I have a few comments and small disagreements of my own.
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Originally Posted by SandOtter
I just had to pipe in as a former salesperson...
A commission should reflect a good-faith estimate of the value of each components input and benefit from that input. Ask yourself this, did you deserve the residual profit that you got when handling these accounts by yourself, regardless of how long they were with your company?
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I don't think this is a fair question. fisher318 owns part of the company with his two partners. Of course he deserves the residual profits from his clients. This can't be disputed.
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Originally Posted by SandOtter
Why shouldn't your new salesperson benefit too? I look at it as income you would have never received if not through the salesperson's effort. With a continued residual commission equal to the starting commission, a salesperson would then be invested in that client remaining a client long-term, rather than be in a perpetual search for new clients for that larger commission.
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Whether the salesperson realizes it or not this is a team effort. He can bring all the sales in the company can handle. If management is incompetent or makes poor business decisions he may still be out of a job. I agree that sales people should be compensated fairly. I don't think they should be given the keys to the company vault.
If the sales person is going to be the main point of contact for each account s/he handles then I would agree that commissions should remain constant and even a salary be paid. For example, if you were selling car parts for a manufacturer to a car parts supply chain. The sales person would be in constant contact with that client. S/He would deserve INCREASED compensation the longer this business remained a client and the more product they purchased.
I don't believe this is the case for fisher318's business. He is providing a complex and involved SERVICE. Once contact has been made with the client and services arranged the account is handed over to the people completing the services. As this is a long and involved process, constant contact and account manipulations (service changes etc.) are suggested and explained by the employees providing the service(s).
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Originally Posted by SandOtter
At least consider structuring the residual commission so that they increase over the years they are with your company. That way, the salesperson will naturally hang onto the clients that pay a larger commission and would be happy to turn over less productive accounts to new salespeople for them to build.
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Again, in this business (SEM services), I don't see this being a fair payment structure. Using this stucture the sales person may consider it, at a certain point in time, more important to keep his existing clients then to find new clients.
As a side note clients don't like being shifted around to different point(s) of contact (especially if you're being handed off to someone new(er) in the company).
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Originally Posted by SandOtter
Please keep us informed of the outcome...expecially long-term. I'm curious if you will see short-term benefits with long-term client loss. And a higer turnover rate in salespeople. Good salespeople are a treasure that keeps on giving. After all...they're just tryin' to make a good living too!
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I don't think that customer retention should be the responsibility of the sales team. The sales team should go out and get sales. Account managers should look after the interests of the client and keep them happy. Account managers are liaisons for the clients that keep the wheels turning. Poor sales techniques will obviously hurt the account managers ability to do their job successfully and vice versa with other departments.
fisher318 has a smaller company and currently he and his partners are the main (only) points of contact. If he wants to unload that responsibility onto his sales people then I suggest he pay them a salary plus commission.
But from his original post he said these sales people want to work for straight commission. They want to sell... For this reason I think a sliding scale (decreasing over time) payment structure is appropriate.
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Originally Posted by SandOtter
(Sorry Compu, I'm not trying to insult you, just honestly bringing up how my idea contrasts with yours in this one, small area.)
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No offense taken. We're all entitled to our opinions. Expressing them helps us learn from others and even helps shape new ones!
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Originally Posted by jawn_tech
Great post, SandOtter.
Offers great insight to fisher318 and anyone else what to consider and expect when working with a sales force. If you want a salesperson of high caliber, it's much more profitable to offer good incentive than to merely offer to throw someone a bone and ask them to go out and bring in large accounts.
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I agree. You definitely get what you pay for. From what I understand it seems like fisher318's friends want to work strictly as sales people on straight commission. This sounds more like an affiliate than an employee. Therefore they get paid accordingly.
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Originally Posted by jawn_tech
Like I said, you get what you negotiate. Don't limit yourself to thinking you'll never go higher than paying peanuts if you really want your company to grow.
Again, take your own hours involved in the "work" of the project and pay yourself accordingly, and consider that as part of the cost. The commission comes from the profit (not cost of the work), and better to have the sales person get a good share than to find yourself without the account completely.
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The commission becomes a cost of the work. Tracking commissions and paying commissions involves some level of work. There are costs associated with that work.
No matter what agreement you settle on make sure you're comfortable with the amount you'll be paying and plan your cash flow accordingly. Residual commission checks only get bigger (if your sales team is doing their job)...