How can I determine how much to pay a salesperson?
I have been in business for about a year and need to add a Marketing/Salesperson (Relationship Specialist) to my team. I am looking to hire a Relationship Specialist to sell Medicare services to senior citizens in retirement communities. I'm not sure what I should pay someone for this position. I was thinking an hourly base plus commission. Any thoughts?
Thank you in advance for your time and help.
Do you know your margins? Once you know that you will be able to offer your Marketing/Salesperson/Relationship Specialist a choice: 1. If that person wants less risk but some upside for performance (meaning generating measurable cash flow) then hourly plus is the solution. 2. If the person is shown an increased potential for being willing to take more risk for a higher upside potential then straight commission would be his/her choice. But either depends on what kind of volume can be created with your product or service. I just know that I heard wonderful words when I went to work for a company years ago that offered a draw against commission. The draw was minimal and deductible from earned commissions; but my boss said "We've got it figured out so that I can honestly say that I hope you make a ton because the more you make the more we make. So I'll do everything I can to help you make a fortune. " Those words inspired me to make really good income and become National Salesman/Recruter of the Year. Hope this helps.
You may want to consider sharing resources for a target customer segment but for a different product offering. For example, we are trying to reach out to healthcare providers, ACOs etc., to help them write interface programs that could help them bring together various software platforms. We are also in a early stage and thinking about ways to contain costs.
see what your competitors are paying- try and "steal an experienced salesperson.
Richard Stern-Suggest you find a person who has experience in your industry. If you find someone tyou think is right have them write a Sales and Marketing Plan to sell your service.
If the Plan looks good suggest a base salary and commissio. Based on the rate once the person breaks even then strictly commission.
Suggest contacting Unemployment department and find out what the base salary is for the sales positio.
Use this as a starting point.
For your additional question, commission can be a percentage or a fee per or a sliding scale (ie $100 commission for a $1000-2000 sale, $200 for 2-5,000, etc.)
There are a million formulas and they can all be good if it benefits both parties I'd counsel a couple of things that are key to having a good sales person as well as a metric.
- Know how important is how much revenue? Can you satisfy unlimited sales, would you have to pause to grow in operations at some level? Your target should be supported in a business plan not just getting "more"
- Businesses that skimp on sales compensation get what they pay for. Sales people who can sell can sell anything so the better ones go to where the money is.
- Know the value of a new sale to you based not on revenue but on profit. Compensating on pure revenue may not be as beneficial as looking at it from profit.
- Some industry "norms" in a very flexible world might be 10% of revenue or 40% of profit.
- Sales people will generally do what they are paid best to do so your pay structure needs first to attract and then retain a professional who is guided by compensation to do what is best for your business
- If you think industry knowledge, contacts are most important consider investing in sales training if you don't have a seasoned pro, you can build a time commitment into your hire if you are investing (just like paying for a degree and getting time back).
- You must manage a sales person or be prepared for failure. I teach clients not to manage sales people on revenue, compensate them on money, manage them on behavior (how many appointments, follow ups, prospecting targets, etc.)
Even if you are tempted by commission only, be sure you don't fall foul of any minimum wage legislation i your jurisdiction.
The same goes for working hours and though it doesn't apply yet, benefits, such as pension contributions – for instance, auto enrolment applies to ALL companies in the UK after 2017.
An hourly basic or equivalent hours salary is sensible and you py for experience and intellectual capital.
Operating a sliding scale along the lines suggested is also very sensible, as a simple treshold is open to abuse if there is any discretion over discounts when the month end approaches.
A low hourly base with a commission with performance bonuses is a great structure for salespeople. If they're building from the ground up and not coming into an existing territory, you can do a diminishing base so that they are covered for breaking virigin ground within a territory and have something to live on while they build the basics. If the territory is already in existence and they are stepping into some existing accounts, then a small base with commission on their sales seems to be a good combination.
The type/level of compensation may also depend on if the company will be providing leads to the sales person or they will be self-generating leads. If you are providing qualified traffic, fixed cost can be less with higher variable (commission). Remember, a list of retirement communities is not a lead.
I agree with many of the answers below. I would probably hybrid some of the answers to find the best solution. I would pay a starting salary possibly around minimum wage, and pay commissions above that wage. However i would clearly define how the commissions will work in progression with goal achievement. I would also make sure they have proper sales training if you do not hire a experienced individual.