Commercial Sales- Pay Plan

[Chet]

I need to develop a compensation pay plan for a superstar salesman. I want it to be commission based. I'm looking for a percentage that I would pay for new work that they develop and a percentage we could pay for ongoing maintenance work. And I think the percentages should come from or some how be adjusted from the profit of the commercial department, so that we don't under bid jobs just to get numbers.
I believe an outstanding salesperson should make a lot of money if they can bring in the work.

Please let me know if you have a compensation plan in place that works for you?

 

[PrimaDonna]

Check in with @Steve Toburen . This was covered in SFS. I'm sure he has a quick report or link he can send you or post here with a structure.

 

[Steve Toburen]

Ah, Meg, you are killing me here. This is one subject I am a very unpopular curmudgeon on...

... I believe an outstanding salesperson should make a lot of money if they can bring in the work...

I agree! BUT the problem is very few small service businesses are going to attract an "outstanding salesperson". Yes, I know there are exceptions and if you can find one- go for it! But generally the "sales superstars" will be off making BIG money at a Fortune 500 corporation. (Or selling cars with Corky!)

Steve

PS So normally up till you hit at least 2,000,000.00 in yearly volume the very best "outstanding salesperson" will be the owner! (Watch me duck for cover since I know all of you want to shave the "dirty work" of face-to-face selling off to an employee.) Actually this is very common. HERE is my reply to a Kansas carpet cleaner (cough, cough) who wanted to shir... I mean "delegate" his sales duties. (I do have some solutions on avoiding the common pitfalls.)

 

[PrimaDonna]

Whoops...my bad. Guess it's time to attend SFS again and brush up on the curriculum. Maybe that is something I got from my work with Chuck Violand? I know I picked this up somewhere....

Sorry @Steve Toburen

 

[Shane Deubell]

Would tell ya to start off with a part-time marketer that generates estimates. Then you can go out for the sale.
Weather they do it by phone or door to door is your personal choice and what type of jobs you want to prospect.

Salespeople have skill levels just like every other profession. To generate your own leads and close in an industry you are not familiar would be tough.
At top end for sure, might be better off playing the lottery.

Some questions to consider

Do you have a marketing plan
Do you have specific target in mind
CRM to collect all this information
Follow up process for estimates/customers/leads

 

[Steve Toburen]

Whoops...my bad. Guess it's time to attend SFS again and brush up on the curriculum. Maybe that is something I got from my work with Chuck Violand? I know I picked this up somewhere....

Sorry @Steve Toburen

No worries, Meg. Chuck too says that up till well over 1,000,000.00 the business owner's "highest and best use" is likely in sales.

Now of course the subtle trap is for someone to think, "Hey, I'll pay 'em on commission and if they don't sell anything then I pay nothing." But the problem is this unskilled and likely inept salesperson will screw up/tick off potential accounts that a motivated owner would have sold.

Steve

PS As has been noted if you do with a salesperson it is smart to tie their commission to profitability on their sales instead of gross sales. Otherwise they will bid a bunch of work super low to pump up their commission check but you will lose money on every job. (Don't ask me how I learned this!)

 

[Desk Jockey]

HERE is my reply to a Kansas carpet cleaner

Man that's just not right!

"Trying to Improve in Topeka"

Leave for a few minutes to take care of a sick horse and this is what I get.

 

[PrimaDonna]

No worries, Meg. Chuck too says that up till well over 1,000,000.00 the business owner's "highest and best use" is likely in sales.

I'm really off my game today!

 

[Shane Deubell]

Think of it from the salesperson's point of view.

You want them to go out and work 40 hours a week on full commission with no health ins or paid time off.
You dont have any database, no in house leads, they have to do all the work.

I did this job, they paid $400 week plus commission, insurance, 2 weeks vacation.
Over long term we switched to full commission.

Investments dont work this way, you have to put some skin in the game too.

 

[Shane Deubell]

Part-time marketer is completely different, can pay $12-$15 hour. Maybe add a bonus.

 

[The Great Oz]

Assume Chet is sharp businessman with appropriate gross sales, but commercial cleaning has never been a strong point and he wants to build that segment. Let's also assume that Chet will pay this person a base salary so they aren't going to starve.

????

I need to develop a compensation pay plan for a ... salesman. I want it to be commission based. I'm looking for a percentage that I would pay for new work that they develop and a percentage we could pay for ongoing maintenance work. And I think the percentages should come from or some how be adjusted from the profit of the commercial department, so that we don't under bid jobs just to get numbers.

 

[Chris A]

Why are there not services doing this for small service businesses? Seems like this topic comes up a lot.

 

[Lee Stockwell]

Why are there not services doing this for small service businesses? Seems like this topic comes up a lot.

Oh there ARE such services.

Avoid them.

 

[Desk Jockey]

Part-time marketer is completely different, can pay $12-$15 hour. Maybe add a bonus.

