Commission sales?

Discussion in 'Landscape Architecture and Design' started by steve@moon, Nov 28, 2007.

  1. steve@moon

    steve@moon LawnSite Member
    Posts: 2

    All right guys, I don't know if this has been a thread before, so please don't jump down my throat if it has, just direct me to where it is...

    We have three designers who are also our sales staff for the company. We are in the process of restructuring the company and one of the ideas we are tossing around is regarding commission sales for our designers/sales staff. In the past we have set sales goals and profit margin expectations, but there have been very few incentives for sales people to reach their goals. It seems that there is a "we can get by" attitude.

    My questions:
    1. Anybody offering commissions on their sales?
    2. Anybody try it and give up and if so, why?
    3. Any ideas on how to implement the changes?
    4. What percentages are you offering on commissions?
    5. How do you determine your commission...gross sale, net profit, profit margin, etc?
    6. Do you offer other rewards or bonuses to sales staff?
    7. Do you have penalties for not achieving sales goals?
    8. If you are not using designers for sales staff, who does your sales?

    We are trying to create an "ownership" in the future of the company with our employees and have offered rewards for sales leads to our production employees with good success this year. Any other ideas for getting more sales in the door?

    Thanks in advance!
     
  2. PaperCutter

    PaperCutter LawnSite Bronze Member
    Posts: 1,954

    I worked as a commissioned sales/designer, a few years back. Anyhow, it worked as follows:

    Straight commision (no salary or hourly- sell or starve)- 7% of the gross, with bonuses at the sales meetings for various categories, and once we passed a certain tier we'd get gas vouchers, get our cell phones paid for (I was using, on average, 2300 minutes a month). Anything we forgot or screwed up, or a client dispute we couldn't resolve, we'd get backcharged for. Example: I left one dimension off the plan for a bbq island. Rather than make a phone call and ask, the idiot sub guessed. He guessed wrong, the whole thing had to be demo'd and rebuilt, and the sub and I had to split the cost.

    There were over two dozen designers on staff where I was. The middle-of-the-road designers could make between $30-60K a year, and a few of us were in the six figures. IF you offer commissions, and those commissions are paid on completed jobs- make real sure you can install those jobs in a timely manner. If your designer has to wait six months for install, they'll go sell somewhere else.
     
  3. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    This was the first year I had people other than me giving estimates for larger jobs. I still prefer to give most of the larger estimates. But we get sooo many in the spring and early summer that I have to delegate some of them and all of the small bids to other managers in the company, who I've trained.

    So far, I have not implemented commissions. I am slightly opposed to it. Only because that means we'd have to increase our prices by whatever that commission is. So let's take a paver patio job that comes out to $12,000. If I gave a 5% commission on that job, that means we'd have to sell the job for $12,600 instead. I haven't wanted to do that, as it makes our price point just that much higher. But maybe it's a smart idea.

    Like you, I'd be interested to hear how this works for others. I do have that same problem of our managers / salesmand taking ownership of their bids. It seems like sometimes they just hurry through them and don't try to sell very much. Maybe this is the solution?
     
  4. steve@moon

    steve@moon LawnSite Member
    Posts: 2

    I disagree with your assessment that you would have to raise your price to your customers for the comission as, if your pricing structure to account for overhead is correct, the cost of the designer's salary is written into the price already.

    Our intent is to create more accountability for our designers and cause them to be as accurate in the design and estimate process. If we do institute this, we are looking at reducing the salaries by the percentage of commission based on the average of their past 2 years sales, allowing them to make no less than they have in the past, provided they continue to sell at the same level. What we are hoping for is these guys to take the initiative to increase their income significantly by increasing their sales. The down side to this is what to do with situations that are unpreventable from the operations side of the installations that cause them to exceed estimates: weather, labor shortage, etc.

    We have tried a couple of ways to increase sales in the past by establishing goals (last year based on total dollars sold and this year on man hours sold), but that has not been very successful. We are not yet completely sold on the commission thing, but it has become a very real option for us.

    More input please!!!
     
  5. Cantona

    Cantona LawnSite Member
    Posts: 51

    I understand what you are doing, by allowing you team to increase ther salary through increased sales, but we have had no success with this method. It has made people leave in the past. They feel they are being penalized for selling at a respectable level and it sets them a step back on the longer road to making good money.
    We offer a base salary then comission on whatever is sold. We do not raise the price of the bid to cover the comission we just let it come off our margin. We make that up in volume. If I can run 4 constructions crews 50 hours a week for me at a slightly smaller margin versus 2 then in the end the company will end up grossing and netting more revenue. We have one guy who sells poorly for most of the year (does other stuff well) but at Christmas he out sells the other 3 guys 10:1. He absolutely kills on holiday decorations...The little hit on the margin for his commission is worth it for the amount of revenue coming in that time of year. For us to really grow there is a balance we have maintain between our margin and our net income. We rather bring in 2 million a year made at a 15% margin, than 1.5 million made at a 22% margin. The total dollar amount in profit is what matters most to us.
     

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