Sales Rep Commission Rates and Schedules

Folks,

What do you typically pay for a sales person in your organization?

Thanks.

Tim

$ 50,000 plus 2.5% commision on his new accounts only.

Is the commission on just the jobs he finds, or for any work you get from a customer he found? Commission on the net or the gross?

Hold on a sec. It can't be that cut and dry. $50k plus commission?

I have been putting some thought into this also. I have about 1000 questions, because I have zero experience in the area. But, I do know, I am watching (and working at) a perfectly good machine-shop, while it spirals down the drain because it lacks a sales department. I definitely see the value of a sales rep. But, I would think the base salary would be lower, and commission a little higher. I mean, seriously, It took me over 12yrs to better $50k as a machinist. You know, the guy who actually does the work.

how many machines would this $50k sales rep. be expected to keep busy? Does he work on-site? Or remote? Are his hours tracked? Is there travel involved? Who pays expenses?

Does there exist such a professional that would represent several smaller shops? For less money.

For what its worth though: The owner of the shop I work at did have a sales rep. interested in pushing us.
He came to the shop several times. And seemed very interested. Almost excited. Said he saw great potential. Thought he could really turn the place around. (he was doing quite the job of selling himself!!) His expectations were: $52k and 2% with a one year contract. Now, we are a small shop. One 4-axis VMC, and one 2-axis med. capacity lathe. I don't see how we could absorb that extra $50k unless he brought in enough work to warrant another shift. Which raises payroll significantly. He would have to generate at least $300k in sales for the company to benefit. And we would be stretching the shops capabilities.

I am sure sales is what the shop is lacking. But $50k before commission? Really?

7-12% straight commission on new account for the first year and sliding scale on existing accounts after first year. Sales only gets paid when the customer pays not when they issue PO.

Too Much

ontariocanuck said:

$ 50,000 plus 2.5% commision on his new accounts only.

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That base figure is way too high and the commission is too low in comparision. Also, I like higher commissions for repeat customers. This reduces the financial impact of new customer acquisition. This allows pushes sales into forming lasting relationships. Something like 3% on new customers 5% on repeat customers. You define what a repeat customer is. I have also seen variable commisions on customer volume. Maybe after a certain revenue figure the customer is a "key account" with a different rate. This rate is usually higher because key accounts require more time and care.

The real answer depends on capacity and cost calcuations. Small shops without lots of open capacity would have a difficult time satisfying a dedicated salesperson.

Northwestfab said:

7-12% straight commission on new account for the first year and sliding scale on existing accounts after first year. Sales only gets paid when the customer pays not when they issue PO.

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This is more along the lines of what I was thinking.

My partnership company's chief sales person was my other partner. We manufactured industrial sensors. During 20+ years we got roughly 20 sales representatives, paying them 15% only. Mostly they were idle except for one, who got us substantial jobs at the rate of (1 job)/(2 years).

Best wishes --- Allen

yea, see. This thread is now getting the responses I was expecting. A guy could bounce around for quite a while putting in 5-10hrs a week on the phone with a few $50k yearly contracts, and make a killing until he ruined his reputation.

The title says sales rep.
The text says "sales person in your organization"

Big difference in how they get paid and who is covering the car expenses and such.

The 50K base plus 2.5% is about right for a sales guy that you "own".
Since the response says "on his new accounts", I'd guess this was an employee.
Of course you have to give him/her a car, computer, and cover the phone bills.

Outside reps, 8 to 20% depending on what they are selling, machines are big ticket sales, job shop repair work, much smaller dollars for the same sales effort.
Many reps will want a commission on all work in thier teritority, old or new.
Bob

Are we talking someone out there trying to sell/distribute a product you manufacture, or someone trying to find companies that could use your machining shop services?

First one is easy enough, second one not so much.

you should think about working a commission from the nett profit off any job they bring in thats what we were going to try for eg £1000 sales @ 20% profit = £200 give the rep a 35% cut off that £70 and then making profits becomes the aim off the game for every one. we have a sales guy here for nearly half a year so far not so good it takes time to get things going some new work in but not much

IeliteENGINEER said:

you should think about working a commission from the nett profit off any job they bring in thats what we were going to try for eg £1000 sales @ 20% profit = £200 give the rep a 35% cut off that £70 and then making profits becomes the aim off the game for every one. we have a sales guy here for nearly half a year so far not so good it takes time to get things going some new work in but not much

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Any rep worth hi salt will declind your CHEEEEEESKATE commission offer...


Let me ask you... How many Reps have knocked on your door and offered to rep your company?
Let me guess the answer... ZERO... not a one
Reason? Because they dont need you, the shop owners are everywhere and noted for shifty methods and non paying....

How many reps have shown you a print and said,,,I HAVE A CUSTOMER for THIS... can you make it? How much will it cost ???
My guess is that you or the boss said... not interested...

Face it... you're company aint worth the reps time... this is a DO IT YOURSELF JOB....untill you get big enough to bill $1,000,000 per yr and probly a lot more... and if a rep would take you on you'd better not shaft him or the word will get around faster than you can imagine...

Bad thing is, at 7 to 12% commission, the sales rep is likely making more than the shop/owner is. And having to pay a commission often shoots the price of a job too high... Not trying to disparage sales reps.. just stating facts.

