different appetite for risk, so should be best left to individual choice.
I don't say what I decide is rational, but this is what i feel & I can't help it.
Hope this throws some light on the salesman's perspective.
Cheers! MaheshPrivate Reply to Mahesh Deshmukh | May 31, 2005 4:29 am | | re: Ideas on how to build a strong commision only sales force! | # | Douglas Karr | | I am in agreement. Sales requires start-up time to build trust and a relationship with the prospect. Outside of online affiliate sales, I've not seen any 'Commission Only' jobs that require a sales person to spend their own money, gas mileage, entertainment, etc.
Perhaps you could supply some additional information on the product or service you are wanting to sell?
DougPrivate Reply to Douglas Karr | May 31, 2005 5:43 am | | re: re: Ideas on how to build a strong commision only sales force! | # | George Huang | | Andrew,
I agree with your points as I had ever tried to build up the same force but fail. It is very difficult to find any good rep who can work on commissioin only.
George Private Reply to George Huang | May 31, 2005 1:23 pm | | re: Ideas on how to build a strong commision only sales force! | # | Steve Macke | | Typically you are going to attract the young single individual who needs to enhance the resume in order to get a salaried sales position - or you are going to get those who can not hold down a salaried sales position. So you will be hiring and training to a point were it will be a distraction from profit generating efforts.
all the best
StevePrivate Reply to Steve Macke | May 31, 2005 1:26 pm | | re: re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | I will break a precedence of long-silence and dis-interest in threads of this kind on Ryze by offering:
Companies offering commission-only "opportunities" quite often have must-to-avoid, extremely-questionable solvency. If a company can't afford to properly attract and compensate quality REPRESENTATION of their business(es) in the field, they are SUSPECT. There can be as much justifiable doubt that a company will deliver as promised as there might be about putting the right rep on a full-time comp and benefit-package basis.
On the other hand, if lack of solvency is an issue, then the company in question should consider a REP firm, with established, commission-only arrangements, though often, some sort of retainer arrangements may also need to be made, in addition to a higher commission rate that commission-only arrangements prescribe. Of course, rep firms have their attention divided as many times as the number of clients they rep. Divide the amount of hours in the typical working day during the typical working week and...THAT'S how much time is being devoted to the sale of whatever it is YOU'RE selling. Without HARD statistics along these lines, picture somebody without YOUR level of commitment to your product or service, "selling" it for...about an hour a day, squeezing it into a myriad of sales presentations of a myriad of many other properties... However, rep firms exist, thrive and earn substantial revenues, obviously. There's a market for EVERYTHING...
In my opinion, when companies choose their representation carefully, there (ideally) is a mutually-responsible relationship and singular goal of mission, direction, dedication, concentration, focus, committment and hopefully....success. BUT...SOME, at both 1099 rep and company, may find the freedom, performance-pay-only and lack of obligation...desirable...Such can be the making of a sustaining, consultative practice/business.
In closing, dedicated, staff reps are walking, physical evidence that there might be a REAL enterprise behind this person. It's advantageous to any enterprise that, their rep will "be around" for a while, as their prospects and clients can identify them at events, functions, what-have-you. The stability that THIS represents also adds value and sustained or, soon-to-be-gained profitability, assuming that this person is "performing" and continues to gain and sustain mutually-beneficial relationships. I hope that THIS represents some sort of reconstituted value...to SOMEBODY...as there is nothing NEW, here.... Private Reply to Michael Spitz | May 31, 2005 1:52 pm | | re: re: Ideas on how to build a strong commision only sales force! | # | jeetendra jagwani | | I agree with Andrew and Mahesh. If a salesperson is really good, why would he waiting for someone to offer him a commission only job? Also after long enough years if he is open enough to do commission only sales, then there must be something to be probed. I am not including exceptions. But then again exceptions are not the rule. Also on a commission only payout, there is only so much control that you have over the person and process. Which I personally wouldn’t be comfortable with. The assumptions here are that the products/services being sold are not impulse buys. So products/services that work well on the commission only model are real estate, designing, consulting and broking. But then again the complete working model here is different. Limited staff strength.Private Reply to jeetendra jagwani | May 31, 2005 3:29 pm | | re: Ideas on how to build a strong commision only sales force! | # | Priya Krishnan | | Matt, If you are looking such a large number of commission based sales people, I would suggest you join the Manufacturers' Rep program. One of such is www.manaonline.org. There you would get more help then just finding the sales reps.
Good luck, Priya www.cartoon-shirt.comPrivate Reply to Priya Krishnan | May 31, 2005 11:08 pm | | re: re: Ideas on how to build a strong commision only sales force! | # | Nancy Fraser | | I find it interesting to read the thread on commission only sales jobs. Some of you have come up with some very creative reasons why it's wrong...like the company must not be very solid financially, the sales person must not be very successful etc.
In some cases this might be true but there are also many commission only sales jobs that offer excellent benefits packages and good client lists. If there is no client list there is usually a period where the sales person is supported by a draw while they build a list of contacts.
