Using round numbers here for ease of calculation. Say you're in sales and selling around $5MM annually. After you've paid all associated overhead (COGS, shipping, rent, vendors, travel, etc.) your profit is around 20%, clearing about $1MM for your employer. What would you say is a fair compensation percentage for your salespeople? Scenario 1 would be a base + commission/bonus. Scenario 2 would be straight commission. Appreciate any helpful feedback here. TIA.
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Sales Compensation
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Last: 3 yr ago by lawless89
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Micropterus said:
Using round numbers here for ease of calculation. Say you're in sales and selling around $5MM annually. After you've paid all associated overhead (COGS, shipping, rent, vendors, travel, etc.) your profit is around 20%, clearing about $1MM for your employer. What would you say is a fair compensation percentage for your salespeople? Scenario 1 would be a base + commission/bonus. Scenario 2 would be straight commission. Appreciate any helpful feedback here. TIA.
What's your industry?
What's the total revenue and EBIT of the company?
What's the relative cost structure when compared to peers?
What cycle is this company in? Growth? Infancy? Decline? Rebirth?
Mostly Foggy Recollection said:
What's your industry? Chemical
What's the total revenue and EBIT of the company? ~$100MM. EBITDA is around 18% ?
What's the relative cost structure when compared to peers? Expound pls.
What cycle is this company in? Growth? Infancy? Decline? Rebirth? Growth
Micropterus said:
Using round numbers here for ease of calculation. Say you're in sales and selling around $5MM annually. After you've paid all associated overhead (COGS, shipping, rent, vendors, travel, etc.) your profit is around 20%, clearing about $1MM for your employer. What would you say is a fair compensation percentage for your salespeople? Scenario 1 would be a base + commission/bonus. Scenario 2 would be straight commission. Appreciate any helpful feedback here. TIA.
$200k plus benefits seems fair. I've been in sales for over 20 years and an average sales rep should make $100k, above average $200-250k, and top reps $300-400k +
A lot of variables out there, but that's my 2 cents.
What industry are YOU in JimSA?
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Micropterus said:Mostly Foggy Recollection said:
What's your industry? Chemical
What's the total revenue and EBIT of the company? ~$100MM. EBITDA is around 18% ?
What's the relative cost structure when compared to peers? Expound pls.
What cycle is this company in? Growth? Infancy? Decline? Rebirth? Growth
If one's relative cost structure is weak compared to industry peers, sales compensation becomes a highly debated subject amongst the C level.
I'd probably have to look at Operational Metrics (if you're private, this becomes nearly impossible for me) versus your company's industry peers to give a well rounded answer, but my guess based on your answer of the company being in a growth stage, is that they have tolerance for risk and thus should tilt to the higher end of the industry spectrum.
In my industry, and more importantly, salespeople at my company, get a choice between full commission and salary plus commission.
The full commission reps range between 14-17%. The salaried reps start at 75K with a 7% commission. An average rep pulls in 1.4M in Gross profit. For a full commission guy at 17%, that's 238K take home. For a salaried guy that's 173K.
My top performers are over 2M in GP a year and one is at 3M.
So I do have one that is over a half mil, gross and have had one gross between 650-700 during the height of the shale development a few years back.
I'm in the Industrial Goods sector.
Based on what you are laying out for 20% EBIT.
Scenario 1: base salary $100K, 2-3% commission on revenue.
Scenario 2: 6-7% of revenue.
Scenario 1: base salary $100K, 2-3% commission on revenue.
Scenario 2: 6-7% of revenue.
Around 14% of GP here. Electrical industry
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TwoMarksHand said:
Around 14% of GP here. Electrical industry
I bet I could get 5 guesses and correctly guess your employer
Mostly Foggy Recollection said:TwoMarksHand said:
Around 14% of GP here. Electrical industry
I bet I could get 5 guesses and correctly guess your employer
If you had time, you could sleuth my history and get it with one guess.
