Sales Rep Commission Percentages

[cyclesmith]

Hi Guys,

I'm doing a bit of research regarding sales reps' commission percentages. I have started a company with a partner and we specialise in accounting, IT and OHS & Fire Safety. We will add more divisions later on. I'd like to pay a basic salary + commission based on a percentage of monthly sales to a sales rep. What are some of the percentages your companies pay/ what remuneration packages do you offer to your sales reps?

 

[noob_saibot]

Hopefully this isn't your first and last post...

There are 2 broad ways of paying commissions.

You get the high and exponentially-declining structure

AND

The low but recurring structure.

AFAIK, when there was a sim card boom (around 6-8 years ago) the structure was low but recurring for many years. So if you sold 10,000 sim cards, you'd still be earning a % of proceeds from each sim.

I'm not quite sure what your company specializes in, as IT and accounting are 2 very broad and very different fields. Both also seem service-orientated, unless you're selling software.

If you are selling software, you'd probably want the high and declining structure over 6-12 months for sales reps.

Other people may have more value/insight to add to what I have said.

 

[Shoaybd]

The best method is where you give them a target linked to their basic salary and commission % after they reach the target.

In the IT world for eg. GP Target is normally minimum 5 times your salary. But the best way is to base the salary on Gross profit. If you are selling services then you know your margins are high so you can just give a % of sales. On products your margins are small and discounts are given eating away your GP so you would give a GP target.

Commission % is normally industry driven. It can be on a rising scale, so for eg fist 100k = 5%, 100-200k = 7.5%, 200k plus 10%

 

[cyclesmith]

@noob_saibot I just never took the time to register, so there'll be more posts as I am registered now!

We're selling both services and products, though I want the rep to focus on the OHS division. I was thinking about different tiers/ scales, i.e. the bigger the volume of sales the bigger the percentage, or something like that. My biggest concern is just to compensate the rep with a fair remuneration package. I'd rather have them grow with the company than have a different rep every so many months. I don't want to "financially strangle" whoever takes the position, but I also don't want to get it wrong and end up paying most of the profits in commission.

Thanks for the comments so far - three heads are better than one!

 

[noob_saibot]

I don't mean to criticise what you're doing, but your company is providing too many different services to other companies.

Unless you are focused on the SMME market where you consolidate the systems into one, it seems like it would be better to focus initially on a max of 2 sectors and focus strongly on either a product or service or a product that comes with services.

That is just my opinion though, and you are welcome to disagree about it.

 

[cyclesmith]

@Noob_saibot that is actually the whole idea. We focus strongly on the smme market, especially the small and micro businesses. Thanks for the input, I appreciate it!

 

[midnightcaller]

I don't have a solid understanding of the products and services that your business sells.
However , one need to consider what one is incentivising

Hunter - goes after new business. Often different tactics applied to win the customer over from a competitor. Depending on the type of product and service, this may have a long/ short sales cycle. The cost of acquiring the customer must be considered.

Farmer - after winning the customer there may be ongoing account management. Cross sell & up sell of products and services. Here the cost if maintaining the customer is different from acquisition.

Depending on the stage that your business is in, one will need a mix of hunters and farmers.

You can get one person that does both hunting and farming. The remuneration of hunters and farmers may be weighted differently to get the desired revenue mix (lump sum vs annuity) for the business.