Sales Commission - how do you structure yours?

[GenOneClaire]

We're about to take on an advertising sales manager but the commission element is making my head hurt. I just wondered what you offered?

We're paying basic just above minimum wage and were looking at a straight 10% commission, but realise that this might not motivate in the same way that, for example, banded commission linked to turnover might.

Does that make sense? I have confused myself :|

 

[Shaun_Pearce]

5% for the first 40% of their target
15% between 40%-100%
33% when 100% of their target is done.

 

[GenOneClaire]

That's really helpful, thanks.

How do you work out their target? Is it breakeven point or more?

(sorry to be naive, I'm new to this element of the business)

 

[bigman]

Hi,

We pay commision generally on 2 schemes. We are in the IT sector as well if its helps.

We pay commision only so you would need to be self employed and for this we pay a 40% rate of the margin/profit. ie if a sale had £100 profit in it, the sales person would receive £40.

The most popular is a basic wage, usually a min wage level and commision on top based on the profit they generate for the month.

up to 3k profit - 10%
3k to 8k profit - 20%
8k upwards profit - 30%

Also usually throw the odd £100 in here and there at certain target levels of say 5k and 10k to give a bit more of an incentive.

Hope this helps.

 

[Richie N]

Really depends on the position and industry, some do it on turnover and others on profit.
I would suspect that a Sales Advertising Manager would want more than just above minimum wage, regardless of the commission scheme.

 

[daveashton]

Hi

This is all about ROI and there are many good web guides on this but as I do these for a living here are some very basic tips and please remember I do not know your business so these are template rules.

1 Gross margin target / 5 = OTE

so if they are to run a sales team the extra margin the team should do with the sales mangers help is divided by 5 to work out the managers OTE

2: have at least 2 incremental jumps i.e.

Gross margin target of 300K/5 = on target earnings of 60K ( how you split the basic and commision does not matter but most companies go for a 50/ 50 split i.e. basic of 30K in this expample.

so over the year this person will make an extra 30K for making you 300K gross margin (GM) or 25K per month for 2.5K commision

so in simple terms do not pay a flat rate for the 0-25K and put in a couple of nice steps to motivate the sales manager i.e. 0-5K nothing as this covers the persons cost and then 5-10K x % 10-18K Y% and 18-25K z% and if they do over their target pay another 10% ish on top as this is money you were not expecting

 

[downsouth]

so over the year this person will make an extra 30K for making you 300K gross margin (GM) or 25K per month for 2.5K commision

Whilst these are only guide figures, would you think these are fair figures given the extra 300K GM the sale person has brought in

Do you think its fair to offer 10% of the GM?

It looks ok if its only 3-6 deals to bring this amount in,(50K-100K per deal, relative minimal effort) but if they person has to close 20-30 deals then the effort is much larger,

Do you feel the sales person deserves more?