The media typically does not pay a salary. There are some newspapers that have unions that offer a salary and a small commission. What happens in one of the situations I am aware of is that the incentive to sell more than say 10% over the previous year is minimal because the commission is capped. The following years budget is based on the previous years sales so who would want to sell more than they are being paid for when it's just going to make it harder to make budge the next year.
Many media sales people make 100K per year at the low end, up to 350K or much more at the high end. If you know you can sell and you believe in the product you are selling and the company you work for, then you want to work where you can make the most money...and that's on 100% commission. If you want a job where you can skate through the workday and know you will be paid anyway then sales isn't the job for you. In a salaried position you will never make the big money that's out there for dedicated sales professionals.
There are a number of sales training companies or that should be able to help you build a sales force that is effective. i.e. Sandler Sales Institute. Maybe you want to advertise and interview prospects yourself...then I would suggest something like Behavioral-interview.com
Nancy Nota Bene Consulting www.notable-marketing.com
Private Reply to Nancy Fraser | Jun 01, 2005 3:45 am | | re: re: Ideas on how to build a strong commision only sales force! | # | Mark Buckshon | | I am going to disagree (in part) with most of the posters here. Our business has a combination of salespeople who work on a 1099 commission only model, and some who collect base salaries/guarantees. I have decided to move the business to a pure commission model without displacing the salaried reps who earn their way.
The reason for the change is the many 'failures' of less than effective representatives who couldn't earn their way, but were happy to draw their salary. So, I thought about our model and sales cycle, and came up with a concept that promptly and immediately rewards for performance based on measureable progress, switching to pure commission once the representative has established him/herself.
This of course is not the abusive 'pure commission' -- 'we'll pay you when we get paid' model -- but it is one that breaks the sales process down into discrete components and awards compensation ONLY when these objectives are met. (We also cover reasonable expenses from day one). No one however, is 'paid for time' -- in other words there is absolutely no fixed draw or income guarantee, and we are straightforward right from day one when prospective representatives contact us in response to our marketing.
Now, if the original question is: "How do I recruit pure commission representatives", I would put the answer back to this point -- you are dealing with an entirely different universe and approach to marketing for this kind of contractor and conventional employment/recruiting advertising is not likely to work. I've developed some answers suitable for our own business (including some rather unusual approaches that have even our current employees and my family scratching their heads). One is a battle against a particular internet scam that has already helped us find one excellent representative and is bringing other candidates our way. See this link and then follow the path -- you'll see how wonderfully indirect this marketing approach is. http://www.cattyshaq.com/forum/modules.php?name=Forums&file=viewtopic&t=1247&sid=d17ef8bc823a2a323c92bb53203f3a68 Underlying the principal here is the fact that if you are looking for commission reprsentatives, you are competing in the environment of "franchises" and "business opportunities" and you need to define the risk/reward level for the commission based opportunity in that context. Private Reply to Mark Buckshon | Jun 01, 2005 7:45 am | | re: re: re: Ideas on how to build a strong commision only sales force! | # | Travis Hughes Interactive | | Great post, Mark.
While it can obviously be and normally is more difficult to recruit a commission only sales person (or person who gets small base with large commission structure) it can be down.
Paying a person a large base or salary is obsolutely no guarantee that you will have a good let alone great sales person.
I specifically will point to the large salaries you might see at say Oracle or Sun during it's hey day - at that point those folks were basically ORDER TAKERS.
I'd like to see how much they sell today. Now, take that same person and put them in a company that has little market share, no advertising and in a position where - oh my gawd! - they actually have to prospect and *gasp* cold call.Private Reply to Travis Hughes Interactive | Jun 01, 2005 2:02 pm | | re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Steve Macke | | Travis - you have a good point - however - there is a happy medium here - there needs to be a balance of salary and commission. The company has to take on some expense for cost of sales and reasonable salary for a company sales person is part of building a professional sales force.
If your go to market is to not have any salaried pros on the payrole - then use channel partners.
The vast majority of successful sales organizations have found the right blend of salary and commission - each market and product mix will determine the split.
A small percentage of successful sales organizations of note are commission only.
All the Best
SMPrivate Reply to Steve Macke | Jun 01, 2005 11:21 pm | | re: re: re: re: Ideas on how to build a strong commision only sales force! | # | David Norcross | | New to this forum but would like to dive into this discussion. Finding a good salesperson who is simply willing to work is very very difficult in today's market. The so-called "heavy hitters" demand the higher salaries and then simply rest and rake in the check.
Give me a proven salesperson who has experience in the market place and who is willing to work on straight commission any day. That person truely has confidence in their abilities to do one thing and that is sell. I think it is also very important to note that those on 1099 have certain tax advantages that salaried reps do not. I agree with the post about manaonline.org. More and more companies are moving to Independent Reps for the reasons that I just listed.
Thanks
David
One Source Graphics www.osprint.netPrivate Reply to David Norcross | Jun 02, 2005 4:59 am | | re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Shanti Braford | | I like how most of the posters presumed that you'd need "the best" salespeople in order to be successful.
I am actually starting up a new venture that will be 100% comission only, multi-tiered.
