Question

Topic: Career/Training

What's The Standard Commission Plan For...

Posted by migliarino78 on 6/16/2012 at 7:38 AM ET 125 Points
RE: What is the standard commission plan for a Sales Exec (BDM) in a start-up company?

Hi ppl,

I am close to securing a 'newly created' sales position within a start-up company & I require some guidance around commision.


SNAPSHOT:

- company specializes in Brand Merchandizing / Promotional Products mainly to corporates

- products are designed in-house & sourced / manufactured in china

- gross profit margin is high (50% - 200%). The director is able to negotiate very low input costs in china

- company is 2 mths old and consists of only the director, who is also the company's product designer / engineer

- director has a wealth of industry & product design knowledge. None when it comes to sales

- revenue generated so far has all come from 'warm' contacts only

- naturally he wants to be able to venture in 'new business development' - which is where I come in

- in terms of remuneration, we've both agreed on a commission-only structure

- I have a BDM background within the recruitment industry, as well as a rather extensive (up-to-date) database of warm clients. Consisting of approx 900 decision-making contacts that are relevant to this start-up

- the director would like me to eventually hire, train and develop sales staff as the business grows

- My own database can be split into approximately 9 'patches' (one sales rep per patch)

- revenue will be generated from these very contacts I've brought into the business

- the director wants me to come back to him with some ideas around commission


QUESTIONS:

1. Given i'll have no base salary, what commission (%) is industry average?

2. In the event a sale is generated from one of my 900 contacts (by a sales rep other than myself), what is a reasonable cut (%) for me?

3. I have no control over input cost, only the end sale price. Given this, should commision be on 'REVENUE' or 'GROSS PROFIT'?

4. In the event i leave the business - & sales occur from my contacts immediately after - how long after i leave will i still have a right to a % of those sales?
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RESPONSES

  • Posted by peg on 6/25/2012 at 5:19 AM Accepted
    First, every company is different.

    Second, a sales rep "norm" in your business is about 35%-40% of the sales price. The sales price is established by factoring in the manufacturing price ... meaning, the company calculates the manufacturing price and the commission into the sales price, so the salesperson doesn't have to worry about the manufacturing price -- that's management's job.

    Third, it's unusual for the sales manager (which is pretty much how you've positioned yourself) to have no salary. Usually, the sales manager makes a base salary and a percentage of overall gross sales (3% or so).

    You might want to consider selling directly to your own customers (earning 35%-40% on each sale) as well as managing other salespeople (earning 3% on their sales). In this way, you can control your earnings -- at least in the beginning.

    Generally, once you leave a company you are not around to handle the customer or service the business, so you no longer earn commissions, particularly if you are in a management position. You might try to negotiate something else -- possibly a reduced commission for orders that were put in the queue during the past 30 days or so, on the assumption that the company will have to hire or arrange for someone else to handle customers sales and service in your absence.

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