We've been through 4-5 of them over the last several years. However none were true sales people, more of a happy bag and smile marketer. There is still some value there but don't expect a marketer to drive sales the way a true sales person would.

I hear Tom King talk about the contacts he makes and the power lunches he has and that is totally different from what we are doing as are our results that are equally different.

 

[Shane Deubell]

We've been through 4-5 of them over the last several years. However none were true sales people, more of a happy bag and smile marketer. There is still some value there but don't expect a marketer to drive sales the way a true sales person would.

I hear Tom King talk about the contacts he makes and the power lunches he has and that is totally different from what we are doing as are our results that are equally different.

Well of course, one costs $60-100k a year and one costs about $20k.

Tom lives in indy, you like in topeka....
Expect different results.

My gawd in indy i wouldnt call on any account less then 100 employees.
Still would never run out of leads.

 

[Shane Deubell]

Why are there not services doing this for small service businesses? Seems like this topic comes up a lot.

They cost about $40-$50 hour.
With a 10 hour week min

 

[mirf]

When I asked this folks suggested it was my job and they were right in my opinion.
If a person sells $7500.00 per week at 15% he grosses $1125.00. You still have to pay
taxes, travel, marketing materials plus other expenses. If they sold $45000.00 per month I would not be able to produce
the work in a timely manor or quality of work needed. The salemans job is mine. The follow up and maintence is backed up in house
this year. Easier to hire and train a great tech, CSR rep, office manager and free up some time.

 

[Lee Stockwell]

I believe it was Harry Muensch of the Oscar Smith Co who told us to only hire people to do what WE knew how to supervise and train. He told examples back in the 1980's of owners grief over hiring someone to do outside sales, and then failing because they didn't know how to direct them.

Hire an assistant for cleaning. You will know what to expect and recognize their success or lack thereof.

With the time saved YOU then need to invest in learning needed marketing skills. SFS comes to mind, not because Steve T or Bill Y post about it, but because I have NEVER heard an attendee come back and have any REGRETS for that effort.

 

[Mikey P]

Chet


You'll really want to come listen to Tom @MFE.

Darn good thread!

 

[Steve Toburen]

Thanks, Lee! I don't know Mr. Muensch. But he sounds like a smart guy.

I believe it was Harry Muensch of the Oscar Smith Co who told us to only hire people to do what WE knew how to supervise and train. He told examples back in the 1980's of owners grief over hiring someone to do outside sales, and then failing because they didn't know how to direct them.

This is where almost every cleaning and restoration contractor I've worked with has fallen down big time with hiring a salesperson. They don't "delegate" the work. The owner "abdicates" and therefore there is no training, support or most importantly accountability of the sales force!

Steve

P.S, Simply put, salespeople need to be "managed". (Or in Harry's words. "directed".) But most cleaners will hire a salesperson and then basically say, "Go git 'em, Tiger!" Car dealers (love them or hate them) probably run the most efficient sales organizations out there. They have sales down to a fine art. And what does every car dealership have? A SALES MANAGER!

This need for direction is why Chuck Violand on spends an entire session on Tuesday at SFS on how to select, motivate (they need to be constantly "propped up"), manage and hold sales people's "feet to the fire". (The real reason Bill let's Chuck have a section of "his day" is Billy needs a break.)

 

[Lee Stockwell]

We've lost a generation of pioneers, just found his rather recent obit:

"Harry H. Muench, 88 of Nanticoke, PA passed away Wednesday, March 26, 2014 at Wilkes-Barre General Hospital.

Born on May 16, 1925 in Queens, NY, he was a son of the late Henry and Annie Hamilton Muench. He resided in Nanticoke since 1970 and previously lived in Laceyville, PA for 10 years and earlier in Long Island, NY.


He served with the U.S. Navy during World War II as a signalman on a mine sweeper.



Mr. Muench had been employed by Servicemaster Professional Cleaning Co. for many years as Regional Manager for the Northeastern United States and Southeastern Canada. In 1968 he purchased the Oscar Smith Company, Wilkes-Barre, owning and operating the business with his sons. He retired in 1995. He also wrote a sports column for the Rocket-Courier in the 60s and 70s"

 

[Shane Deubell]

Thanks, Lee! I don't know Mr. Muensch. But he sounds like a smart guy.
This is where almost every cleaning and restoration contractor I've worked with has fallen down big time with hiring a salesperson. They don't "delegate" the work. The owner "abdicates" and therefore there is no training, support or most importantly accountability of the sales force!

Steve

P.S, Simply put, salespeople need to be "managed". (Or in Harry's words. "directed".) But most cleaners will hire a salesperson and then basically say, "Go git 'em, Tiger!" Car dealers (love them or hate them) probably run the most efficient sales organizations out there. They have sales down to a fine art. And what does every car dealership have? A SALES MANAGER!