Like someone said above... you're not going after the market of 30-something experienced veteran sales reps on a 100% commission basis. If you find them, great.
But more than likely you're looking at college kids and maybe unemployed recent college grads, as your target market.
Private Reply to Shanti Braford | Jun 02, 2005 4:20 pm | | re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | With all "due respect", what the 1099-minded contributors here consistently neglect and ignore is that: experience and further, industry-specific experience, "seasoning" and other key skills are deserving of appropriate compensation.
There's much talk about "salespeople" in what I'm reading here, with a "flavor" of cattle. I am rarely, if at all, catching any appreciation of the value of solid representation that a carefully-chosen business development person can mean to the perceived value of a company and the contibution that this key person(s) can make in the long and the short term. Unless I've missed it, there has been no premium put on the value of RELATIONSHIP-BUILDING, another key component of what a person designated to increase revenue and increase market visibility through various means, is expected to accomplish.
At the risk of redundacy, sales professionals in any field, that are truly "worth their salt", bring to bear an entire skill set and professional profile that quite often excels and exceeds those of a hiring authority and purse-guarder.
Again, a 1099-consulting arrangement may have its tax advantages but...and I've attempted to convey this in my prior post, a mutually-obligated understanding and RELATIONSHIP between an appropriately-compensated and well-chosen business development professional and an employer is a better guarantee of a clear mission. Why would any employer NOT compensate a dedicated and credentialed sales person for this kind of relationship yet, be quite comfortable with providing a salary to an office manager or, CFO, CTO, etc? Why WOULDN'T an employer properly compensate a person who is their representative in the field, a person chosen to increase revenue, market share and industry perception? If there is going to be a majority of thought along the lines of pure performance-based compensation, let us also look at the top people in our nation's government...OK, so we won't go THERE....
Maybe we also won't go to the real facts of business life where sales professionals can often be locked into stringent non-compete clauses that hinder their ability to earn a living in their chosen industries should they want to improve themselves or leave an unpleasant situation. How many times have sales professionals built up a solid book of business, only to be dismissed deliberately for purposes of making those acquired accounts, "house accounts"? Are 1099-ers completely immune to these kinds of scenarios? They are likely even more vulnerable to them.
What about sales cycles? High-ticket sales cycles can sometimes be as long as a year and a half for a six and seven-place deal. What's YOUR landlord going to say about THAT? Of course, not eating for that time period will certainly trim some waist lines...
The "logic" of penalizing such a key person to the success of any business eludes me, to say the least. Please forgive. I offer condolences to those who can't manage to see the value or, don't have or, refuse to have the comprehension, means or solvency for compensating key people to their enterprises' success and sympathy to those whose bad experiences or lack of business management prowess leads them to these conclusions and thought processes. Private Reply to Michael Spitz | Jun 02, 2005 5:02 pm | | re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | David Norcross | | I agree with that concept as well. However, be prepared for a ramp up time frame to build sales while the new inexperienced reps train. This is why the independent route is becoming so lucrative.
David
David Norcross
One Source Graphics
Your Image is Everything
www.osprint.netPrivate Reply to David Norcross | Jun 02, 2005 10:24 pm | | re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Travis Hughes Interactive | | Hi Steve,
I'm in total agreement with your post. For my last firm I did have some theoretically 100% commission salesmen, however, I covered all their expenses (home office, dsl, phone, cell phone, travel and entertainment) and then gave them substantial options with a very large commission pct - 30% to 50% depending on the deal and no cap.
But these were seasoned pros who had money in the bank and could hold out without income. They were interested in the stock and huge upside since commission were uncapped. For me, then the expenses I incurred were recruiting, training, support and expeneses but much less than just one guys base salary.
For a few of the younger, more inexpereinced guys, I gave 100% commission and and expenses were covered, no cap on commission, but they got much, much less stock. They also had a lower commission but I did offset this with a draw to help them out. Per the contract, the draw was to be paid back although I assumed privately that it wouldn't be so I budgeted for that. The draw was between $1,500 to $2,000 a month.Private Reply to Travis Hughes Interactive | Jun 02, 2005 11:27 pm | | re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Travis Hughes Interactive | | Very good points, Shanti. Rarely do we need "the best" to be successsful even in a startup. Having a moderately talented sales person pound the phones cold calling and the pavement many times is far more successful than having the "best" salesperson who prefers to have leads handed to them on a platter or just wants to "manage" the process and is used to taking orders.
Over time, the needs of the org will change as will its ability to recruit, train and retain people with various skills and talents. But we all have to start somewhere and what a company needs a start is not what it needs as a market leader.
I can assure anyone that what Honda Automotive needed at its founding or even 10 years after is far different from what it needs today. In fact, if you look at all of these large famous companies - IBM, GM, Toyota, Boeing, etc. The founders wouldn't even RECOGNIZE the company, culture, etc. if they say them today.Private Reply to Travis Hughes Interactive | Jun 02, 2005 11:30 pm | | re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Travis Hughes Interactive | | At my least company we interviewed quite a few "heavy hitters". They all were "overquota" for famous companies.
