Commission only sales (financial, profit, organization, pay)

[BJBoxcars]

I'm looking for expertise in terms of marketing:

We have been selling a very specialized scientific calendar to the Minnesota Dept of Health since 2003. We are now looking to broaden our efforts to sell it to other state depts of health, drug companies, medical eqpt manufacturers, etc.

I've put together a business plan, had it reviewed by someone in sales and am now attempting to hire 3-4 salespeople with experience.

However, the sales plan is set up as commission only, plus bonus. Someone can make $50,000 or more their first year in what we believe is a very doable volume, with decent increases year to year assuming repeat business plus new accounts. (~$90k the second year)

First question (to the sales/marketing gurus out there): Is it realistic to expect someone to sell commission+bonus only? They would be selling out of a home office, covering their own costs.

Second Q: What's the best way to find those salespeople? They can be from anywhere in the country as this would be sold primarily over the phone.

Thanks for any input.

[sunsprit]

Common places to reach independent manufacturer's sales reps would be industry trade journal classified ads, trade shows (reps wanted sign in booth), referrals from other reps, or sites like Monster.com.

As an independent rep, I prefer straight commission sales work. Be sure you know what comparable sales jobs are paying for commission structure so you are competitive in attracting and retaining active reps. The last thing you want is to award a sales territory to somebody who just puts your line in a briefcase and doesn't show it when they have more profitable lines to show their clients.

Be prepared for your reps to have other ... non-competing ... lines.

[studiobtm]

Keep in mind that it is very easy for the owner of the product to over estimate how successful even good sales people will be - Unless they are actively involved in sales themselves and have real world experience. Heck - it just sells itself right?

You want me to work full time for a year and only make $50k on a pure commission structure? No thanks. You're probably are not going to attract good sales people at that rate. And poor sales people just drain time and energy and money with nothing to show for it.

I have been involved in all aspects of business including sales. In my opinion the most important component of most businesses is good sales. By far.

I would restructure your pricing so you can afford to double your intended commissions. If you have a good product and you provide good training to your reps the higher price wont matter that much. But the ability to highly motivate your sales force will make a huge difference. Treat them well and they can make you rich.

[sunsprit]

Originally Posted by studiobtm

Keep in mind that it is very easy for the owner of the product to over estimate how successful even good sales people will be - Unless they are actively involved in sales themselves and have real world experience. Heck - it just sells itself right?

You want me to work full time for a year and only make $50k on a pure commission structure? No thanks. You're probably are not going to attract good sales people at that rate. And poor sales people just drain time and energy and money with nothing to show for it.

I have been involved in all aspects of business including sales. In my opinion the most important component of most businesses is good sales. By far.

I would restructure your pricing so you can afford to double your intended commissions. If you have a good product and you provide good training to your reps the higher price wont matter that much. But the ability to highly motivate your sales force will make a huge difference. Treat them well and they can make you rich.

That's why most independent sales reps have more than one line in their bag.

I've got several that only net $3,000-7,000 per year, on average ... but they're niche products that complement my main lines, which do pay in five figures.

[golfgod]

sunsprit hit the nail on the head. I spent almost my entire working life as an indpendent mfgr's rep. I would NEVER take any kind of (especially sales) job for anything but straight commission. That way I know I can never be under, or over paid.

golfgod

[studiobtm]

I don't disagree with either of you but...

The owner is figuring $50k working full time. Reality is probably $25k working full time (maybe not - but I have seen this situation repeatedly). That makes it not worthwhile as a side line. That means no product gets sold. That takes a company that might have a great product - no where.

If nothing else try this. Keep your current commission schedule. But advise your reps that there will be a bonus equal to the commission on the first xx sales. That will motivate them to SELL. If / when they hit the xx mark, re-evaluate and adjust the bonus to something that works for everyone for the long term.

I'm involved in the software business. A good niche product usually has a lot of room for price adjustments. Use it.

[studiobtm]

Oh and I wasn't denigrating pure commission. You misread that comment. Top level sales people prefer 100% commission.

[sunsprit]

Originally Posted by studiobtm

I don't disagree with either of you but...

The owner is figuring $50k working full time. Reality is probably $25k working full time (maybe not - but I have seen this situation repeatedly). That makes it not worthwhile as a side line. That means no product gets sold. That takes a company that might have a great product - no where.

