SALEMAN COMMISSION

Hey I haven't been on in a long time, and if I knew how to use the archive I'm sure this topic is in there. I'm hoping a couple of you old timers remember me, but I need to know what type of commission I should use to pay a new salesman. This is his bennies.... Truck, all auto expenses, cell phone, and medical insurance, taxes and all work related WC/Gen. Liab. Do I pay him a draw each week, then back out his expenses at the end of the month? Can I hire him as a sub-contractor? He wants 1/3 of gross profit, 1/3 goes to overhead and 1/3 goes to me. Is this fair for all parties involved? So far he has not brought much of his own work in, I have given him all the leads and then insulted him when I called him and "ORDER TAKER". He also told me that if he had to generate his own leads he'd be in business for himself. I just don't think it's fair that I generate at my COST leads that come into the office and he'll make the same as me. He said that this is standard.....hummmmmmm I NEED HELP, PLEASE ADVISE OR CALL 248-474-2767>>>

Warranty or even freebie non-warranty repairs still cost some money to the over-all budget, even though it is minimal, but yes, it does wind up as a cost to the business which is tallied on the financial statement.

It is part of the entire cost of sales, so it really is not a penalty factor to the salesman, nor is it a charge-back to the salesman, but just a small price included in every sale made to be accountable.

Lets take another example:

If your company desired some free publicity and you did a Habitat For Humanity roof for free, it still cost your company money to do, so it is a cost of future sales, which you can divide up amongst the total amount of jobs you forecast that you will do, based on previous years figures, as close as possible.

No penalty for the salesman, unless he screwed up the bid with a major shortage.

Ed>>>

Our "call backs" are minamial and I don't plan on charging our salesman for any call backs. I lean more on the side that the crew should eat the cost of call backs, however I haven't charged them either. BUT....if it were to become a problem that's who would eat the cost.>>>

What about all the roof installations that do not have warranty call back issues. Do you share that"found" money with your sales person. Or are your warranty call backs so frequent that you have to factor it in as an expected "cost of doing business" because every job is performed in a sub standard manner and each one can be expected to have a call back.

If you want to factor in warranty call back amount charge it to the crew who does the installation. Not a salesman who takes his work seriously and strives to oversee the work (to a reaasonable degree) as a good faith jesture to the company and the HO.

I do plenty of "project management" and there is NEVER any additional amount factored in for that.

And by the way what is the hourly wage you pay in conjunction wwith the 5% commision ?>>>

What about all the roof installations that do not have warranty call back issues. Do you share that"found" money with your sales person. Or are your warranty call backs so frequent that you have to factor it in as an expected "cost of doing business" because every job is performed in a sub standard manner and each one can be expected to have a call back.

If you want to factor in warranty call back amount charge it to the crew who does the installation. Not a salesman who takes his work seriously and strives to oversee the work (to a reaasonable degree) as a good faith jesture to the company and the HO.

I do plenty of "project management" and there is NEVER any additional amount factored in for that.

And by the way what is the hourly wage you pay in conjunction wwith the 5% commision ?>>>

roofrite Said: And of course warranty issues can in no way even remotely be connected to the sales person.

I sell my jobs, set up the material order,collect payments,visit the job site when the work is ongoing,take all initial calls regarding HO concerns,and carry my tools to correct any minor issues on the spot when I go to collect final payment. And I have NEVER been offered any compensation for getting my tools out to correct something so as to make the homeowner satisified.

Warranty issues are part of the Cost Of Doing Business, which Must be accounted for.

So yes, when you are determining your selling price, the Salesman's Commission, based on the Companies Costs are reflected in the initial figure.

If he were to have project management duties tied in with his estimating and sales duties, there may even be a possibility that he in fact would be responsible for warranty repairs, depending on the agreement that each party entered into.

You, yourself do those repairs as the One Hat Owner, which you don't compensate yourself for, but if another worker did those repairs, he would be entitled to get paid, as well as you deserve to also.

Ed>>>

roofrite Said: 5% commission is not a fair wage for a competent roof salesman if he works strictly on commission. Another example of why so many jobs are going to those who are unskilled and incompetent.

The 5% is on top of the hourly rate during his training period, which, if he chose, he could get the 10% instead, but this is at least a guaranteed wage by the hour until he shines in his sales skills, I hope.

