Issue link: https://read.dmtmag.com/i/95278
SALES MANAGEMENT Recruiting, Teaching,Management & Compensation of Salespeople #8 BYGRAYSON SCHWEPFINGER I would like to expand the straight commis- sion programs by giving an example of how this might be computed. The numbers I using here are strictly for example purposes and should not be considered as a recommended program. Let's assume, again for the sake of an exam- ple only that you feel a fair amount of income for your salesperson would be $50,000 a year. By fair I mean an amount that would create the desired amount of profit for the owner but also provided income that would encourage a good salesperson not only to produce but to stay with you. Since our goal is to create profit I set my goals on a profitable basis. Remember my defi- nition of profit is the amount made between the delivered price of the unit and the selling price. Under this guideline if you are paying 15%profit for the salesman to earn $50,000 in year he would have to generate $750,000 worth of gross profit. Very few areas generate the same amount of sales each month. As an example in my area of Pennsylvania you would not deliver the same amount of units in January and February as you would in July and August simply because of weather conditions and the difficulty of pouring foundations. For the most part this is not a problem you would face in the deep South. Consequently when you set up monthly goals they should correspond with the average amount of business you do eachmonth. I like to go back over a three-year period and average the amount of business done each month. As an example let's say you do 5% of your gross profits in January and 10% of your gross profits in August. DECEMBER 2012 28 THE JOURNAL Let's say you want the salesperson to gener- ate $750,000 gross profit for the year. That means youmust generate 5%of their gross prof- its in January and generate 10% of your gross profits in August. This means that $37,500 of salespersons profit must be generated in Janu- ary. The August goal for gross profits would be $75,000. I like to break it down even further in those months where the goal would require multiple sales. In August for example I would set the goals to be $25,000 in the first 10 days, another $25,000 in the next 10 days and the final $25,000 the last 10 days of the month. I realize that statistically it will never work out this way but it keeps the goals in smaller incre- ments so you don't wait for the last month and try and do everything in the last 5 days! Regardless of what kind of pay program you decide to use you are probably going to decide to hold some special contests during the year. If you have enough people you might give up to 3 awards. Most often the highest award is given to the person that sells the most homes, the second award to the highest total profits and the third award to the single highest profit. Re- membering that the goal is to create profits not sales I would change this around to reward the person with the greatest total amount of profit as number 1. The second award would go to the single highest profit and the third award goes to the person with the most sales. Two comments here, if the salesperson is a good salesperson and they have the most sales they probably will have generated themost profit and will win both prizes. Unless I amtrying to get rid of old homes I am not interested in making sales that are not profitable. The second comment Is by making the highest single profit the second prize you not only follow the philosophy of stressing profit you give even a newcomer salesperson the chance to win. In a sense all pay programs are commis- sion. If you don't sell enough to earn your pay you are let go! Another approach to straight commission is the variable commission. This is where the amount of commission paid varies with the amount of sales made. This is popular since once the salesperson meets the required goals a good percentage of overhead should be paid so you can afford to increase the commissions on additional sales. There are numerous other ways to work out a pay program. I have listed what I have found over the years to be the most popular along with my own thoughts on how to structure them. If you have any questions, or comments, please e-mail me at schwep1@aol.com. Until next month, GOOD SELLING! T J Grayson Schwepfinger is a nationally known speaker and member of the manufactured housing Hall of Fame. He specializes in sales and sales management training and can be reached for com- ments or more information at his e-mail schwep1@aol.com or his phone 610 533 4969. Website – www.graysonschwepfinger.com.