If nothing else try this. Keep your current commission schedule. But advise your reps that there will be a bonus equal to the commission on the first xx sales. That will motivate them to SELL. If / when they hit the xx mark, re-evaluate and adjust the bonus to something that works for everyone for the long term.

I'm involved in the software business. A good niche product usually has a lot of room for price adjustments. Use it.

I suspect that the software business is predicated upon intellectual property which is then sold where the "hard side" of the business is a minute portion of the cost of product ... as opposed to hard goods which have an entirely different cost of product basis.

"good niche products" in the hard goods line don't have a lot of room for price adjustments if they're competitively priced to begin with.

As pointed out, it's unlikely that a calendar manufacturer with one product to sell can justify a rep's full time effort ... hence keeping more than one line in the sales bag when calling on clients ... and maintaining multiple income streams. I sure wouldn't mind having a line that added $25K to my income ...

[BJBoxcars]

Thanks for all of your input. The commission level of $50k is only a basic level of volume that I believe can easily be reached. I wasn't suggesting someone working full time can only earn that level of compensation.

On the other hand, I hear loud and clear (and agree) that an owner often overestimates how successful a product could be....even with good salespeople. Only time'll tell.

Sunsprit's comment about a rep selling multiple lines that complement each other would be great. The question is what other lines might be complementary for someone selling such a product? Any suggestions?

Thanks for all of your input. For a financial non-sales guy, it's been helpful.

[sunsprit]

Originally Posted by BJBoxcars

Thanks for all of your input. The commission level of $50k is only a basic level of volume that I believe can easily be reached. I wasn't suggesting someone working full time can only earn that level of compensation.

On the other hand, I hear loud and clear (and agree) that an owner often overestimates how successful a product could be....even with good salespeople. Only time'll tell.

Sunsprit's comment about a rep selling multiple lines that complement each other would be great. The question is what other lines might be complementary for someone selling such a product? Any suggestions?

Thanks for all of your input. For a financial non-sales guy, it's been helpful.

That's why you need to try to reach the reps who are now calling upon your targeted clients with other products. Let them tell you what they have to offer your company ... in terms of representation and prospective sales calls.

Then it's up to you to decide if your company is getting the market exposure through direct sales contact that you want. If you see a conflict, or don't believe that the rep will be able to devote the efforts and time you want ... it's your decision to hire or not.

I've done everything as diverse as electrical/lighting products while also rep'ing industrial polymer/epoxy products, with a major addition of epoxy/urethane flooring systems. Even got hired ... after a long selection process with psychological testing, hands-on site training with cold sales calls for real-world sales skill testing under my regional manager ... for industrial fasteners and supplies by another company. It truly was a great "fit" as an add-on product line to my time in front of a client. Sadly, I enjoyed their product line and presenting/demonstrating it to my client base ... but it was a terrible fit for my time management and the expectations/demands of the company. We parted company after 8 months ... they had a rigid guideline of 8 sales calls per day exclusively with their product line, and their sales model was the founder's work ethic of 7 days per week sales contacts. In my territory, it's not unusual to drive for hours to visit one or two clients ... with no prospective sales calls in-between due to our sparsely populated area in the Rocky Mountain states ... so their expectations were inflexibly geared to high-density industrial city areas. I'd been very upfront with them about what my other product lines were and who I was calling on ... their initial reaction was "that's OK", but the reality when I went out into the field was that I couldn't meet their expectations. Unfortunately for them, their product line is in a competitive market with a number of major players and there's enough loyalty to those lines so that a rep could not sell enough of their product to sustain his sales efforts on the one product line alone. A rep needed to have other lines to justify the time/expense of the sales calls; I actually did pretty well with the line, but the home office unreasonably interpreted that to mean that I could do that much better if I didn't use my time for the other products in my bag. What they didn't understand ... or refused to accept ... was that the other product lines where what allowed me the ability to show their product line, working from my base of client relationships and established sales.

I mention this because it takes a bit of creativity and client base to find what works ... and what doesn't ... in the rep business. That rep is your "face" to your prospective clients, and is working at relationship based sales. If that's what it takes to best market your products, then you need a rep sales force. If your item can be sold as a commodity item factory direct via flyers, advertising, emails, trade/industry organizations, etc. ... then you don't.