Davis In SC said:

Bad thing is, at 7 to 12% commission, the sales rep is likely making more than the shop/owner is. And having to pay a commission often shoots the price of a job too high... Not trying to disparage sales reps.. just stating facts.

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A good sales person is worth his or her weight in gold. Who cares how much they earn if the generate sales and profits that more than covers what they earn?
Often you don't realize how good they are until they move on.

Company #1
Sales $20,000,000 Profit $1

Company #2
Sales $5,000,000 Profit $1,000,000

Which company would you you prefer to own?

Gordon

Gordon B. Clarke said:

A good sales person is worth his or her weight in gold. Who cares how much they earn if the generate sales and profits that more than covers what they earn?
Often you don't realize how good they are until they move on.

Gordon

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I couldn't agree with this more. I just got done hiring two more for a total of 5 in house sales people. Their sole purpose is to bridge the link from company to the customer and they are to do it via phone contact and sampling of product from the factory. Based on what I pay for base along with a 10% commission they need to sell $50,000 a month for me to break even on them being there. If they fall below that for 3 consecutive months they gotta go. If they make $0.01 over they are safe. Rules are very clear for them and they love it and hate it. They hate me as well but that is another story.

Some comish checks I have cut are bigger than some people make in a year. Happy to write them because of the obvious. What they hell do I care if I am giving them 10 points. I am putting the rest in my pocket and it is one less thing I have to do.

While they are extremely important do know that they are replaceable. I dont have the worlds best analogy for what a good salesperson is like, but think of them like a superstar athlete. Big Egos, rambunctious kid like qualities, but very high performance. If they get their feathers ruffled they may fly the coup. It are these and may similar qualities that make them good and able to deal with the rejection. I always like to think what would happen if one of them go run over by a pie truck, what would my exposure be. I call all their big customers and make nice, salespeople hate that but customers love it.

Jason

Gary E said:

Any rep worth hi salt will declind your CHEEEEEESKATE commission offer...


Let me ask you... How many Reps have knocked on your door and offered to rep your company?
Let me guess the answer... ZERO... not a one
Reason? Because they dont need you, the shop owners are everywhere and noted for shifty methods and non paying....

How many reps have shown you a print and said,,,I HAVE A CUSTOMER for THIS... can you make it? How much will it cost ???
My guess is that you or the boss said... not interested...

Face it... you're company aint worth the reps time... this is a DO IT YOURSELF JOB....untill you get big enough to bill $1,000,000 per yr and probly a lot more... and if a rep would take you on you'd better not shaft him or the word will get around faster than you can imagine...

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people in sales tend to forget that the only reason they are there is to bring in profitable business,there is a large company that a family member runs and they have used this method and it seems to work rather well for them before they used it there sales people would go straight in with the lowest tender to win the contract even if it was break even or worse they got commission on the job any way, were only a small engineering firm me and a couple off men a few cncs ect were using the no commission strategy at present just a flat wage company car and have got no were

You guys need to do what your business justifies. There is no right formula for everyone it seems like you guys want to make crap too complicated.

"Sales rep makes more than the owner" So? If you are the owner, are profitable and a sales rep is making more than you, I would hope you are ecstatic, that guy is a bad ass! Figure out what the rep does right and hire 20 more!

What exactly qualifies someone to do sales anyways? Not that I have a plethora of experience to draw on, but from the shops I have worked in I couldn't tell you one Salespersons name. Never even saw most of them, they didn't walk the floor or look into jobs/parts or anything that I had assumed is the job of a salesperson.

In my mind (and granted that ain't always exactly been in line with reality) A salesperson would be bouncing between Office, Engineering/Programming, and Shop Floor. Making sure that the company wasn't just sent up shit creek without a paddle. I mean checking the average time for metal removal on our machines by the cubic inch, figuring out a price per hole, how much does it cost us to drill and tap 1/4-20 holes?, how much more/less does it cost us to do M12x1.75 tapped holes? How much more expensive are the tools for running a widget in titanium than for running aluminum, do we even have the tools on hand to do it or are we going to blow the budget by purchasing some special crazy ass ground tool?

So many shops I have been in have complained about how we aren't making a great profit margin and I've seen thousands of dollars dropped into Machines/Pallet changers/etc. to try and increase spindle utilization. But the question I am always wondering is: Maybe we aren't bidding this shit right

Honestly around or less than $50,000 with commission, sounds pretty damn good. It takes some serious skill to hit that as a Machinist.

vettedude said:

You guys need to do what your business justifies. There is no right formula for everyone it seems like you guys want to make crap too complicated.

"Sales rep makes more than the owner" So? If you are the owner, are profitable and a sales rep is making more than you, I would hope you are ecstatic, that guy is a bad ass! Figure out what the rep does right and hire 20 more!

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if the rep is truly making more than you at the end of the day then something is wrong with the pricing and business model. Take into company profits, benefits instead of cash, etc... Rep should only be making a percentage of what the owner does. Now a weekly paycheck is something different. I have had plenty of times I am three or four on the list. I choose to leave a lot of cash in the company for it to stay healthy and live a simpler lifestyle.