Ed>>>

WOW...thanks everybody for the imput. You have brought up many things that I had never considered. Some of your suggestions I can answer but there were alot of points and different ways to look at this...If nothing else I will be well prepared for Wed. meeting. THANKS TO ALL>>>

The commission you will need to pay your salesman depends on the type of salesman you want, and the work he does in carrying out his job. Does he: • Develop his own leads? (if so, he’s doing marketing & prospecting) • Do the initial qualification? (ie, preliminary call/contact to determine if the lead is worth pursuing. If you get ten leads a day, and you can only realistically handle three, then you have to decide who the three most likely are from the ten you get). • Do an on-site inspection? (Lots of salemen sell product, but few take the time to understand the customer’s issues and actually see what the roofing problems are) • Do the estimate (these range from a ball-park number to detailed estimates with drawings, measurements and photos of all problem areas); • Prepare the quotation? (ranging from a price scribbled on the back of a cigarette box, to formal detailed quotation document with scope of work, payment terms, bills of materials, etc.). • Do the presentation and sale? (Does the saleman do the presentation routine, or does he tailor this pitch to the customer’s needs and wants?) • Write up the contract? (usually, the contract is a separate document from the quotation, and there are specific legal requirements which depend on the jurisdiction) • Bring in the contract package to the office in a timely manner? (If he brings in the contract a day before it is supposed to start, then this will cause all kinds of grief to all concerned) • Review with the installation team what has to be done? (how much information can he communicate to the installation team about the conditions surrounding the contract, including the access, customer expectations, sensitive areas, etc.?) • Follow up with the customer prior to, during and after the installation is done? (ie, is he acting as the “face” of the company in coordinating the work and smoothing over the inevitable glitches that come up during any job?) • Collect from the customer at the completion of the job and ensure that all contractual items have been fully met? (if not the salesman, who else will make sure that there are no loose ends that need to be taken care of? Collecting for extras incurred during the job becomes almost impossible unless a mechanism was set up to ensure that the customer signs off on all extra charges before the end of the installation). • Follow up with the customer post-sale to develop new leads, and get letters of reference/referrals? • Work with the company owners to develop new business or opportunities? (is he a lone ranger type, or will he help your company find new sources of revenue and develop new opportunities)

In addition to the task list above, what are the conditions of work? Is he expected to be available evenings and weekends? Are his travel/communication expenses covered? Is he supplied with all the tools (cell phone, computer, measuring tools, GPS, forms, marketing materials), or is he expected to supply his own? Is he going to be trained or are you expecting him to figure it out on his own?

A few more considerations: are you paying him his commission when he brings in the contract, or when you finish the job and collect? While the two methods seem to be equivalent, they send very different messages to the salesman.

As for the cost of the commission, you can either increase the prices you charge to cover it, or count on increased efficiencies and reduced per-job overhead (ie, if the volume increases dramatically). The former will work only if your salesman can justify (ie, sell) the increased cost to your customers. The latter assumes that the increase in business, at your normal margins, will cover the increase in cost (of the commission). Since an increase in business usually requires additional resources, and additional supervision, this is feasible only over the longer term. So, no two ways about it, if you’re starting out with a new saleman, you hav

And of course warranty issues can in no way even remotely be connected to the sales person.

I sell my jobs, set up the material order,collect payments,visit the job site when the work is ongoing,take all initial calls regarding HO concerns,and carry my tools to correct any minor issues on the spot when I go to collect final payment. And I have NEVER been offered any compensation for getting my tools out to correct something so as to make the homeowner satisified.>>>

5% commission is not a fair wage for a competent roof salesman if he works strictly on commission. Another example of why so many jobs are going to those who are unskilled and incompetent.>>>

Currently, my salesman is myself, but I do utilize my Foreman as my estimator, since I expect him to have a comprehensive knowledge of the costs and he gets his hourly wages for the driving to and from, plus measuring and then calculating and using the Master Script to compile the written proposal.

Soon, I will allow him to do all of the measurement, calculation and proposal writing by the hourly pay and provide him a 5% commission on the Gross Sales amount, only due to the fact that he has proven to be accurate with his measurements and calculations.