But when I pointedly asked "how would you sell our product - an unknown company with a new product in an emerging market" they were dumbfounded.
I asked about their willingness and ability to cold call and pound the pavement and secure small but strategic deals as we grew the market.
Almost to a person the response I got or impression I got was:
1) They wanted to manage the process rather than actually sell. That is, be a sales manager not salesman.
2) Didn't want to roll up sleeves and get dirty, cold calling, etc.
3) Hadn't sold in years - either from being a manager OR an order taker because they worked for whatever company was red hot.
Instead, the hoped my company would grow super fast, the stock would be worth a bundle, they'd then be a manager again looking over a few hundred employees. But never did they imagine nor want to be in the trenches.Private Reply to Travis Hughes Interactive | Jun 08, 2005 2:06 pm | | re: re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Andrew Kraft | | Be careful... be VERY careful... if you give a commission only 1099 salesperson too much support (paying expenses, providing equipment, etc.) you can be at great risk for the IRS stepping in and saying, "no, that person is an employee, back compensate them for benefits and pay up your portion of their employment taxes".
I've seen it happen. It isn't pretty.
Hiring 1099 has its pitfalls... I'm not saying it isn't the right way to go. Just saying: Look into it and talk with your accountant AND lawyers before doing it, as your contract with the 1099 individual affects your risk.Private Reply to Andrew Kraft | Jun 08, 2005 2:33 pm | | re: re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | My condolences on THAT experience, Travis.
I find in MY professional travels that:
Some potential employers often want your ideas on how to sell their product but, don't want to compensate you for them. You can establish your value to an employer by offering ideas but, you'd "better" stay on track that you're interviewing for a "sales" position. "Thinking" sales people are...."scary"....
It's rare (I think) that salespeople have MARKETING-related ideas, something I bring to the "table".
You apparently interviewed some "heavy hitters" but, just not the right people for YOUR organization, Travis.
It also strikes me to be odd that performance-oriented and experienced sales people would not be intereseted in reaping the rewards of being part of the sales process. Surely, made-sales need to be MANAGED. In my opinion, those responsible for landing accounts should also be able to straddle maintaining those accounts while "hunting" down new ones.
Some companies think that they are being incredibly efficient by removing the effective salesperson from the servicing-equation, once the account is theirs. MISTAKE. A relationship of sorts was created which brought about the sale. Don't remove the person responsible for making the deal happen, completely.---extra "fuel" for SALES MANAGERS to stay involved in the process and incentive to keep prospecting for new business.Private Reply to Michael Spitz | Jun 14, 2005 4:44 pm | | re: re: re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Ira Stoller | | There are several types of sales organizations out there. One is the direct selling company which has a limited number of products and/or services which require little training and are designed to be first call closes. Commission only representation works well for this type of organization. Turnover is usually very high here, but the company has so little investment in its people that it doesn't care. Home improvement businesses such as basement waterproofing, windows, siding, etc. come to mind.
Low tech products such as maintenance items are a hybred. Some organizations sell commercial roofing and janitorial items on a commission only basis, while others I have come across pay a training salary plus commission. Often the training salary goes away after a set period of time.
Higher technology, longer selling cycle goods and services typically don't lend themselves to commission only for reasons already discussed in this thread.
Real Estate is a strange one because it's traditionally commission only but with a longer selling cycle.
With all of this taken into consdieration I suppose the best answer to the original post is a question, or actually a series of questions: what are you selling, what's your typical length of sales cycle, $$ volume of typical order, percentage of profit to sale, are there reorders or is this a one-shot sale, length of training cycle, typical projected first year earnings, and I'm sure we can come up with a bunch more. I think the question has been redefined to "Should we go commission-only," rather than "How should we design a compensation plan."Private Reply to Ira Stoller | Jun 25, 2005 12:03 pm | | re: Ideas on how to build a strong commision only sales force! | # | Chen Sun | | There were so many above quality posted answers that I haven't reviewed carefully.
My two cents worth:
1. I think paying straight commission initially is unethical, for most people. There are situations, as described above, that it's acceptable, but mostly, I think it's a smarter employer taking advantage of people.
2. The fact that you're asking this question and has had sluggish sales people in the past indicates that you may want to read books on sales representatives' compensation mechanisms. There are good textbooks on this topic. Instead of wasting 3 months hiring, training, and managing sales reps (whether straight commission or not), why not spend 1 month reading a textbook?
Chen Sun www.WebAndNet.comPrivate Reply to Chen Sun | Jul 06, 2005 4:04 am | | re: re: Ideas on how to build a strong commision only sales force! | # | Carol Stemple | | Thank you for asking the question, as there have been some really interesting posts. My company is about to expand similarly and this discussion has been very helpful!
CarolPrivate Reply to Carol Stemple | Jul 11, 2005 2:16 pm | | re: re: re: Ideas on how to build a strong commision only sales force! | # | Napoleon Jones | | I enjoyed reading all of the post, it is very helpful to my new company as well. We have opted to grant a small base salary to our sales force and managers as we grow our Dealer base.
