Business owners and sales people, how do sales people get paid?

[LuvOrlando]

So we are hopefully going to be starting a business soon. My DH has been working freelance doing Photo-shop add work and we think we can roll out a business based upon it. At the moment we are doing research. We know how to pay Photo-shop people (when we eventually get them) because DH has been doing this himself for awhile. But, neither of us has any idea about sales. We will have a sales staff because neither of us has the time, patience or disposition for it. I'm thinking the sales staff, strictly on a consultant basis, should get paid a certain finders fee for new business and then a quarterly commission for maintaining the account. I think this is reasonable and fair with motivation for both behaviors I want. What I am not sure about, however, is the pay scale.

The details are that the customer will be buying ad space. The product will roll out quarterly. What is reasonable & customary in the sales world? Should the finders fee be a percentage of the first ad or a flat fee and should the quarterly maintainence be percentage or a flat fee... and what percentage is customary? Any input will be very much appreciated.

 

[LuvOrlando]

Please comment, there have to be at least a few business owners or salespeople on here.

 

[Cheshire Figment]

Possibly he should join a business association and find out what is customary for the type of sales he is looking for. And is he looking for people to work regularly, or what?

And also I hope thaat at least one of you has taken at least a first semester college level Principles of Accounting course. Not necessarily to keep the books but to understand what is going on. The reason most businesses fail within the first five years is not because the owner did not understand the product/service but did not understand the financial aspects.

 

[cheermom1]

I am in sales --this is how I get paid ..this is an overview ..

I get a base pay, a bonus for every new account, and a big bonus twice a year for an average of what I bought in money wise..

now base pay is something you are going to have to come up with of what is most appropriate...it varies depending on what product and the business and the area...

I hope this helped

 

[Laugh O. Grams]

You've got to be really careful with how you pay your employees. If you want them to work exclusively for you, and restrict them from carrying other lines or working for other companies, you're going to have to pay unemployment/payroll/FICA taxes for them. If you intend to issue only a 1099 at the end of the year and pay them as non-employee "consultants", and the IRS determines that they're subcontractors in name only, you can land in hot water, paying fines and back taxes on the money you should have withheld in the first place. I'm sure that's why cheermom1's employer pays a base salary with bonuses. I'd talk to your accountant about it for more details.

 

[jt'smom]

my dh is in sales, and his compensation package includes a base salary, company car, sliding scale commission percentage: 10%-22%, quarterly bonuses (up to several thousand each quarter based on performance), 3 weeks paid vacation (based on ly earnings), and the opportunity to earn big yearly bonus based on exceeding yearly sales goals. he is paid bi-monthly, with his commissions being paid on the 15th of every month. the biggest downside is that he is "charged-back" for any contracts cancelled within the first year, so if he has a big sale of say 100 grand and gets 15 grand in commission and it cancels then he has to pay back that commission... trust me, that rarely happens because any good salesperson will die before they take a charge-back! also, he doesn't get raises on his base salary every year. he loves sales because he is in complete control of his own earnings, and he happens to work in an industry that isn't so much affected by the economy. his job has provided our family with excellent income . good luck on the new business

 

[LuvOrlando]

Thanks for some food for thought, I really appreciate the ideas being kicked around.

My DH doesn't need any classes in this stuff, I have more than enough degrees for the both of us. It's the mechanics of sales which eludes me. I want to be fair after all well motivated people do a good job and the best motivator I've ever seen is green.

I have a CPA who will help us out, my degree taught me to respect other people's knowledge and I don't mind paying for it.

We don't want or need on-going employees with a base salary mostly because I do not believe this business could support such a thing. First off, the income won't be substantial enough and secondly, there just isn't enough work. Salespeople have a gift and I'm fine with paying for it, but if it's going to sink the business that's sort of foolish I think. It's not name only, they only need to work every quarter to maintain the business, just like the Photoshop people we will employ so if it works there it should work with sales as well. I will be the business manager who will negotiate changes ect. between the business owners and the Photoshop consultants on an ongoing basis. I really don't care if our sales force works for other people, as long as they understand the finders fee means WE get dibs on the clients, and that that fee means there will be legal consequences if they shop OUR book to other competitors. I suppose I should make them sign some kind of exclusivity document regarding the clients they bring to us, as in this is the fee for bringing us this name. They can do whatever they want whenever they want otherwise. I suppose a lawyer would be needed so that's something to pencil in on my to do list.

If it turns out Sales can never ever be handled on a consultant basis it might well be we will just have to do it without such employees. Does anyone know if this is true? Is sales off limits on a consultant basis? I certainly do not want to do anything illegal but won't lose my house to pay for work we don't need either, KWIM? Frankly, I like the idea of working again, and I like the idea of bringing money into the local economy through sales but if certain aspects of the business are prohibitive then we'll just need to do without them or scrap the whole thing. That would be a shame though...

 

[Laugh O. Grams]

There isn't anything wrong/illegal with hiring a sales force that works on straight commission only. Businesses do it all the time. You just have to make sure that you take the proper steps to ensure that it doesn't look like you're only hiring subcontractors to get around paying taxes. When you talk to him/her about your plans, I'm sure your accountant will clue you in on the rules. Good luck!

 

[LuvOrlando]

Oh, ok, thanks for that I was worried. Since it may be a sticky situation I will talk to my CPA ahead of time to see what I need to do so as to not cross any lines. The very last thing I want to do is cause myself trouble with the nice people over at the IRS so far I do what they ask and they leave me alone and I like it that way

 

[cheermom1]

I wonder if you could hire a telemarketing firm of some sort???

 

[BelleWDW]

.

The details are that the customer will be buying ad space. The product will roll out quarterly. .

I'm curious if this is a quarterly magazine?
There are two like that in our town-but they are monthlies-free at certain location-glossy-nice. They contain articles-vacations in different locations the world-one page each, maybe a 4 page fashion spread-local stores, restaurant reviews, recipes.
Theya re chock-a-block full of advertisements.