The job description for remodeling salespeople is all over the map. A few spend all their work time selling, while many more combine selling with estimating, designing, and production management. Compensation schemes vary, too -- salary, commission, staged commissions, salary plus profit sharing, among others. For most remodelers who have salespeople (58%), annual compensation of an average sales position is roughly the same as that of a production manager. Of firms surveyed who pay commissions, 62% make them contingent on per-job gross profit goals. Some split "excess" profit 50-50, while others cap the commission at a specific dollar amount. A few reward salespeople 20% of gross profit, regardless of net profit earned, but these companies set a high goal of 40% GP. For a third of companies paying profit-based commissions, the commission trigger is 26% gross profit or higher (the low was 5%; the high, 41%).A few of the companies surveyed pay salespeople for self-generated leads. One pays 1/2% of the total job, capped at $500; another pays 1 1/2% of gross profit. Another pays an extra 4% on total job revenue. What's the most difficult issue in hiring, training, or compensating salespeople? How have you overcome it?
"Balancing base salary and commission. If the commission is too high, then decisions may be made that run counter to our philosophy of protecting the client. And if they're too low, the incentive is lost. It's the challenge we've had to deal with. The basis of a solution is ... to hire people of quality and integrity. Then a lot of your issues evaporate."
--Peter Schrader, Schrader and Co., Burnt Hills, N.Y.
"Getting a salesman to have realistic expectations as to how long it will take to learn the product, the service we sell, our company philosophy, our market outlook. Most salespeople are very ambitious and think they'll sell a million dollars in six months. We simply found that not to be the case. The solution for us has been to hire based on our expectations, not on the promises or desires the potential candidate is telling us."
--Michael Strong, Brothers Strong, Houston
"The most difficult issue with a new person is compensation during the initial hiring -- six months to a year. We put them on a small base salary and if they generate enough sales to warrant a commission, then that's what we do."
--Fred Bueler, Bueler Inc., Desperes, Mo.
"Figuring the different compensation plans with the salespeople was probably the most difficult thing because it's an ongoing situation. It also can create lots of problems when you come to final reconciliation. We take the sales price and reduce it by an overhead factor, then reduce by labor and material cost to get net profit. Net profit is split 50-50 with the salesperson."
--Doug Sutton, Sutton Siding & Remodeling, Springfield, Ill.
"It's difficult to find somebody who can sell, estimate, and design. So we're segregating those functions so that the salespeople will sell, the design section will design, and then we'll have an estimating department. However, it's a long-term goal."
--Craig Deimler, Deimler & Sons Construction, Harrisburg, Pa.
Commission as Percentage of Sales
don't pay commission* 33%
pay 1-3% of sales 18%
pay 4-6% of sales 13%
pay 7-9% of sales 18%
pay 10-12% of sales 10%
pay 13-15% of sales 5%
pay 16% or more of sales 5%
* Most of these remodelers are owners/salespeople, pay salary only, or pay salary with profit sharing or a bonus.
Size of Sales Staff
5 or more 16%
Firms surveyed that have sales staff 58%
Cell phone, pager ..... 83%
Flexible schedule ...... 82%
Company computer ... 78%
Education, training ..... 66%
Travel allowance ........ 47%
Expense account ..... 43%
Company vehicle ..... 33%
When is Commission Paid ?
At the sale 5%
At job completion 17%
When draws are paid 19%
Half at sale, half at close 38%
Average Base Pay
Up to $35,000 33%
$35,001 to $55,000 46%
$55,001 to $75,000 16%
$75,001 + 5%
* Other options: 25% at the sale, 25% at the start of work, 50% on completion; or, a weekly draw against projected commissions earned; or commission paid as job payments come in.