Nap Jones www.midwestcctv.comPrivate Reply to Napoleon Jones | Jul 14, 2005 6:55 pm | | re: Ideas on how to build a strong commision only sales force! | # | Robin Larson | | Our company offers commison structures for our Water from Air units and you can offer a base salary based upon X amount of sales in each 30 day period. If they do not meet the minimum then they would not qualify for that base.
Best regards, Robin Larson, CEO The Air to Water Company http://www.airtowatercompany.com
Private Reply to Robin Larson | Jul 16, 2005 6:30 pm | | re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | Response to Robin's post:
With respect, your comp formula pertaining to base seems nifty on the surface, as it's somewhat "performance" based, rewarding performance with the guarantee of some sort of "base salary", whatever that might end up being in reference to accepted industry standards for pay scales in a particular industry, region or, economy.
However, for sake of this "round-table", just as perspective employers interviewing interviewees, reflecting on what we shall say is an "active" work history (others would deem less than 3-4 periods at any one recent employer (within 5-10 years, let's say) this one-sided theory begs and sustains the premise and incredibly BROAD, too-comfortable assumption that ALL employers perform stellarly in making sure its sales force has all that it needs to make those deals/sales and meet and exceed those stated quotas. Poor company performance necessitates a calculated escape, just as much as a non-productive employee may require consultation or, unfortunately, a jettisoning. Sometimes the uncalculated (and perhaps, poorly-anticipated or planned employee jettisoning, is a well-needed, blessing in disguise...)
Not to digress TOO much:
Company liabilities and variables that I speak of can be:
in-stock inventory (out-of-stock?), customer service, the ability to deliver turn-on-a-dime problem resolution, commitment to non-company-detrimental creativity in making a deal happen, a quota-schedule that encourages and incentivizes performance with cash bonuses, a stable and consistent price-quote system that is enterprise-wide, not individual agenda-oriented (often, a company quote can deviate from exectutive to executive, depending who was around to ask that day, state of mind or mood) and also...."book cooking".
These are "real world" contingencies that can severly impact a salesperson's numbers. Unfortunately, these "dirty details" can't be elaborated upon during the interview "courtship", as it can easily be considered to be an extreme "faux pas" and general excuse-making/blaming for not making quota, as true as it all might just be.
Again, I'll reinforce that companies are taking a risk on an experienced representative to help all reach desired objectives. Those carefully-chosen, credential-carrying executives also gamble on critical support from the hiring enterprise to deliver on it's stated promises, capabilities, technologies, whathaveyou. Take your bets...
Hopefully, it is a match, sometimes...an excellent one. Sometimes...it isn't. Regardless, there is ramp-up in any sales situation/cycle and qualified sales people deserve to be fairly base-salaried for their profile and their potential contribution to an enterprise, long and short term.
Guzuntite!
Regards and best wishes,
Michael Spitz
Private Reply to Michael Spitz | Jul 16, 2005 9:18 pm | | re: re: re: Ideas on how to build a strong commision only sales force! | # | Joe Doe | | Came across this message.
With 35 years in the IT&T industry, and stationed in six countries, and worked both as a sales person and in top management designing commission schemes. Here is my input.
Does not matter how you design a commission scheme. I end up with a bad one, just any scheme is better than none.
Commission only is invariably used by fly by nighters, hit and run people with past and consistent failures, wild risk takes, with no capital, who wants to move the risk to the reps. (That is why skilled reps avoid it like the plague) If they need commission only, it is called your own company.
Design the scheme to the individual. Simply ask him what he wants. What drives him. One guy once asked for time off and a cooking course. He got it, and it turned his performance around. It does not have to be the same scheme period after period.
Create self managing teams. They get a budget, and themselves decide what resources they need to maximise their profit. They hire and fire the members in the team. Give then true control within a framework
One guy I had did not like commissions. It was a risk to him to loose income. We put him on a fixed salary with a small discretional bonus, much less than a commission would have given him, he was happy with the security of an income, and performed better.
Make sure a couple of the reps make very good money, and don’t change the scheme to make it more economical. One company I worked for, the reps sold unexpectedly well. The Board increased the sales targets, and reduced the commission. Three months later the core of the sales team had resigned, and the company headed for financial trouble.
Many reps will ride the waves, they take on one job, squeeze maximum sales out of it in shortest possible time, then move to the next job. Keep this in mind, and design the scheme so you get what you want, and always have another rep in waiting, create the next wave.
Most top sales people are in the game for the freedom, the sport of the job and the excitement, and for the money. You have to create that.20% of the sales force often produces 80% of the sales. Don't try to sack the 80% to get a 100% performance. You need a few bad examples too.
Put the commission payment as close as possible to the competed and paid sale. Sales people don’t want to wait six months to get the money. They good ones are usually NOW people.
Watch the culture. You may have a total non performer that fills another invisible function within the team. If so, keep him and pay him badly (as a sales person).
Pay respect to the personas heritage, the culture and place he has grown up and is fostered in. Europeans (all different countries) reacts differently to schemes than Japanese, Indians or Chinese for instance.
Be sensitive what drives an individual, and what disrupts him. If he has problems in his family or financial problems, that is often a showstopper. Find a way to help him out.