Later, he will have the option to earn 10% of the Gross Sale, but NOT get paid the hourly wage for the tasks to get to the point of the sale. I am still supplying all of the leads, but I need to formulate an incentive for self-generated leads that cost me No advertising/Marketing dollars.

I prefer the other method that I wrote about previously, but that also entails a lot more paperwork and justification and as long as I know my numbers, 10% of the Total sale is still acceptable.

By the way, thank you for the compliment on the website. It has generated nearly as many leads as my $3,400.00 per month Yellow Page Ad did 2 years ago and my $2,400.00 per month Yellow Page Ad did last year.

Ed B)>>>

PS. NICE WEB SITE!!!>>>

Thanks Ed, man you have brought of a ton of things that I haven't even thought about!!!! Do you pay your salesman as a sub-contractor? Or do you pay there taxes and WC/Gen. Liab.? Do you deduct draws and bennies from his 3rd of the profit? What is a fair weekly draw? Thanks so much for you wise advise, suggestions, and input. I knew that I would get some honest, intelligent direction from RCS. Thanks>>>

33% of NET Profit is fair, NOT GROSS Profit, because it is based on the job being profitable. Now, you and he must agree on what the overhead figures are that are true and correct. Gross profit does not reflect the additional hidden costs of running a business that are not direct job related costs.

You need clean books and job costing to actually determine what the true current overhead, materials and labor is though, so for every job he sells, you need a job costing final total done.

Do you carry any old debt on the books, that may or may not be collectible?

If you do, the old debt can be looked at in an Accrual method of accounting as monies actually received, but in a Cash Basis of accounting, it only reflects as income when actually received.

Also, what will responsibilities be for the material ordering and job scheduling and actual production performance of the job?

If he has no accountability for the production, then the job costs go up for someone else to supervise and answer crew related questions or conversing with the home owner. But, conversely, if he has to put in time on the job, would he consider that to be a part of his necessary hours due as part of the sales commission?

One thing that comes out of keeping in contact with each customer, is a greater chance for referrals, so if he gets a referral from that customer, have either of you considered if that would be considered a Self Generated Lead, which may have an additional bonus commission figure attached to gaining that referral job?

Will you require him to generate leads on his own? Will the marketing costs come out of his or your pocket?

Flexibility and profitability will be necessary to meet each others goals, but remember one thing, you still are the owner and are capable of establishing the rules.

Also, consider the possibility of future warranty expenditures for the jobs that he sells. Do you create an additional percentage hold back to cover warranty repair expenses for materials and labor? Or, do you decide that any warranty issues are your burden and should not come up?

What happens when a job costing shows a job to wind up being unprofitable?

Do you deduct from his wages? Will he take the point of view that production is not his responsibility? Thats why I feel it is important for the direct salesman in charge to be responsible for material ordering and stop by project check ups, so that he does have that accountability.

Same thing goes for measuring shortages. An independent salesman will want the bid to be put forth at the tightest numbers possible, while the owner may prefer to pad the square footages to account for additional waste calculations.

Will you be reviewing his job diagram measurements and comparing actual field measurements with a second person, or from the foreman of the crew when the job starts? Boom, more time paid for and cost accounted out to that job, but he may think it is not his burden to bare. What would you think and expect?

How will you monitor his trustworthiness for bids that the customer think is too high? If he has any connections, he probably has a crew of subcontractors that can go in and do the job cheaper and he will make money off of your paid for lead.

Everything that you and he can think of in advance must be agreed to, one way or another, because it inevitably WILL come up someday.

One more thing. You do not think it is fair for him to make the same as you on a job, but if you have 3, 4 or 5 salesmen, then each individual is only making the same as you for that ONE individual job, yet you are making a profit on each one of all of the Salesmens profits earned, so Don't Get Too Greedy. A good salesman who can be trusted is GOLD and worth keeping and paying properly, even if it means a financial sacrifice on your part, but not to the extent that you are not making any profit either.

Ed>

Hi Vaa, thanks for the reply and yes it would be after labor and material costs and not total contract price. I believe thats how my husband figures his jobs, 1/3 materials, 1/3 labor and 1/3 overhead and profit so where does the commission money come from? Do we need to add something to the contract price? Then will we be able to compete? You lost me when you went even further with the 1/3, 1/6 and 1/6. Thanks Terry>>>