This need for direction is why Chuck Violand on spends an entire session on Tuesday at SFS on how to select, motivate (they need to be constantly "propped up"), manage and hold sales people's "feet to the fire". (The real reason Bill let's Chuck have a section of "his day" is Billy needs a break.)

Dont know chet so maybe he is serious.

But whenever i see this kinda thread i think they are pipe dreaming.
Sounds so appealing, hire a salesperson and put them on full commission.

Here the franchises/national companies pay around $30k year with bonuses, commission.
Plus some benefits.

 

[Chet]

Thanks for all the information.
I do have a full time sales person. And to answer Steve, yes, maybe I would be the best salesperson, but I don't want to do it and I don't need to do it. I plan on retiring or at least semi-retiring and selling our business in the next 3 years. I know that having a commercial division will be very enticing for a prospective new owner and help with the worth of the business. In our large market there is plenty of opportunity for us to expand in this area and frankly we used to be way over priced to compete commercially but with the advent of encapsulation we can deliver an outstanding product at competitive prices.

So back to a pay plan, we pay our full time salesperson about $45,000 base + bonus ( bonus was tied to net profit of entire business). But he only makes about $55,000 with his bonus. I want to structure the bonus so he can earn substantially more if he is the right person and if he's not I need to have a structure for the right person. In my opinion the bonus needs to be tied to net profit of commercial only, minus the salary so it would be impossible to overpay this person.

 

[The Great Oz]

Hire a sales manager and require them to hold their own feet to the fire. Put a large mirror in their office for the weekly pep talks.

Seriously, I think you need a division manager with marketing responsibility, and if your goal is rapid growth in the short term, give them a serious stake in the profit and control over the crews.

Or, maybe just buy a small commercial specialist and put the former owner to work in this position.

 

[Desk Jockey]

I like your last suggestion.Buy a company that is already commercial cleaning invest in the growth of the divison.

 

[Shane Deubell]

Thanks for all the information.
I do have a full time sales person. And to answer Steve, yes, maybe I would be the best salesperson, but I don't want to do it and I don't need to do it. I plan on retiring or at least semi-retiring and selling our business in the next 3 years. I know that having a commercial division will be very enticing for a prospective new owner and help with the worth of the business. In our large market there is plenty of opportunity for us to expand in this area and frankly we used to be way over priced to compete commercially but with the advent of encapsulation we can deliver an outstanding product at competitive prices.

So back to a pay plan, we pay our full time salesperson about $45,000 base + bonus ( bonus was tied to net profit of entire business). But he only makes about $55,000 with his bonus. I want to structure the bonus so he can earn substantially more if he is the right person and if he's not I need to have a structure for the right person. In my opinion the bonus needs to be tied to net profit of commercial only, minus the salary so it would be impossible to overpay this person.

Personally would want to structure it weighted towards contract work.
So he is focused selling quarterly packages (or whatever) versus just 1x jobs.

Based on your goal of selling, that would be very appealing to a buyer, imo.

 

[TomKing]

Well of course, one costs $60-100k a year and one costs about $20k.

Tom lives in indy, you like in topeka....
Expect different results.

My gawd in indy i wouldnt call on any account less then 100 employees.
Still would never run out of leads.

Yeah in indy it's a cake walk. We just pick up cash off the sidewalks it's so easy. Lol

 

[TomKing]

Thanks for all the information.
I do have a full time sales person. And to answer Steve, yes, maybe I would be the best salesperson, but I don't want to do it and I don't need to do it. I plan on retiring or at least semi-retiring and selling our business in the next 3 years. I know that having a commercial division will be very enticing for a prospective new owner and help with the worth of the business. In our large market there is plenty of opportunity for us to expand in this area and frankly we used to be way over priced to compete commercially but with the advent of encapsulation we can deliver an outstanding product at competitive prices.

So back to a pay plan, we pay our full time salesperson about $45,000 base + bonus ( bonus was tied to net profit of entire business). But he only makes about $55,000 with his bonus. I want to structure the bonus so he can earn substantially more if he is the right person and if he's not I need to have a structure for the right person. In my opinion the bonus needs to be tied to net profit of commercial only, minus the salary so it would be impossible to overpay this person.

Lots of thoughts here.

how much will this rock star have to sell monthly and annually for it to work for you?

Do you know that number?

The number will be so large you will hard pressed to show a profit for yourself for 1-2 years. Are you willing to do that?

The sales cycle for commercial is months and even years for good accounts that will support this rock star. Finding them is not fast and furious.

 

[Lee Stockwell]

I've watched the Indy market since my first business visit there in 1983. Watching the YP there from year to year it was obviously a brutal market.

We went there for many conventions and schooling and spent time talking with central Indiana cleaners inside and outside the Bane group. Over time I saw the demographics shift a lot.

 

[Desk Jockey]

Yeah in indy it's a cake walk. We just pick up cash off the sidewalks it's so easy. Lol

I KNEW it was easy there!