Ways to Pay: Your Company's Pay Plan Must Move Sales

How and when you pay salespeople plays into how motivated they are to sell the next job

Burr Roofing owner Bob Priest found a way to make money on all jobs. He deposits 70% of the sales commission in a draw account the Monday after the sale clears. But at Burr Roofing, in Darien, Conn., the commission is paid on the gross profit of the job rather than on the actual sale price. Payment is made after the job has cleared the “firewall” of rescission and credit checks and has been scrutinized line by line to ensure that the company is meeting margin goals.

“[Our system] has evolved,” Priest says. “We used to pay a base and a commission. Then we went to straight commission.” From there the system moved to its current form, with commission paid on gross margin. The idea, Priest says, is to compensate people for doing what you really want them to do. “I don’t want them just putting volume on the board,” he says. “I want them putting profitable volume on the board.”

Pay As You Go

Other companies too have become far more vigilant about margin requirements. “We don’t get excited about anything but profit,” says Joe Percario, owner of Percario General Contractor, a 50-year-old company in northern New Jersey. Percario GC pays the company’s four salespeople “cash in and cash out.” That is, once the “100% expedited” job clears, reps get the percentage of their commission on that portion of the job the homeowner has actually paid. So if it’s a $20,000 job and the rep collects a $4,000 deposit, he is entitled to 10% of that deposit. “He makes money just as fast as we make money,” Percario says. “Everybody’s a partner.” Among other things, he points out, this system motivates salespeople to ask for the deposit, which is something they’re sometimes hesitant to do.

Staying Hungry for Sales

Like many company owners, Kip Lee, owner of The Window Man, in Savannah, Ga., is not a fan of draws. He advises paying salespeople up front. Putting money in their pocket as soon as it’s in yours, rather than dispersing it as a series of draws, “keeps the hunters hunting” (i.e., selling), Lee says. In addition, “that way they’re not trying to manage the job to get you to install it as quickly as possible” so they can get the remainder of their commission. “You sit down with salespeople and they prove to you with photos and their estimates that they sold it at a proper price,” Lee says, then you write a check.

Lee recalls his own days as a salesperson when “mystery Friday” would arrive. Salespeople were never completely sure how much their check was going to be for, and they often ended up disappointed. Then “they burn through leads because they’re mad at the company,” Lee says.

—Jim Cory is editor of REPLACEMENT CONTRACTOR. a sister publication of REMODELING.