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TwoMarksHand said:Mostly Foggy Recollection said:TwoMarksHand said:
Around 14% of GP here. Electrical industry
I bet I could get 5 guesses and correctly guess your employer
If you had time, you could sleuth my history and get it with one guess.
Yeah, I don't have that time, but my guess is you work for an electrical distributor and one I know pretty well.
COSCAG67 said:
What industry are YOU in JimSA?
Commercial insurance and retirement plans
JimSA, could I shoot you a quick email? I'm looking for some pointers on that industry.
Thanks, you can take it down if you'd like.
FWIW when I was in outside sales in the mechanical power transmission industry, outside sales guys were paid 20% GP and we had healthcare and some 401k match.
Not sure how competitive that was in the industry
Not sure how competitive that was in the industry
Realizing how bad my comp plan is compared to some here.
2011 - 2018...avg around $11 million revenue and close to $1.8m gp per year. Salary + bonus together grossed about 7% gp.
2011 - 2018...avg around $11 million revenue and close to $1.8m gp per year. Salary + bonus together grossed about 7% gp.
Aggie95 said:
Realizing how bad my comp plan is compared to some here.
2011 - 2018...avg around $11 million revenue and close to $1.8m gp per year. Salary + bonus together grossed about 7% gp.
You're absolutely getting ripped off.
I guess I would just make one point that comes to my mind when it comes to sales compensation. Some sales jobs are way harder than others.
At my previous job, I was cold calling companies and trying to grow accounts to develop my account list. It was pretty tough sledding going up against much larger companies who had national agreements at basically every marquee account. I feel like in this situation, the seller is really earning their pay and deserves a good chunk of the profit that wouldn't exist without their efforts.
But we all know there are also sales jobs that are a piece of cake. Some companies dominate their industry and the salesman is basically just an order taker. I think it's reasonable to consider this when putting together a comp package
At my previous job, I was cold calling companies and trying to grow accounts to develop my account list. It was pretty tough sledding going up against much larger companies who had national agreements at basically every marquee account. I feel like in this situation, the seller is really earning their pay and deserves a good chunk of the profit that wouldn't exist without their efforts.
But we all know there are also sales jobs that are a piece of cake. Some companies dominate their industry and the salesman is basically just an order taker. I think it's reasonable to consider this when putting together a comp package
I've been out of sales for a while, but from '14-'17 I averaged nearly the same salary+commission/bonus as you, with $3 million gross sales and $600k gross profit. We had proprietary products with great incentives tied to them that I pushed hard, that bonus usually matched my commission.
I'd be number crunching pretty hard if I was you, not sure what your industry is like but it certainly sounds like you're underpaid.
I'd be number crunching pretty hard if I was you, not sure what your industry is like but it certainly sounds like you're underpaid.
Irrelevant data point....former co-worker's husband is in plumbing sales and she never has to work again. Dude has been killing it for years and just keeps making more and he's 100% commission. DFW housing boom.
Thanks guys; lots of good information shared. Aggie 95, I was in a similar situation as you - I left. And I was in one of those sales roles where you bust your ass to 1) sell a product and/ or 2) provide a composite service to the user in a market where I had to build and grow my customer base. I too was asked to push proprietary products. Proprietary = cheap product + huge margin = vast profits for management and dust in the salesman's pocket.
Two marks hand and I work for the same employer I believe but I still have no idea who he is
I hate these threads.
Sales for FY2020 9 million
GP: 3.8 million
Salary: 3% of GP
BUT I'm in a management role. Manage independent sales reps and I cover about a third of the US. So I work from home or am out traveling with reps once a month. All expenses paid. So I'm not actually knocking on doors selling, I'm just coming in as backup, make price adjustments, fix issues, etc. I do control the GP though based on what types of discounts I give.
Sales for FY2020 9 million
GP: 3.8 million
Salary: 3% of GP
BUT I'm in a management role. Manage independent sales reps and I cover about a third of the US. So I work from home or am out traveling with reps once a month. All expenses paid. So I'm not actually knocking on doors selling, I'm just coming in as backup, make price adjustments, fix issues, etc. I do control the GP though based on what types of discounts I give.
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