Compensating a Salesperson
Business owners consider the angles — salary or commission? December 6, 2008
Question
I am thinking of hiring a sales person, but have no idea what to figure on paying. Do most people pay a salary or just straight commission?
Forum Responses
(Business and Management Forum)
From contributor W:
Do you want someone who has the best interests of the company in mind, or do you want someone who will sell everything and anything, regardless of your capacity or ability to make it? Answer that, and you have answered your question. Others will disagree, I am sure.
From contributor S:
I think contributor W is right on this. If you pay just on commission they will sometimes do anything to get a sale. If they are salaried then they may not be motivated enough to do what is necessary. I guess it all depends on the person you hire, and what their abilities are. We tried it and got a guy who figured he would spend all his time taking architects out to lunch. Our point of view is that they need us as much if not more than we need them. I didn't care for his approach so we let him go.
From the original questioner:
I still do not think that answers my question. I understand the pros and cons of having a salary or commission based salesperson. What I need to have a better feel of is typical pay scales. Are salaries typically 25k or 50k? Do commissions get paid by gross sales, profit, or by the foot and how much? I am just looking for a base to start from.
From contributor C:
I give them a base salary, 25k to 35k, and pay commissions on net, which of course I control.
From contributor P:
The real trick is to find someone who can sell. Maybe one out of ten? After that I like the commission being based on net, or what contributor W does is even better.
From contributor W:
I would really shy away from someone that has experience and wants $80k to start. I would look for that energetic, motivated person who always looks you in the eye and has a natural sense of humor, but is starting at the bottom, new to this exact job description. Even starting out hourly is okay. Why not $13.75/hour? They will get overtime on top of that. Then give lots of feedback, recognition, and matching pay bumps. Their value to you will increase dramatically within the first couple of years. And it depends on location, of course. A modest portion of their pay should be in the form of production bonus based on overall output - invoicing, not sales - because it is no good to sell something if you cannot get it out the door.
From contributor B:
I am in the same boat as you. I want to be fair to her and to the business. I asked one of my cabinet reps who has been in sales for a number of years and his response was: If base salary was $500.00 per week, he would ask for 25% of the net profit after all job expenses were tallied up. I believe that would be good for him because of his experience, not so sure for a newbie.
From the original questioner:
Thanks for all the input. I think I have a base to go from. I like the idea of using youth to my advantage. Train them how we do things and not have the teachings of the other guy to muddle through.
From contributor V:
I have gone from GM to mainly doing sales now. I get a decent salary. One that pays my bills plus a commission based on percentage of gross. You should figure out what you can afford to pay on percentage of gross. I will not work for net for exactly the reason one sited earlier - "which of course I control".
In business it is your obligation to show as much write off as is legally possible. I have seen a multitude of sins written off by others and will not allow my income to be moderated by what others want for themselves.
I have an extremely high closure rate and have consistently increased sales each month and since being able to concentrate on mainly sales while also doing project management, it has grown exponentially.
Bottom line, pay them enough to pay their bills, give them a decent commission that they themselves can track and is not subject to the whims or dishonesty of others. If you have the right person you will make each other money.
