Instead of rewarding sales volume, Stebnitz Builders pays its five salespeople a commission based on the gross profit each job earns. "This format keeps the salesperson as interested in the profitable outcome of the job as the owner," says Gary Stebnitz, sales manager for the $4-million company in Delavan, Wis. "It doesn't matter how much a person sells if it comes in less profitable than the company needs."
In addition to selling, salespeople are responsible for estimating (using HomeTech), choosing subs, handling simple designs (more elaborate designs are subbed out) and client selections, and assembling the job notebook for production.
If a completed job shows a gross profit of 35.5% (a 55% markup), the salesperson receives 25% of the gross profit as commission -- approximately 8% of the sales volume. With a gross profit of 31% to 35%, the salesperson receives 15% of the gross profit produced. All salespeople have the opportunity to enhance their commissions by selling jobs with a gross profit above 35.5%. If they do, they receive the 25% commission, plus 40% of the additional gross profit. "With this system, we find that the majority of our salespeople average significantly higher than the straight 8% of sales," Stebnitz says.
At Stebnitz Builders, salespeople are paid straight commission with no base salary and no other benefits. New salespeople receive a draw against future commissions up to a limit of $5,000 and six months. After that, either they begin earning enough commission to pay back the draw or they leave.
"Hiring salespeople is one of the most difficult parts of this business," Stebnitz says. "There are plenty of not-so-good salespeople out there. This system helps everyone decide when it's time to move on." --Victoria Downing is president of Remodelers Advantage, Fulton, Md., (301) 490-5620, firstname.lastname@example.org.