Sales and Commission Is it normal??

[LizzyBeth]

Hello Everyone,

My question is: Is it normal to pay a salesman $1600 per 2 weeks + 4% commision on any and everything? (1st Q: Is that a great, good or bad base and rate?)

2nd Q: For example, if he gets on with a Builder, and the Builder give us 5 houses a week... we of course pay him for the new installs of 5 houses. But does he also get commission for repairs at those homes that we have to fix under their 1 year warranty?

3rd Q: And my MAIN question is: What if those home owners AFTER their house is completely built turn round and become a new residential customer for us, even outside of the initial warranty, should the salesman then get commission off of everything that home owner does for life? Service repairs....new unit in 20 years, etc....?

I am not saying they should or shouldn't get commission. As a owner, this is new territory for me and I truly don't know.

Any input would be greatly appreciated. Let me know if you need anything clarified.

Thank you

[Dad]

Moved to proper forum

Thx

[Dad]

Your main question > Just my .02 but why would you pay commission on anything else except what the salesman sold?

Having a salesman get perpetual commissions on anything else would be like having a new business partner. Soon that salesman could kickback and do nothing for you except cash commission checks. Let the salesman sell not get lazy. One sale, one commission.

The amounts you pay will depend on your market and will be based on the experience of the salesman. This is why we do not allow pricing of equipment and repairs on this site... they change depending on where you are.


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[LizzyBeth]

This is also what I thought as well. I just wasn't sure and did not want to approach him without having done a bit more research. I think it's possible that he knows me and the other owner and are green when it comes to all this and so we would have never known if this was normal or not to pay this much out. Thank you for 2 cents. Let me see if anyone else has anything to add as well or anyone with a different opinion. Thanks!

[retired btc]

Is his/her position just a salesman or do they do installs and repair as well ? It has been my limited experience that you only get paid for the sale, any repairs and follow up work doesn't fall under their scope of work, I would think that paying them for every repair and subsequent PM Contract would make them less hungry to make any sales. My neighbor deals in farm equipment, he only gets paid commission on the sale no matter what follow up work gets done to the equipment. I think car salesman have the same type of policy no sales no commission.

[LizzyBeth]

Is his/her position just a salesman or do they do installs and repair as well ? It has been my limited experience that you only get paid for the sale, any repairs and follow up work doesn't fall under their scope of work, I would think that paying them for every repair and subsequent PM Contract would make them less hungry to make any sales. My neighbor deals in farm equipment, he only gets paid commission on the sale no matter what follow up work gets done to the equipment. I think car salesman have the same type of policy no sales no commission.

Yes, this is what I am thinking as well. I wonder what industries they DO use that in...I've put this question in 2 forums and so far....no one has said HVAC. Thanks for the response. I just don't want to be screwed over as an owner. Because we give a lot...paid vacations, holidays, bonus, he has base salary too and medical. But sometimes you think you are treating employees well, when you are not. So we want to make sure.

[LizzyBeth]

Is his/her position just a salesman or do they do installs and repair as well ? It has been my limited experience that you only get paid for the sale, any repairs and follow up work doesn't fall under their scope of work, I would think that paying them for every repair and subsequent PM Contract would make them less hungry to make any sales. My neighbor deals in farm equipment, he only gets paid commission on the sale no matter what follow up work gets done to the equipment. I think car salesman have the same type of policy no sales no commission.

Oh, I forgot to answer the 1st question. He is a salesman, and he moniters and runs the job INITIALLY. After that, they are not involved with repairs, maintenance plan and things of that nature.

[retired btc]

Oh, I forgot to answer the 1st question. He is a salesman, and he moniters and runs the job INITIALLY. After that, they are not involved with repairs, maintenance plan and things of that nature.

Then I would have to say no further commission would be warranted, A lot of companies offer benefit packages some good, some not so much, I used to work for a company that paid Dental and Vision in addition to all those you mentioned, then too they also matched employees 401 k deposits but they were a larger company as well. As far as the wages being good, that depends on what the prevailing wage is in the area.

[mobeless]

I am in a similar boat right now. We are trying to establish a matrix that would incentivize the salesman. We are working on a base pay that requires x amount of quotes per month if the x amount of quotes per month are not made for two consecutive months they would be on probation or jeopardize keeping the position. Commission will be .5-1.75% of percentage project following job completion and full payment of job.

[Gy1964]

I was on a either or scale. i got 400 per week or 5% which ever was higher. Not both. I live in Florida where it is legal to pay straight commission. I found when I went straight commission @8% with no fall back, I actually sold more. with salary + commission there is low incentive to beat the bushes and sell.

[mobeless]

Were your percentage based on the total sale amount? Or did it reflect the profit? Was the commission credited following completion of work or closing of sale?

[mobeless]

Were your percentage based on the total sale amount? Or did it reflect the profit? Was the commission credited following completion of work or closing of sale?