If sales people makes excuses, often the case, eliminate the cause for the excuse, and they go back to work and peform.
Just my thoughts and experience.
Best regards Bert
Bert Felt PO Box 90-173 Auckland New Zealand Tel 021-933-058 +64-21-933-058 Text messages to 021 064 2976 bert.felt@ieee.org
Website www.bert.rr.nu Private Reply to Joe Doe | Jul 18, 2005 2:25 pm | | re: Ideas on how to build a strong commision only sales force! | # | Lydia Sugarman | | Lydia Sugarman
I've never been afraid to work on straight commission becuase I was always confident that I would be successful and I always have been. I've been a sales professional for 30 years and have sold a diverse spectrum of products and services, including financial products, travel, syndicated tv programming to Internet-related services and products.
You name the situation, I've experienced it. Too many companies play by playground rules...changing the game after it's already in progess. Bottom line, I felt pissed and exploited as well as losing tens of thousands of dollars in promised compensation. I walked and in some cases, put them out of business (cautionary tale-play fair!).
I've had my own company for 4 1/2 years now that is a full-service online marketing and communications agency. We recognized that most companies are flummoxed trying to figure out which technologies they should integrate into daily sales and marketing efforts and how to best help their people embrace these technologies to the greatest advantage. So, we offer a unique suite of Business Relationship Management Tools plus the strategic and creative services to get everyone up to speed, using the technology to greatest advantage, and getting the greatest Return on Relationship (tm).
Needless to say, it's been straight commission for me. Now, as we are poised to grow, I find myself considering the same questions about how to build a strong sales force with a fair compensation plan that makes everyone happy.
Nobody's mentioned draw against commission as a viable compensation alternative. It rewards the producers. It helps nurture newbies. It supports those who may bring something else to the table. And, from the employer's perspective, it reveals the posers out real fast.
In my first experience as a novice insurance agent, the draw was enought to give me peace of mind while learning the business. As a recruiter on Wall Street, there was real incentive to produce and increase my draw every quarter...which I did.
I believe real sales professionals appreciate the opportunities and challenges presented by this compensation plan. Of course, it can grow as the company grows and added responsibilities for sales management demand a salary / override/ commission schedule for management.
Look forward to hearing what others think. but for me, I think this is worth serious consideration when building a sales force for a relatively new company without a lot of brand recognition that needs self-starting, motivated, and accomplished salespeople.
Of course, the company has to offer a genuine opportunity on several levels.
Lydia Sugarman New YorkPrivate Reply to Lydia Sugarman | Jul 18, 2005 2:53 pm | | re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | Very interesting scheme and perspective, Bert. Intriguing real world possiblities and situations. There are lots of options, for sure. You've listed a few creatively reactive ones.
Not sure I'd go with all of it but, you've stated some of the most realistic things that I think were brought out in this thread.
Very best regards and luck for the future, Bert.
Michael SpitzPrivate Reply to Michael Spitz | Jul 19, 2005 5:24 pm | | re: Ideas on how to build a strong commision only sales force! | # | Dan B | | If you don't have a market that can realistically provide earnings in excess of $200,000 for someone who is good, then you're better to go ahead with a salary offering, hire some mediocre guys to "rake the muck", and hire one bad-ass to close the deals they uncover. Give "spiffs" and a career path to motivate the low level guys, and unlimited potential to your killer.
Remember -- there are "Order Takers", "Presenters", and "Changers of Minds" in the sales world. Order takers earn up to $60,000 if they can upsell. Presenters earn $80-100,000 if they hustle and uncover refferals. Changers of minds earn millions of dollars -- and they don't want any limitations to their earnings brought on by a company's need to pay their salesman salaries!
Salesman willing to work commission only are of two breeds: 1) Dumb rookies that have pie in the sky dreams. 2) Confident Pros who know your market well enough to estimate with fair precision how much they will earn.
The reason I like commission only is because the comp rate is typically graded to favor high producers so that they will have extra cash for individual marketing, hiring an assistant, and other expenses. Because I decide how I spend my money, I get all of the rewards from my expenditures or all of the savings if I decide that I don't need to spend.
Guys who say, "I wouldn't work for a company that didn't offer a base salary," are probably not Confident Pros, but rather suspect, less comitted, Order Takers/Presenters.
Private Reply to Dan B | Jul 22, 2005 2:54 am | | re: re: re: re: re: Ideas on how to build a strong commision only sales force! | # | John Anghelache | | I just want to address one minor point that I don't think anyone has discussed.
It's not always the compensation that will motivate a salesperson. The main thing is (and I've been in sales and marketing for 7 years now) how hard they have to work.
If you can structure things so that you bring in good, quality prospects... then you'll have salespeople knocking on your door. Because, for the most part, they don't like prospecting and don't really know how to market. Good sales people know how to close the deal... not necessarily... how to get the deal.
So if you can get them quality leads to work on and follow up with... then... you can even pay a little less but you'll still have motivated people working for you because they're getting in front of real customers and closing.
