How To Compensate Outside Sales People?

Related: Integrator Compensation Report 2016 and Manufacturer Sales Compensation 2016 Report

Jason, are you assuming no base or? And your website mentions residential and commercial so is this for both or one of the two areas?

I think you will find it exceedingly difficult to find a real consensus on this issue, for a variety of reasons.

The biggest thing you have to consider in addition to what outright percentage of gross sales you will pay is how the pricing of the job will impact that percentage, either positively or negatively.

Then you have to consider how that person will actually be paid -- will it be when they get the contract for the project? When the project is finished and signed off? Pay when paid? A combination of the above?

How will chargebacks work if a project cancels?

Do you offer any RMR-based services? If so, how will you compensate those?

A million things to consider.

I'd be willing to talk offline about this if you're interested. John can provide you with my email address and you're welcome to send me a note.

All accrued percentages by the rep should be honored, even if the project cancels. However if the sales rep is found to have lack of competency(ask your engineers) or is selling out of his you know what or pulling his pants way down on hard spec bids then penalties should be negotiated with that said sales person's performance. Spend time with your reps, they are not all bad as most think however if you can have them express their philosophy on how their contributions will benefit the company then you can steer them into the right direction where you will not have to worry about them too much. A good sales manager should have a keen nose for BS along with not being pressured to post upside prospects to hit any monthly/quarterly numbers.

You also have to analyze your forecast spend based on upside/backlog/ROI and set your allowances based on past revenue highs and lows. Engage with other senior employees on their input, vision and suggestions to gain perspectives you might otherwise not have considered. No one is an expert day one, however time heals that deficiency if tact and thought processes are used correctly. Participate with your team. Daily.

Some regions are just too fast paced, very large corporate infrastructure already running amuck and as a small piece of the engine you will not have time figure things out and rectify them. In this scenario everyone is sent to the front lines to protect the bottom line.

Last of my opinion and my Friday beer, Engage in philosophy constructs and how everyone's opinion in the organization integrates. Expose the negative openly, not behind closed doors.

A sales rep, promising X,Y,Z prospects...if new to your company must still be accountable to deliver mentioned promises. Culture is not overnight and a new person still needs time to aggregate to your processes. If the sales rep is a beast and takes off running it; is then YOU that will have to compensate.

Good Luck!

No salary and 10% of gross or a low salary and 2%—4%.

Most important, set some discount rate and explain that everything beyond it is paid from his pocket  

 Jason,

I would recommend looking at different compensation for new business verses existing and put a higher rate for generating new business.  The detail of % etc really depend on the company policies towards bonuses and how the team gets compensated.  Hopefully the entire company gets paid when projects go well and they can see margin erosion when they go south.  Also I would not compensate from total sales.  I would recommend to compensate on margin/profit goals.

Good luck 

Before you start, check what the competition is doing.  If you want top performers (with experience in the industry) you will have to pay more, and offer a better work environment.  Set this up before you start and apply to everybody in the house.

In a previous life I had 2 sales guys on straight commission who would sell anything to anybody, bring the contracts in and expect to get paid.  We held payment until the customer did the install and checked out.  Part of the sale was contingent on the customer paying invoices for a minimum of 6 months for the house to get full value.  If we didn't get 6 mos. we lost $400 for each deal.

Then the deals started coming up short and they quit.  How do you charge them back for lost revenue?  We took it out of commissions due, but they sued.  LESSON: Cover your bases with a contract and make sure you try to specify all contingencies within reason.

Check references, find out the relationship to the applicant and discard friends and family.  Only past employment or possibly previous customers will be of any value.  Check driving records, do a background check, and a credit check.  Then listen to your wife, she will know what to do.