Commissioned Salesman

Discussion in 'Pesticide & Herbicide Application' started by DiscoveryLawn, Jan 4, 2005.

  1. DiscoveryLawn

    DiscoveryLawn LawnSite Senior Member
    Posts: 408

    I did a search and got some good info but I would like to ask this of fertilizing and weed control companies only.

    I am considering hiring a sales representative (selling application programs only) to work on a commission only basis. I know of a local company that pays his sales staff a salary plus 5% commission of annual sales. I am considering paying a straight commission of 10% of annual sales. I am still playing with the numbers though. The rep. will generate his own leads via door to door sales and few other ideas I have. Leads that are generated by my efforts (advertising, referrals etc.) will pay a commission of 5%.

    I am going to check with my CPA but I am also considering making this person an independent contractor.

    I would like to know some of your thoughts regarding pros and cons of paying a sales rep commission only vs. salary + com.

    Also does anyone do something different to compensate sales person or other employees for new sales?

    Thank you for your help,

    David
     
  2. i_plant_art

    i_plant_art LawnSite Senior Member
    Posts: 558

    its a tricky thing i think something to worry about as far as an independent contractor go are insurance requirments, for vehicle and such what if somethign were to happen its a question of if they were "working" when it happened or not (does this makes sense) also are they always selling for you or maybe they have a company as well and are selling other things as well such as mowing etc etc for themselves as an actual employee it would be easier to get them to sign a no compete with you. also a question i have is are you going to have a company vehicle for them or do they have to have thier own. if they have thier own you have an insurance liability there as mentioned b4 but also milage ( which could be nasty if not properly accounted for) just somethings to keep in mind. currently i do all of my own selling but have thought about looking into a sales person like you are. keep us up to date on if u decide to do it or not and which way u choose to make things happen
     
  3. DiscoveryLawn

    DiscoveryLawn LawnSite Senior Member
    Posts: 408

    If I go the indepedent route they will use there own vehicle, insurance and pay for their own gas. As far as they selling other work for themselves I don't care what they do if they are 100% commission and are turning in sales. I no longer mow or landscape so as long as they are not selling apps. for themselves they are welcome to pick up extra work as long as they are clear that it is not my company that is doing the other work.

    If I go the salaried + comm. employee route or even 100% comm. employee route than I would reimburse for mileage and I will not permit selling of any services other than my own on the companies time. I do have an extra truck that I could use as a sales vehicle but I would rather keep that available for future growth.

    David
     
  4. Dman1214

    Dman1214 Banned
    Posts: 118

    Independent rep theory would be out - no way would that pass an IRS audit in my opinion. As far as how you would compensate, you must consider net sales -how would you back out cancels? I pay my sales reps salary plus commission - I want them working for me. I start with 4-5 full-time sales guys and reduce as the season progresses (1 usually weeds himself out, 2 role into service, and 2 remain in sales - new sales and alot of upsells to existing cust.)
     
  5. DiscoveryLawn

    DiscoveryLawn LawnSite Senior Member
    Posts: 408

    Thanks DMAN
    Before the independent rep theory gets thrown out too fast I want to mention that there are both local and national home improvement, steak and seafood sales and delivery services, knife sales (Cutco) and several other companies that pay their reps this way. Not only are the reps independent but in many cases the canvassers that go around knocking on doors to set appointments for the reps are independent as well.

    Anyway I am going to check with my CPA on this one to know for certain. I am just curious to know if any of you guys can offer an opinion outside of the potential IRS implications.

    David
     
  6. philk17088

    philk17088 LawnSite Fanatic
    Posts: 17,386

    I think this has another angle to it. Do you want your company to be viewed in the same light as these window sellers?

    I would really be wary of the commission only route.This puts alot of pressure on a rep to make any money.He might start over promising or selling what ever he possibly can to make a buck.

    Another thing to consider when setting this up is your perception of what a rep is. Just from your thinking it seems like you hold sales reps in low regard, a necessary evil. THis perception will shine right thru to a real sales pro and he will drop you like a hot potatoe.
    This is a position that will have a direct impact on your business.The rep will be the first thing that the customer gets to know about your company. Do you really want an independent contractor setting the tone for your customer relationships?
    Just something more to think about.
     
  7. James Cormier

    James Cormier LawnSite Bronze Member
    from Ma
    Posts: 1,218

    The sub contract route may work out, I think its worth talking about. There are some new rules that the IRS has set forth and are pretty strict about qualifying someone as a sub contractor.

    The most important is setting hours, if you require them to come into the office each day, punch in, then punch out each day at the same time then they dont qualify as a sub. Now that doesn't mean you cant do it that way and many do. The problem comes if you ever get audited, then your will owe. Also one of the most important is use own vehicle.

    Of course subs carry there own insurance, vehicle's and pay own expenses. Your liability is reduced, but your control is also reduced as far as productivity. You must stay on top of this, cause Ive been burned by subs not carrying insurance, and when my insurance audit came I paid dearly.

    Now the bigger question is, are there salepeople out there that want to work this way? Do you need salespeople that have turf backgrounds? Dman, you could answer that one right? What kind of support do you the owner have to give a sub salesperson, Direct mail, newspaper ads, tv, radio. Or just send them out there?

    Good subject to toss around
     
  8. AintNoFun

    AintNoFun LawnSite Bronze Member
    Posts: 1,807

    just out of curiosity, what would you pay someone a week if you were giving them a 5% commission on top of a salary?
     
  9. DiscoveryLawn

    DiscoveryLawn LawnSite Senior Member
    Posts: 408

    I was thinking of $300.00 per week. However, I really have not done much research in that direction YET so that is just an educated guess.

    David
     
  10. comperk

    comperk LawnSite Member
    Posts: 20

    The number one way to build your company is to hire the right people. You get what you pay for. I would definitely go for salary plus commission. Look at the big picture...

    1) They will want income stability over the course of the year. Winter and the dead of Summer will produce the least amount of sales. However, you make up for that with the Spring rush and early Summer. It will even out over the course of the year.
    2) The first several years will probably not be profitable. However, the customers that the salesperson produces in the first two years will still be around in the third year (if your service is good), etc. Does that make sense?
    3) We pay on a straight commission, not a percentage, depending on the number of applications and extra services. $5, $10, $15, $20, and $25 plus $450-$500 per week.
    4) Give them a yearly goal...400 to 450 customers. This is reasonable in a decent market.
    5) What kind of company do you have? Do you sell on price or value? If you sell on price, you will make more sales, but you will have less profit and your customers will not stay with you. If you sell value, you will sell less customers, however, they will stay with you and in the long run they will make you more money.

    These are some things to think about. I hope it helps.
     

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