The question: How can an owner compensate a commercial sales person while maintaining control?
Steve’s answer: These setups almost NEVER succeed but if you insist, here are three recommendations.
Hello Steve,
Is there anything that you can point me to in the way of a compensation package for a commercial sales rep. I am not comfortable long term paying for someone to work without producing results. I have haphazardly started this position by agreeing to a salary with a draw.
It didn’t take long to start seeing some challenges such as:
1. Compensation: I want to support him while he works to get this division of the company off the ground but I want to move towards full commission.
2. Information: Technology makes it easy to store client info on a phone. I want him to have the info at his finger tips but protect my investment in obtaining this info. Whats the best way to secure the info? Non-compete contracts are difficult to enforce at best.
Thanks in advance
Trying to Improve in Topeka
You are smart to be thinking about this stuff now, Trying. (Actually BEFORE you started the arrangement would have been better but let’s move forward!)
First, just a general observation re: outside salespeople in the commercial carpet cleaning field. The vast majority of these arrangements are a complete and total DISASTER! Why? Let me count the ways along with a few ideas on how to avoid the problems:
The average cleaning industry outside sales person quickly becomes a “Loose Cannon” in three ways:
1. Wasting your time and money. Especially if you have him or her on a regular draw salespeople will often start inventing “busy work” (I call this stuff “Displacement Activities”) that is much more comfortable than facing the daily rejection of “cold calls”.
SOLUTION: Hold your salespeople feet to the fire by adding accountability every day. Set a reasonable goal on how many new documented contacts you expect them to make every week. (Hint: During your initial meeting setting up this arrangement get the new salesperson to come up with their own goal. Usually this goal will be absurdly high so right away you generously lop off 10 to 20 percent and you will look like a generous hero.) Hold people to this goal with a brief daily meeting. But actually abusing your generosity with a regular draw is the least of your sales person challenges. A MUCH bigger problem is …
2. Screwing up potentially good accounts through a generally bumbling approach.
SOLUTION: Insist on follow up. Have a “route book” where your sales person has to log in each contact with every prospect AND what their next step is going to be PLUS when they are going to do it. Then review these jobs by flipping through the route book on at least a weekly basis.
NOTE: I suggest a 10 minute early morning meeting as in “So whatcha got PLANNED for today?” and then an every Friday “Let’s sit down and analyze things” meeting. So now your sales person will have these daily and weekly “deadline meetings” hanging over them. So maybe they’ll get out there and PUSH instead of whiling away the afternoon shooting pool and drinking beer. (Actually that sounds pretty good!)
3. Under pricing jobs. The sales person’s temptation is to price each bid so low that you automatically get the contract. So of course their gross sales look great. BUT meanwhile you may be losing money on every job! This is bad enough on a one-time job but horrible if you are locked in to a long term contract.
SOLUTION: Tie their commission to the profitability of the job. (Of course, this means you will have to actually know if you are making a PROFIT or not but that is for another article!)
NOTE: Given all three very real problems above I’m going to stick to my guns and say for 95% of the carpet cleaning business owners out there (up to let’s say 20 employees or so) your “highest and best use” is being your own outside salesperson! If you do then make your time count by following my “How to Sell Commercial Work” Special Report. I’ll also mention if you want to clean up in commercial you really need to add encapsulation cleaning.
Now Trying, your second question appears at first glance to be about technology. (Bad news. I’m not a “techy” person! Sorry!) However, my guess is you are more concerned about security and especially what to do if the salesperson walks on you. (Or worse gets hired by your competitor or goes into business for themselves.)
Now the conventional wisdom on non-compete contracts is that they are unenforceable. That is normally true in low level positions like technicians. But when you are sharing privileged, confidential information with an employee a judge tends to view this much more seriously. Consult an attorney on this.
But an even better way to protect yourself is to have a close, trusting relationship with your commercial accounts along with running an efficient operation that lets you give low prices and still make a profit. That way IF your past salesperson starts soliciting your accounts your client will a) be offended at the lack of loyalty by your ex-employee and b) will be comforted by the new company not being to substantially under-cut your pricing.
And of course the third way to prevent employee defections is to both a) hire the Very Best People and b) treat them so well they would be crazy to leave. (I realize this is harder to do than say!)
Now I know what you are thinking, Trying. This sounds like a lot of work! I agree! In fact, doing it right with a sales person is actually MORE work than the owner just scheduling my suggested Dedicated Sales Morning once per week and just doing it themselves.
The temptation, Trying, is to just hire a warm body and sit back with a contented sigh now that someone else instead of you can suffer the abuse and rejection of the commercial market place. BIG MISTAKE! Once again, in hiring outside sales people I urge you to either do it right or do it yourself!
Steve
PS: Another comment re: Goal Directed Behavior. Right now you should be analyzing WHY you are hiring a sales person and WHERE you want them to focus their efforts. For example, do you want long term, regular commercial contracts? (Who doesn’t!) Then pay a bonus when a PROFITABLE long term contract is landed.
HINT: Pay the bonus out monthly over the first year which both protects you if the account leaves plus motivates the sales person to stay with you to keep getting paid! (Be sure to run this arrangement by your local attorney.)
I Think that outside sales people should be able to have the information that you need from them at their finger-tips at all times. They should show that they are able to produce the results that you need for your company before they are even paid, if they can not produce results they they should not be paid. I also think that meetings should be held with this person and your company, on how they plan to produce results for them should be held at least once or twice a week.