John Anghelache Private Reply to John Anghelache | Jul 23, 2005 8:52 pm | | re: Ideas on how to build a strong commision only sales force! | # | Lydia Sugarman | | You're not describing sales people, you're describing order takers. Big difference.
Order takers are easy to find, just talk to anyone at any call center for a major mail order company.
A good salesperson will understand marketing, in most cases, better than the marketing "experts." Marketing is understanding who your audience is and how to sell them your product offering. The "original" marketing specialists were the top salespeople of any organization who shared their field experience. From my anecdotal experience, I still remain unconvinced that pure marketing people really know what they're doing absent any sales experience. Too many have an arrogant attitude about their target audiences.
A good sales person does know how to cold call, generate leads, make a compelling presentation by researching the prospect and uncovering their pain points, and then, closing the deal. That is what sales IS, for god's sake!
If you can't do that, then you're just an order taker.
I can tell you that every successful sales professional I've ever known is solely motivated by money. That's why they do what they do. It's not because it's easy! Or, because they're lazy!
As an experienced sales professional and company owner, I found your description insulting. Or, maybe, it is just a very naive perspective. But, what you describe is not a sales professional. I'd NEVER hire the person you describe.
Lydia Kidwell SugarmanPrivate Reply to Lydia Sugarman | Aug 08, 2005 12:05 am | | Andrew: re: Ideas on how to build a strong commision only sales force! | # | Joe Severa | | Touche' Andrew, why indeed? The exception w/b a guranteed residual income Comp Plan, I have two of the best myself. Is today a sort of Ad day? I see that it's never Ad day here, Huh?
Just another non B2B network I see. You guys are in the wrong business, B2B means referrals, tangible referrels by everyone.
Bye guys,
Joe Private Reply to Joe Severa | Aug 17, 2005 6:10 am | | re: Ideas on how to build a strong commision only sales force! | # | Mike Foley | | We actually tried a commission only sales guy. We gave him 50% of every deal closed, and fed him good leads. It turned out he was just passing time until he could land a good sales gig at a software company. He constantly dropped leads, didn't use the SFA tool, and was impossible to get a hold of.
I've had former coworkers try to start companies (basically resellers) using a commission only sales force. It just didn't work. While I'm sure it's possible, the benefits of a full time job (vacation, 401k, options, etc.) are a bit too much to compete with. We are in Silicon Valley, so it's probably different elsewhere, however. Great thread though...lots of insightful comments! Private Reply to Mike Foley | Aug 17, 2005 7:02 pm | | re: re: Ideas on how to build a strong commision only sales force! | # | Travis Hughes Interactive | | I've been in this same boat before with sales people who might just try to pass time, not follow up leads, not use SFA tools, etc.
I found a few ways to prevent this or at least mitigate it.
First is in the hiring process. I became very, very picky and rather than trying to the sales person to join my company, I tried to play "hard to get" and make them want to get in.
So many people think that it's only about money to get people to join or only looks in dating. Psychology and the use of building desire works wonders.
Look at the military. The reason why so many people want to be Special Forces is exactly because its so hard and so many fail.
By turning the tables and saying, "you aren't good enough for us" picques people's interest.
Selecting the right person from the beginning saves you a lot of time and hassle down the road. It not only works as a pre-filter but also can attract others that are very capable and motivated to prove themself against a challenge.
"You seem good, but I don't know if you can make it in this industry."
"You have some good experience but I don't know if you can make it at a startup."
Filter and set expectations.
Next, from day one, you have expectations that are followed and that if NOT followed, immediately let you know there is a problem and you can take action.
Examples:
1. Daily activity report - even if just by email 2. Call reports 3. Pipeline Reports 4. Pool Reports 5. Weekly Sales Meetings (even if by phone)
These don't have to be long or complicated. In fact, if they are small and you still don't get them then you really know there is a problem.Private Reply to Travis Hughes Interactive | Aug 19, 2005 7:41 pm | | re: re: Ideas on how to build a strong commision only sales force! | # | Mubasher Moin | | I have a query if one of you could shed some light on this. I apologize if it is a little off the topic. I am trying to find out what percentage of a Sales Person's total sales for a particular year should be his take home pay. I wanted to know if there is an Industry standard for this. Meaning, if you are projected to sell $1Million worth of services, should your total pay ( i.e base plus commision) not cross 15%, 20% or 25% of $1Million. We are in the Technology Industry and offer Technology and e-publishing services to Publishers. Would like to get some input from people who make a living selling technology solutions.
thanks: Munaf Private Reply to Mubasher Moin | Aug 19, 2005 10:41 pm | | re: re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | Experience/industry standard-commensurate base salary plus 10% of all sales plus additional incentives for upselling existing accounts, performance bonus plateaus, sounds enticing to me.
Regards and best of luck,
Michael Spitz Private Reply to Michael Spitz | Aug 19, 2005 10:48 pm | | re: re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | Travis, Sales reports and good contact mangagment skills are important but, unfortunately...for all that is gained by this, a LOT of time is lost in dealing with clunky contact management software, time that could be spent executing the core activity of making connections and signing up prospects.
