Joining a company to develop direct sales

[richofwombwell]

Hi all,

In need of some advice. I had been looking at setting up a b2b toner and ink dropshipping company that sells direct to businesses. Out of curiosity due to not gaving the capital to start this venture up I contacted a local company for a job but they had no direct sales set up but where looking to do so as there next point of expansion.

After a meeting with the business owners we left on thinking about payscales and pay structure. Now if past experience and performance in the industry is anything to go by i could potentially increase there sales by a 50-70% of what the company is earning at the moment in 2 years time.

I obviously want to be appropriatly rewarded financially for this but i have never been in this position before. Can anyone offer any advice ?

I have to look at commision structures, basic salary, bonuses everything ! Dont want to overstep the mark on it.

 

[Dan Angell-Collins]

Hey Rich,

I'd look at the basic being enough to cover all of your 'basic' requirements. As a guideline a good quality salesperson will have a basic of £18-£25k dependent on experience and be able to earn double as an OTE. It would be worth having an idea of what's the maximum business they can take on board each month and make that your 100% bonus/commission target and then scale it down on a % basis.

You could work on a commission basis and take a percentage of the value of the business you bring on (ie you bring on a contract for £3,000 monthly and they pay you 10% of the first months invoice) but that will depend on the average value of the business brought on and what their margins are.

In all honesty it will come down to what they can afford as it has to be making them more money. If your salary is £24k you'll need to be bringing in around £3k of new business a month to cover the cost of having you there. . . . .

Dan

 

[richofwombwell]

That's what I was thinking, I will be drawing up the commission structure as well as my own salary too. I just don't want to grow the company by 70% and only see a small return on that effort in the long run.

I was going to be looking at a staggered commission rate initially depending on what the monthly gross profit I brought in. so for example having a cut off rate of my monthly salary then upto 4k 15% 8k-12k 20% then 12k+ 22%.

If I essentially double the companies turnover would it be a far fetch to ask to for it to be put on a long term timescale to be awarded B "non voting shares" based on target hitting performance for the company ? Or to have the ability to become a sales director.

 

[richofwombwell]

Never been in this position before ! Pretty interesting place to be. Great opportunity !

 

[Dan Angell-Collins]

It is a great opportunity! If you want to become 'Sales Director' then you would need to ensure the company is benefiting more than you are. Sounds slightly backwards but the better the company does the more capital they will have to grow and therefore promote you and take someone on to replace your sales.

I would start it off with a good incentive for you to bring in some numbers and for them to see a high return and then review it after 3 months as they will be able to see the potential

Best of luck though as it's going to be tricky getting the balance right!

 

[richofwombwell]

My only drawback is that as they have an ecommerce platform too they have a desire to take customers away and put them on a reduced commission rate after a period of "ownership" by myself as an salesperson.

 

[Dan Angell-Collins]

That's not a drawback as it'll increase customer retention. From your point of view you'll only make commission on new business I'm guessing?? The more they retain the bigger the business and the quicker you can be promoted. I would have thought that the next step would be to employ a retention or client manager as if you grow the business by 60-70% it'll be worth them investing in that. Maybe you want to suggest that as part of the long term plan??

 

[richofwombwell]

I suppose so its probably a short sighted salespersons view but sales processed whilst the account is under my administration will be given at a higher rate than whilst at the companys administration. Ill be getting commission on all sales from customers I have generated.

There is abit of work to be done in the sales process as they have not had any telesales section and my experience is in one of there product lines so i will be gaining new business on the one product possibly and then expanding the account.

Alot to think about and plan out really !!

 

[richofwombwell]

All of the clients have a specific login with specific pricing too so i believe once the account had been developed i will be aiming to move them onto the online ordering system

 

[CloudAccountantcouk]

You could set up your own company and act as their agent to generate them business. They then pay you for the business you send them. You could then offer the same service to other businesses in other areas. You would need a contract saying they can't approach your clients directly etc. no risk to them except they may be better doing it themselves. Obviously you don't have the comfort of a salary at the start. Works if you could land some big accounts that they wouldn't have done without you.

 

[Paul Kelly ICHYB]

How much risk are you prepared to take?
Will you work without salary and get rewarded on sales only?
If the project fails, will you give compensation back to the business owner?
If not, do you want more than a salary and maybe a performance bonus??

Success or failure, a salary is guaranteed.

 

[GraemeL]

I was going to be looking at a staggered commission rate initially depending on what the monthly gross profit I brought in. so for example having a cut off rate of my monthly salary then up to 4k 15% 8k-12k 20% then 12k+ 22%.

This is almost certainly too simplistic, but without understanding the costs structure of the business I cant be sure. If the distribution costs per unit sale are high, or the cash generated per unit sale is low, there is much less gross profit available for commission.

Bad debts and account management costs also need to be factored in.

Personally, I think you would gain much more credibility by suggesting that you go on a fixed salary for 6 months. Then you agree an incentive program - possibly based on a reduced salary. Assuming you do well in the 6 months, that will give you a strong negotiating position and you will all know how much the business can afford to pay in commission. The costs (direct and indirect) of a direct salesperson are usually underestimated by business owners.

 

[richofwombwell]

I have gone into alot pf preperation with this, this model works with the product lines i have experience with selling which currently appropriates to 30% of current sales. I would not be asking for more than is generally acceptable as there needs to be monry going into the "pot" for future sales staff. i have a sales forcast for my original business plan and going on previous experience i was working to a 50-60% gp margin.

I dont want to put myself in an initial position of hardship or i might have well as just started up myself.