How are salespeople paid?

[LeslieG]

My husband and I have decided we need to hire a salesperson for our business, someone to go out and drum up new business, check in with existing customers, etc. My husband has always done it in the past, but he's being spread too thin, so to speak, so we think this would be the best plan.

Anyway, we don't know much about how salespeople are paid. Some are straight commission, some are salary plus commission, reimbursable expenses, mileage for use of their own car? We're not sure.

Can I get some input on what we should be looking at?

 

[FireDancer]

Any of the options are acceptable depending on what you sell and what kind of person you are looking for. I know of people who work on 100% commission (no sales no paycheck), some who work on a draw so that they are at least guaranteed a minimum, some who get some salary and then earn commission on top of that, and some that work for straight salary/hourly.

Most of the time the deciding factor is a combination of the industry, responsibility (inside sales, outside sales, only sales vs sales + account management), or a combination.

It's hard to say which is right with the information provided.

 

[VickiVM]

Be sure to check with the Dept. of Labor; there are FLSA laws regarding exempt Sales positions that may impact your decisions.

 

[golfgal]

To find the best salespeople chances are you are going to want to offer a salary + commission and benefits. The base salary doesn't have to be huge but enough to get by-but then again low enough to motivate them too. You can build in a tiered commission schedule so the more they sell the more they make.

You could do 100% commission but I think you will find you will get better people if you offer more than that.

 

[pearlieq]

In general sales people are paid their base wage, plus a commission and reimbusement for expenses (including mileage).

You'll need to figure out how much of this person's time will be spent doing actual sales versus doing customer service, because they need to be compensated accordingly. If they're responsible for a lot of service, their base needs to be higher to account for the time they're working with existing clients instead of bringing in new sales.

You'll also need to consider how fast your business generates money. Are you a store where if you sell more widgets you get more money today? Or are you a manufacturer that has a 6-week turnaround to custom make widgets for someone. In a quicker turn business you can offer more of the compensation in commission because the sales person will receive it faster. If your business is slower to generate revenue you'll need to offer a higher base to compensate for the sales person having to wait months for commissions.

Straight commission, in my experience, is a pretty bad idea. While it doesn't cost you much out of pocket, it's very undesirable for an employee. Would you want to go to work every day for no guarantee of payment? Wouldn't that kind of job be your last choice? You'll wind up getting people for whom you are the last choice (which isn't usually the A-Team if you get my drift) and they'll bail the second something better comes along.

 

[meghanet]

Speaking as a former salesperson turned business owner I will tell you that I firmly believe the only way to go is straight commission. Typically serious salespeople don't like salary + commission because the commission is lower than if it was a straight commission position and they make more on straight commission (I always did). I tried out different pay plans for my salespeople and I got, by far, the best results and best return on my money by doing a generous straight commission.

I can say this since I used to be one, salespeople can be very lazy. Give them a salary and they will typically just sit back and rely on that. I've known some real big-hitter sales people and everyone of them would only work on straight commission because they made more, they liked the competition aspect of it, and it drove them to do more and be better. (Competition is a huge motivator for a salesperson!)

Also, if you go straight commission you can pick up some great part-timers. My part-timers aren't throwing up outrageous numbers or anything, but they are consistently doing good work and are a little less maintencance than my full-timers (which is to be expected since this is a full-timers bread and butter).

Of course you can do whatever you want, but I would strongly encourage you to do a straight commission that is as generous as you can be. Now, I can't speak with 100% certainty without knowing more about your business, but that is always my initial response whenever I get asked this question. Feel free to PM me if you want to talk further about it in greater detail and I'll try to give you the best advice I can!

Oh, and as for not being guaranteed payment if you're straight commission: all I have to say is that any good salesperson that is worth working with knows that they are guaranteed payment on straight commission because they know that they can get the job done. Those are the people you want to be working with, not someone who needs a salary because they don't know if they'll be able to actually get the job done. A true salesperson should know their closing rate and so it's very simple for them to calculate out how much they'll be making.

 

[Darcy03231]

My brother is a sales person. He works on straight commission. The company provides him with a car, cell phone and benefits.

