Here are a few more thoughts excerpted based on an email I sent the other day:
We have worked with clients that have ranges between 3-14% commission before incentives and bonuses. Overall sales compensation before benefits as a line item on the P&L tends to average 10% of sales.
Additionally, compensation MUST be tied to specific job tasks and responsibilities. Some companies have salespeople sell exclusively while others require them to manage the entire process. We recommend the former, since why in the world would anyone want to limit the sales potential of a true rainmaker with clerical, administrative and operation duties?
Compensation MUST ALSO must be tied to company objectives and attainment of those objectives. Objectives can include promoting specific products, add-ons, new product sales, revenue goals, profitability, other department sales, etc. I don’t recommend paying based on job costing (unnecessary task in residential sales on all installs – simply spot check), but we make sure salespeople are selling the proper scope of work for the proper price, otherwise commission payments may be reduced on a case-by-case basis. It is management’s job to determine selling prices, teach salespeople how to build a complete solution and not allow salespeople to negotiate printed prices. Marketing allows for promotions.
Commission can be tiered to incentivize salespeople to sell and make lower-end products more appealing to wider segment of the market.
Commission is componentized based on job functions:
- l 50% = Selling & customer care functions
- l 20% = Service team leader & sales coach
- l 20% = Home shows, join and attend networking and trade association group meetings
- l 10% = Sales, marketing & company meetings
I hope this helps.
Any other thoughts, please email or call.
Drew Cameron, President
Energy Design Systems, Inc. & HVAC Sellutions