Sales Commissions Earned

Are you a salesperson? Are you a business owner who pays commissions to salespeople? Depending upon  your role, you may have a very different perspective regarding commissions.

Today, many salespeople are not paid a salary, rather they are paid a percentage of the gross profit earned on each sale. Some may remain a part of a company benefit program including health-care plan, expense allowance, 401K, cafeteria plan, etc..., but are frequently not considered a salaried employee. Many other salespeople earn a larger share of the gross profit, hence are responsible for their own expenses, benefits and tax payments. Most of these are considered 1099 agents rather than employees.

Whichever applies to your situation certainly influences your attitude towards commissions earned. I have spoken with some business owners that consider salespeople a necessary expense and not an asset. These are typically somewhat reluctant to write those commission checks each month, seeing cash going out the door but not certain if the salespeople are actually worth it. Others see salespeople as a critically important component to the success of their company and enjoy writing large commission checks, knowing that the growth and profitability of their business hinges upon the performance of motivated and inspired salespeople.   

As a career salesperson, I have strong feelings about commissions and an important message to all business owners who utilize salespeople to penetrate new markets and grow the customer base. Here is my recipe for a win-win pay-plan that works well for both the business owner and salesperson alike:

1. Keep the pay plan very simple.
2. Avoid conditional circumstances to generate commission.
3. Salespeople want to earn money. Motivate them.
4. Dangle the carrot. Top performers will go for it.
5. Pay commissions promptly.
6. Inspire salespeople. Let them know that you are anxious to pay them the big bucks in return for big, profitable sales performance.
7. Owners: Show appreciation and respect for your salespeople.

"In effect, the sales rep has created and enhanced the business cash flow, and is being paid what she is worth to the organization. Not many other jobs can make that bold claim in an objective way. Low level sales producers receive low amount pay days. Bottom producers are not worth what they are paid as they don't add much revenue or new customers for the company. Star performers earn their commissions and bonuses" says Wayne Hurlbert at Blog Business World.

The end result is that happy, inspired, motivated salespeople will generate far more sales, more profit and greater growth for the business, bringing smiles to the faces of both the business owner and salesperson alike!

...........................
Daniel Sitter
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Comments

[Steve Roesler]

Hello, Daniel,

Glad to see your post on compensation. For those of us who are self-employed--therefore, are in sales--percentages mean a lot.

You sparked a thought about another sales compensation "trick" that I've seen and that is insidious.

It's the one where someone builds up a territory, then gets "moved" to a less profitable territory and loses income as a result. A new sales rep is introduced to the "old" territory and the cycle continues with the company benefiting.

Those who built the business not only aren't rewarded, but are punished for their success.

Keep writing...

[John]

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[sales commissions]

If I had an idea to sell a product based on an idea, would I be selling more the product or more the idea?

Sorry for such a complex question, try your best to answer it.