 

[Disnydad]

My wife is in sales at straight commission, no salary. She does well.

 

[pearlieq]

Oh, and as for not being guaranteed payment if you're straight commission: all I have to say is that any good salesperson that is worth working with knows that they are guaranteed payment on straight commission because they know that they can get the job done.

While I do tend to agree that sales people are motivated differently than most and that part-timers can be a great idea for a small business, I do have to disagree with the above.

If the OP is in a long-cycle industry like manufacturing or does sales with any kind of government agency, they very likely wouldn't see a dime from a straight commission job for 60-90 days, even if they sold their keisters off and built a huge pipeline. I know sales guys who are OK with that kind of arrangement and while it's not that there isn't a place for them, but they tend to take a lot of management because they're implusive and unrealistic.

Straight commission might be OK for side businesses and churn-and-burn, but I think a modest base is best. It fosters a bond between the employee and the company, ensuring that they both have skin in the game. Straight commission sales people are too disposable.

 

[dalt01]

To find the best salespeople chances are you are going to want to offer a salary + commission and benefits. The base salary doesn't have to be huge but enough to get by-but then again low enough to motivate them too. You can build in a tiered commission schedule so the more they sell the more they make.

You could do 100% commission but I think you will find you will get better people if you offer more than that.

exactly..............

Speaking as a former salesperson turned business owner I will tell you that I firmly believe the only way to go is straight commission.

salespeople can be very lazy. Give them a salary and they will typically just sit back and rely on that.

dont believe this.....stuff.....and if that is all this person thinks of the employees i feel for them

While I do tend to agree that sales people are motivated differently than most and that part-timers can be a great idea for a small business, I do have to disagree.



Straight commission might be OK for side businesses and churn-and-burn, but I think a modest base is best. It fosters a bond between the employee and the company, ensuring that they both have skin in the game. Straight commission sales people are too disposable.

right on, Fuller Brush, Electrolux, etc, etc. which are high turnover is good for straight commission. if you want to build a team with some measure of loyalty always pay a base salary..........it is not about the money..........its about "i care about you and your future". i am not just talking here i have been in direct and indirect sales and sales managment for my entire adult life. i cut my teeth knocking on doors and making cold phone calls.

 

[BelleWDW]

Dh is in sales and sells $5-8 Million $$ a year-

He has a base salary-then a chart for commission....

More he sells the higher the commission rate

So its a huge motivater to sell more

He gets $ mileage....which is a big chunk for him-pays his gas and car note

Also-they pay our extra phone line for Fax....pay his cell phone...and any supplies he needs-like ink for the printer and paper

He basically works mostly form home-only in office a couple hours or less a day


I think it would be VERY hard for a new salesman to work stricktly commision-you gotta eat and pay rent-Right.

Once he looked into working for an out of state company-their base was only $15k a year..-didnt even consider them...!!![COLOR]

 

[quentina]

While I do tend to agree that sales people are motivated differently than most and that part-timers can be a great idea for a small business, I do have to disagree with the above.

If the OP is in a long-cycle industry like manufacturing or does sales with any kind of government agency, they very likely wouldn't see a dime from a straight commission job for 60-90 days, even if they sold their keisters off and built a huge pipeline. I know sales guys who are OK with that kind of arrangement and while it's not that there isn't a place for them, but they tend to take a lot of management because they're implusive and unrealistic.

Straight commission might be OK for side businesses and churn-and-burn, but I think a modest base is best. It fosters a bond between the employee and the company, ensuring that they both have skin in the game. Straight commission sales people are too disposable.

I am a HR specialist for 140 C-stores....been with company for 19 years.

Hubby...staight commission in a retail establishment....makes double what I do. Yes, there are good and bad times however, the good far out weigh the bad. In the past he was a manager however; the company closed. The entire team went to a new establishment and the commission did not bother them at all. DH has turned down promotions because he can make more on the sales floor and have less responsibility.

If you are a good company with a good reputation....sales people will stay and do a great job.

From a wife's perspective.....those paychecks at Christmas, superbowl, income tax time etc.........are amazing.