Question

Topic: Other

Sales Commission Standards

Posted by Anonymous on 3/12/2009 at 3:08 PM ET 250 Points
I have an opportunity to become the one and only salesperson for my cousin. He owns a spray foam rig/business. My job would be to cold call (both via telephone and travel) to generate leads and set up appointments so that my cousin can do an appraisal for the job. I will give rough estimates for cost of a particular job to the prospective client. I have to educate myself on all the product knowledge and the spray foam industry as a whole. This is a 100% commission based job with no other benefits or compensation whatsoever. We are trying to determine what is a good commission rate for me to receive for my work. Can you give me an idea of where to start? I was thinking of around 20% but don't know if that is too low (or too high). Job costs can range from $3000 up to 100's of thousands. I have been making approx. $60K per year working in a non-sales/non-commissioned based job. Also, should my commission rate be based on the actual sale of the job or from the profit of the job itself? Thank you.
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  • Posted by michael on 3/12/2009 at 5:49 PM Member
    10% is a good place to start and probably fair for both of you. ve

    He will need to build your commission into his bid. The other way around he could essentially pay you $25 for a $3000 job because he wants to get the business and will do if for almost cost.

    Bottom line is that, if you do it based on profit, you have to know what the margin is. 5% margin on $3000 is $150 and you get 10% of that or $15. Lots of work for that. And, how does your cousin determine profit? What goes into it? Advertising? Insurance? Ink? Cell phone? His DSL line at home?

    Also, if this is one-shot work you don't have the time to build relationships you just shoot a price and move on.

    Michael
  • Posted on 3/12/2009 at 7:31 PM Author
    As far as profit goes, he makes a lot of it. For example, he did a job that took three 10-12 hour work days and charged $24K for the job. His materials, rental equip., supplies, labor, etc. cost approx. $5500. So, he profited approx. $18,500 just from this one job over the course of less than a week. Other jobs that he did may cost a customer around $4500 and take a day to complete. His profit on something like that is nearly $4000. I don't want to be greedy, but I need to make money for my research, time, travel, etc. not to mention the fact that I have to pay for my own health insurance for me and my family along with other expenses that may normally be (somewhat) compensated for by a more professional sales company.
  • Posted by telemoxie on 3/13/2009 at 1:38 PM Accepted
    Please be very, very careful about cold calling people of them by telephone.

    Please make sure you fully understand the telemarketing do not call program. The way the law is written, the penalties can be substantial for calling people who are on the do not call list. Of course, I do not know to what degree the law is actually enforced.

    I am personally not a fan of straight commission arrangements. I would suggest that you try to negotiate an agreement where you are free to hire additional sales people if things work out. You may also want to be sure the agreement does not restrict you from selling other home improvement services.

    There are many fans of straight commission arrangements on this forum, and they can probably give you some very good advice. Whatever you negotiate, I would suggest you build some networking into your marketing plan.

    If that were me, I guess I would be happy with a 20% commission on the total job (not profitability, since I would not control profitability) and I would want to lock them into that rate for a minimum of a year. I would also want to spell out clearly the timing of payments.

    One of my former clients was an attorney who specialized in lawsuits between salespeople and corporations. I am sure you and your cousin had the best of intentions, and that you will both start by doing everything possible to make this work. But taking some time now to develop the best are impossible might save you a lot of headaches and maybe even a lawsuit down the road.

    Good luck.
  • Posted by telemoxie on 3/13/2009 at 2:00 PM Member
    By the way, there are hundreds of questions on this topic on this forum. At the upper right, you would see a section that says search questions. You could put in the keyword commissions, and find many relevant discussions quickly.

    You they also use Google to search the site, for example:

    +commisons site:marketingprofs.com/ea

    I just did a search, and got 567 hits. You can use standard Google search techniques to narrow this down even further of course.
  • Posted on 3/13/2009 at 2:09 PM Author
    Thanks for the info. (Telemoxie). I will look into the whole telemarketing thing, but I believe that if you search the phone book and pull up residences or businesses and decide to solicite a call, I don't think there is any law on that...just the same, I will look into it. I will also check the forum to see some discussions on the topic. Thanks.
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