[Gy1964]

My commission percentage would decrease if i had to drop the price to sell the equipment. but on the other side, if I sold some extras I got a higher percentage as much as 12%. a GOOD sales person will not work for base pay plus commission because they wont make as much as if you just paid them a good commission on the total sale.

[James Colver]

Well to answer your question no it is not normal. I don't have any sales people working for me. I just go out and talk with the client and they usually sign 90% of the time. the main reason why I land most of the jobs I bid is because my rates are more reasonable and a big reason why is because I'm not encuring the additional expense of paying for a salemen. Think about it....

[mobeless]

Well to answer your question no it is not normal. I don't have any sales people working for me. I just go out and talk with the client and they usually sign 90% of the time. the main reason why I land most of the jobs I bid is because my rates are more reasonable and a big reason why is because I'm not encuring the additional expense of paying for a salemen. Think about it....

I agree however if you lets say had the ability to grow your company by 3x I feel a salesman would be needed.

[Sooty]

My commission percentage would decrease if i had to drop the price to sell the equipment. but on the other side, if I sold some extras I got a higher percentage as much as 12%. a GOOD sales person will not work for base pay plus commission because they wont make as much as if you just paid them a good commission on the total sale.

That's a PAR system and is normal for sales in the trades. The idea being that you'll be incentivized to push higher margin units and work towards a higher price rather than just dropping it as low as possible to close a sale and move on. What the OP is talking about is more what you'd see in finance or insurance where the client is your client but in jobs like that the salesman is the one handling all the questions and doing the work. If a customer needs their furnace fixed chances are the salesman isn't the one driving out to the house at 3am. If he goes out and closes a deal with the builder he gets a cut for every house that is fair and he brought you in a ton of money but that should be it.

[James Colver]

I agree however if you lets say had the ability to grow your company by 3x I feel a salesman would be needed.

Well you should think about whether or not it's a good idea to grow your business. Many of the large companies pressure their techs to do bad things and that's not good. I have a buddy who once hired a bunch of new techs and grew his business. He told me he never went fishing ever again, worked twice as hard and made the same money

[stomachbuzz]

Your main question > Just my .02 but why would you pay commission on anything else except what the salesman sold?

Having a salesman get perpetual commissions on anything else would be like having a new business partner. Soon that salesman could kickback and do nothing for you except cash commission checks.

I mean...yes and no.
There are several forms of residual income in 'compensation' for a previous action that keeps coming in long after the action is done. Royalties are a typical example for this. Why should an artist continue to be compensated for a little bit of work they put in 40 years ago?
Many areas of life (especially in America) have turned into 'rent seeking behavior'.

And the simple answer is...because they keep providing value. A radio station will still pay royalties for a decades old song because it's a good tune that still brings a strong audience that they can sell advertising time for.

As far as a salesperson's work, I mean, heck, if they can sell a service job, and have it be a 20-year-long customer, then that sounds like a gold mine to me. Much rather have a few 20 year customers than many 5 year customers. Not even just a personal preference, but keeping an existing employee/customer is always more profitable than acquiring new ones. If a salesperson can 'fill your schedule' with a strong rotation of 20-year customers, then sounds like a win-win to me, even if they do 'kick back and collect the checks'.

The reality is, in order for that to happen, they would have to continually maintain a solid customer service relationship, and be constantly renewing contracts, things they should be compensated for.
I would much rather incentivize a salesperson to focus on long-term customer retention than just getting the quick check and turning into "NMP"

[justin_]

my friend works in medical sales and once he brings in a new client... any future sales he makes commission on.. so say if he cold calls a doctor and brings the doctor to the company, and 2 years from now the doctor buys a bone stim, then he gets commission. but he is cold calling and bringing in new clients to get work.

if your sales guy is cold calling, going door to door, and finding all the work for you, then MAYBE I could see giving him future commission on clients he brings in... but if you are doing the advertising and giving him the customers to contact, then absolutely no way should he get anything other than commission on the sales he makes at that time.

one exception would maybe be service contracts and preventative maintenance contracts.... some companies give a small yearly bonus every time the customer renews as well, but this is hard to track IMO. a bonus for the initial sale is plenty.

is your commission based on profit or total sales? IMO would much rather have based on profit as a business owner

[justin_]

As far as a salesperson's work, I mean, heck, if they can sell a service job, and have it be a 20-year-long customer, then that sounds like a gold mine to me. Much rather have a few 20 year customers than many 5 year customers. Not even just a personal preference, but keeping an existing employee/customer is always more profitable than acquiring new ones. If a salesperson can 'fill your schedule' with a strong rotation of 20-year customers, then sounds like a win-win to me, even if they do 'kick back and collect the checks'.

are they finding the the job? if the salesperson is cold calling people and going business to business, and finding their own work and jobs then I totally agree... but if the company is advertising and has its own large customer base, and is giving the clients to the sales people then I would have to give a no to that. Also the salesperson almost sounds like a partner in that scenario with long term commission. maybe thats a good thing though. depends on the company and salesperson.