As ultimately sales people are ALWAYS judged by the numbers that they are expected to generate, there is SO MUCH, time being wasted by "report" generation and other tedious activities that organization often require.
What's a salesguy to do? These are the ironies of the selling process, particuarly with large companies.
Accountability takes many forms. Yes: a "problem" if no one's doing at least some sort of reporting to track progress.
Best,
Michael SpitzPrivate Reply to Michael Spitz | Aug 19, 2005 10:51 pm | | re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | Mike:
You had some bad luck with that commish-only salesguy. Did you check his references? Did you call ex-superiors and maybe, former clients?
Best wishes for better luck, the next time.
Michael SpitzPrivate Reply to Michael Spitz | Aug 20, 2005 2:40 am | | re: re: re: re: Ideas on how to build a strong commision only sales force! | # | Travis Hughes Interactive | | Michael,
I agree that salesmen should spend most of their time selling not filling out reports.
In general, the final and only metric that really matters for sales is how much did they sell.
However, in getting started, it may well take the saleman 30 days or longer to just build a pipeline and another 30 to 60 days to start closing business.
To show activity and communicate to management what's happening some level of reporting is critical. It doesn't have to be long reports or even pretty. But submitting a simple pipeline report, some type of activity report (ie., what company you talked to, who, when, by what method, last contact, etc.) and some type of meeting report.
From a management perspective, it gives them immediate visibility into the salesman's performance without having to wait 30, 60 or 90 days.
I can say this because I had a sales guy working for me, who I knew for over 10 years and was very competent. But I was busy with other things and he took over sales. I found out 4 months later that he was jerking me around and not doing anything but wasting my employees time and mine.
Had I been more hands on and had even basic reporting required I would have immediately seen what's wrong.Private Reply to Travis Hughes Interactive | Aug 20, 2005 5:07 pm | | re: Ideas on how to build a strong commision only sales force! | # | Lydia Sugarman | | Michael,
Okay, you're the salesforce's champion lobbying for salaries plus commissions, plus performance bonsuses, plus upsell bonuses, plus, plus,plus, but chafing against using the tools that provide the accountability necessary to justify paying out all these monies.
Granted, most of the SFA/CRM applications out there are byzantine and time consuming. They seem to be built for and sold to the C-level suites and middle management without taking the frontline salesforce's needs into account.
However, once the time is invested in setting things up, where using these systems become second nature, they become an indispensable and valuable tool in maximising sales and income. helping everyone know how much is in the pipeline, at what point in the sales, and what has to be done to close the deal.
How can you expect a company to pay out compensation without any concrete accountability? That isn't realistic. As employers, we need to know that you are doing all the things that need to be done to get to the sale, the contract, and the check that clears the bank before we pay you.
Maybe you could offer some real life examples and concrete solutions to this forum? How does your employer compensate the sales people and what SFA solution are you using or have used in the past that worked well for the company and for you?
As small company owners looking to grow the bottom line along with a company full of happy, motivated employees, we are always looking for real solutions that can reasonably be implemented where everyone profits in the most real definition of that word. The reality is that in more instances than most would think, the company owner 's paycheck is less than the salespeople who work for him/her.
Additionally, we are preparing to launch what we think is a simple, elegant integrated suite of business relationship management tools that will offer an alternative to all the piecemeal solutions that are currently the only choices. The more input we can get from people in the field, the better the solutions we offer will be.
Thanks! LKSugarmanPrivate Reply to Lydia Sugarman | Aug 28, 2005 10:30 pm | | re: re: Ideas on how to build a strong commision only sales force! | # | Michael Spitz | | I am clearly being misinterpreted about my thoughts about CRM/contact management tools. I'm sorry about that. Please allow me to restate for better understanding that: ANY software for any puropose should have intuitive interface design that facilitates copious notetaking and self-reminding of as many pertinent details as necessary to keep track of the deal, the people involved and where the deal might be going.
I'm also sorry to say again that, it's sad that good contributors here like Travis, have been severly disappointed by hired people that didn't perform as hoped. The reasons for that may be multi-fold or, maybe the match was not right. I've read it time and time again that, some salespeople performed great in one capacity but, that was not necessarily transferable to the new gig. Often in my experience, the hiring companies themselves couldn't perform and wouldn't take responsibility for their own severe dysfuntionality and misrepresentation of stated capabilities. But, assuming this doesn't describe YOUR enterprise, I recommend (yet, again) check former employer references, former clients and colleagues...and I don't mean HR.
Outside of a consultative arrangement (and respectfully, my understanding with my present enterprise would not afford any time for any side projects) I feel (and hope) that my contribution to date to this thread has given sufficient food for thought and a worthwhile strategy for moving forward when considering a salesteam hire. The details of my current compensation will remain private, I hope all can understand. However, I CAN tell you that my current plan is quite in order with what I've maintained in my contributions here. Any thing short of that, just would not happen. In exchange, I'm contributing on many strategic levels, not just on a cold-call basis. I'm very excited about the prospects and, about my new company's, cutting edge appications.
Best of luck to all,
Michael SpitzPrivate Reply to Michael Spitz | |
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