Know-How Exchange : Student Questions

Another key issue will be the quality of leads you are provided, as well as the quality of marketing material, etc.

If you have no leads, poor collateral, and a lousy web site, I would expect that to put upwards pressure on commissions. If the company is providing you with market intelligence, warm and hot sales leads, great sales literature, and a top notch web site, I'd expect the commissions to be down a bit.

The most important issue will probably be the expectations of the "right level" of commissions in the minds of the owners. Some owners feel that the top sales producers should take more home than they do. Some don't feel that way. And, if it is a "family owned" business, and you are not a relative, you may find it tough to earn more than the family members.

By the way, to avoid issues down the road, or at least to have a good chance of resolving any disagreements in your favor, you may want to have your commission arrangement reviewed by an attorney... I know a fellow who specializes in sales compensation agreements, and I'd be happy to refer you to him if you contact me directly. Good luck.

Grant,

When speaking with the company about a commission structure you need to be aware of how the company is probably looking at your income. Whether realistic or not, most companies will have both a production and income target in mind for their salespeople. Unfortunately, many companies do not look at what goes into a sale, but rather what they believe wll be an annual income for the salesperson. For instance, they may be thinking that you should be able to sell and install 6 to 8 in the course of the year and that a "fair" income for one of their salespeople is say $120,000. Consequently, from their perspective, they will want to base a 120k income on 8 sales, giving the average commission of $15,000 per sale or a commission of 2.14% per unit. Often they will be thinking in terms of a sliding scale of say 1.75% for the first 3, 2.15% for units 4-6, and 2.5% for units 7+.

You, on the other hand, may believe that during the first year a reasonable number of sales is 4-5 and that a reasonable commission is considerably greater than 15k per unit.

You will need to do a little research to get an idea of what other similar products in your industry pay and, if you can, what your company is targeting, both in terms of production and income. If the company's target is 8 sales and an income of 120k and your target is 5 sales (first year) and a commission of 15% ($525,000) you need to know just how far apart you are before you begin your conversation. You'll need to have done your homework in order to bring them into the real world--or be willing to compromise at something very close to their original projections.