I’m not sure if this will help, but my company (I’m a contractor with a door to door sales team) is testing this app called “canvassmate.” The actual app launches sometime in late May or early June of ’12 and it’s free to use if you sign up on their website – http://canvassmate.com. Good luck!
I think the real question people need to answer, like many other positions in a company, isn’t “How do I pay them?” because that’s pretty simple. Pay them as much as you need to in order to make a profit and keep them providing results for your company. It’s a free market and not job is entitled to any amount. Whatever a person will work for, so long as you are meeting your profit goals, is what you should pay them. Just because Bob makes $XX doesn’t mean Jack should also. Whatever you have to pay the best workers to keep them, that’s what you should pay. The REAL QUESTION?
What does a REALLY GOOD outside sales person look like, act like, sound like? What skills do they have? What habits do they have? What information will they need to do their job well? What resources and tools will you provide them to help them do their job better?
It isn’t the toolbox that makes the carpenter, its the carpenter who uses the tools to their fullest potential.
In carpet cleaner terms, “A brand now high power truck mount won’t make you a good cleaner, but a good cleaner can do amazing things with a high powered truck mount.”
I love this website and after being in the industry for 20+ years I still spend quite a lot of time on here catching some of the latest trends and information. What I don’t understand is why is so much geared just towards carpet cleaning? I choose not to go towards that in my industry. I restore hard surfaces and offer a plethora of services besides our night contracts, that is true, but not carpet cleaning. So what about hiring outside sales for general cleaning contracts? How would that look? Pay? Commision? Etc?
Thanks for praising our website! We work really hard on it!
And I do appreciate your question, “Why is so much geared just towards carpet cleaning?” I guess it is sort of a “chicken and egg” thing and in which came first? 🙂 Just like you, many of our readers offer janitorial services, hard surface cleaning, floor waxing, etc. But one common denominator is almost all of our site users offer commercial carpet cleaning! (Possibly because properly done commercial contract carpet cleaning is one of the highest profit margins out there!)
So I COULD counter question you and ask, “Why don’t you get into this very lucrative service? Especially with ‘encapsulation cleaning’ start-up costs are low and employee training is easy!” 🙂 Or a more respectful response would be, “Virtually every single one of our over 1,000 articles we host on this site apply equally to selling and structuring ‘general cleaning contracts’! Just insert this phrase any time you hit the words ‘carpet cleaning’!”
Re: “Hiring outside sales for general cleaning contracts?” the principles will be much the same however the sales cycle will be much longer and the price pressures (low bids) will be greater. So this sort of salesperson will require closer management (accountability) by either you or a sales manager. Remember that “sales management” also involves morale boosting and general encouragement. It is a lonely and at times discouraging life out there on the front lines! I’ll try and come up with more thoughts in a future post! And thanks for the suggestions! 🙂
Ugh. I have to disagree with all of you. Having done multi million dollars in sales per year and watching my father do the same, I like the base salary + bonus approach. I would never take a commission only job nor have I ever hired someone on commission only. Commission only is hurting the consumer not helping them. What is “Bob” going to push the most? The most expensive thing he can. Doesn’t matter if the consumer needs it or not, he will just talk them into it with bogus reasons. Again, never have worked commission only nor been around anyone who has….and I’ve been around some very good sales people and much larger businesses than most of you have.
Chad I agree with you completely. A really good sales rep needs a base salary in order to clear their head of day to day issue. Offering a commission should drive your sales rep to work smart and hard.
As an experienced outside sales rep I would never accept a commission only position. You are basically saying, you’re skills are not worth paying for so prove it. Obviously if your rep doesn’t bring in new business consistently that person should do something else.
That’s my 2cents worth. Laurie Scovel
So happy I found this article. There was things I never considered. I was actually going to post an ad on kijiji before I found this. I think I will just do my own sales and closing deals.
Thanks!
Hey Kirk,
Don’t burn yourself out man. If you do your own books and office work AND you plan on selling yourself then you’re adding a ton of stress. If you can afford a sales person then I’d suggest getting one. A good one can make your life a lot easier.
Fifty years building my multi million dollar cleaning company in the San Francisco Bay Area, from the garage, to over 400 employees. My brother and I doing the work ourselves, then graduating to managing and selling ourselves. Then to hiring sales people, we tried all forms of compensation, making many costly mistakes. As we learned we failed our way to success.
So as a consultant now,I recommend the most effective “Win Win” approach we found.
We make a 3 to 6 month plan with the sales rep, paying a monthly salary to cover their basic needs, plus a profit on each account as we keep it.
We make them the Account Manager on their book of business to insure they keep their interest in their investment-” The Account”
As part of the out of pocket dollars we put out, they pay that back from their commission over time,until our out of pocket is zero
Moving forward, they build their book of business for themselves on a commission basis
We give them 25% of the profit every month, after all cost
I found this very interesting. Myself I started my cleaning business about 5 years ago after being a custodian for many years working for a school district. Got tired of the B.S. of it all. Decided to start up my own business but did it late in my life. Started it at the age of 59. I have been doing every thing myself from working the business to doing all of the sale work and the accounting. I am looking to expand now and was thinking of hiring some one to do the sale work based on commissions only. This gave me a lot to think about now.
Thank You
Larry Liles
The comment section has been very interesting. We are in the process of making an outside commercial sales person.