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Sales Commissions

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  • Sales Commissions

    We've got a guy working for us. He's a real nice guy, knows plumbing codes by heart and has (his words) grown million dollar companies. He's here, he wants to stay, his heart's in the right place, but he's plumbing for us and his heart is in sales. We're wanting to put him strictly on sales but I'm clueless about paying sales people.
    We don't know what he can do. His ideas make sense but we don't really know or trust him much yet. I want to put him on either salary+commission pay or straight commission. I don't know which is better. And I don't know how much.
    I will ask him, he's experienced in this side of the business (his word) but I want numbers in my head before I ask him what he thinks is fair percentages and such.
    Anybody have any ideas?

  • #2
    Re: Sales Commissions

    Cruch some numbers. See how much commission (or base salary+commission) would be fair to both you and the employee. You should be able to come up with something that makes the company a decent profit, while decently rewarding the employee for his work.

    Good luck.
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    • #3
      Re: Sales Commissions

      Mid salary for your area and 4-6% commission, in a $100,000 range of sales, add 2% more for $250,000 range and so on. If he bites, your in the right area then. If he doesn't, let the negotiations start. If he has the experience in this area, you can ask him, what kind of pay is he expecting for this job. Then you act as if this is too much and lower the salary or commission, till you both are satisfied. As time goes by, up his commission or add benefits. You'll know around the end of the first year, as to who is the real bread winner, hopefully you both are.......
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      • #4
        Re: Sales Commissions

        Go low on the salary and high on the commission rate (while still leaving something for you!) If he doesn't produce, you haven't lost much, if he really produces, you both make out well! Some business owners get really upset when a salesman really produces and they have to write huge commission checks, but in my mind, if the owner is writing huge commission checks, he has some huge income coming in from the salesman. Another way to protect yourself is to do a workup on the job cost after the job is done, and make his commission a percentage of profit instead of a percentage of gross. That protects you if he sells loser jobs. Or a mix between the two works out well for all concerned.


        • #5
          Re: Sales Commissions

          I have learned never to pay a salesperson salary of any type. 8% gross commision with a draw against the commision. Good salespeople will thrive on this formila and not so good salespeople will die on this formula, which is exactly how it must be IMHO

          Until lions have their own storytellers, stories of the hunt shall always glorify the hunter