Sales incentives, short term and long term.

[JTSpear]

In other words, after you successfully sell a particular job at a particular price point, at a previously agreed upon rate of commission, the boss wants to renege on the promised commission and steal the money from you and take it for himself.

Sorry if I'm talking too bluntly here; messing with sales peoples' commissions is the classic problem that sales people have. He is not even trying to be clever about it.

Usually what happens with really good sales people is that they'll agree to work for a company at a given commission rate. Previous sales people in the same position had dismal sales to their credit, as a matter of routine. So the new guy comes in, uses an entirely different approach, and just blows up previously existing sales records, and does so continuously. People at the top see this guy getting paid enormous sums of money, probably even more than they get paid, and it really pisses them off. So the first thing they think of doing is to cut the rate of commission they'd previously agreed to pay the guy. Or they take away a sales territory that he's got all slicked up and selling like gangbusters, and give it to one of their buddies. Anything to keep this ass-kicking saleman from making irritatingly large amounts of money.

What they don't understand is that for this sales guy to be making irritatingly large amounts of money, the company also has to be making huge amounts of money, too. It is communist thinking that is the problem. They end up doing everything they can to remove all of the incentive to sell products or services from the gunslinger they hired in the first place to do just that. They in effect kill the goose that laid the golden egg.

Your boss is not even smart enough to give you the money he's already agreed upon for the deals you've already done, and then next week announce a change in the commission structure for any future sales going forward. He just steals the money from you right now, no excuses. At least, that's the way I'm reading the situation you're describing.

To me, (and I know this sounds really harsh, coming from a guy who's not a pro) it means your boss is a really stupid, shortsighted individual. He deserves to have you give up entirely on the whole idea of being a sales rep for the company.

Treehead32, on the other hand, seems like the dream boss from a parallel universe, or something. To be willing to pay climbers their full rate of pay while they are selling, plus commission on top of it when successful, is just incredible. His approach ensures the security of the earnings of the climbers, and also gives them insight into just how hard it really is to sell, and the consequences of selling services too cheaply.

I think you should absolutely insist on being paid all of the money your boss owes you for your previously earned commissions. Then ask him if he doesn't think it's fair, what rate of commission would be fair? Then when he tries to cut your commission rate in half, you tell him that that is not enough compensation to get you to even try to do sales, thanks anyway, I think I'll just stick to the climbing.

It is no wonder he's the one responsible for most of the sales; he steals from anyone else who tries.

Apologies for the rant.

Tim

I'm not saying he adjusts my commission rate, that certainly would not be a good way to encourage sales. What I'm saying is that on some jobs I have added $ to a proposal with the intent of giving myself that extra money. for instance if I look at a job that should cost $1000, at 5% I would make $50. If I think I can get more money for this job and I want to make more money for my sales work I could just add $100 to the job and take home $150. I have done that in the past and it was his perspective that if I can get more money for a job then I should get that money anyways and it should just mean a higher profit for the job. So rather than me taking home $150 on a $1100 job I should make $55, from the bosses perspective.

 

[TimBr]

I'm not saying he adjusts my commission rate, that certainly would not be a good way to encourage sales. What I'm saying is that on some jobs I have added $ to a proposal with the intent of giving myself that extra money. for instance if I look at a job that should cost $1000, at 5% I would make $50. If I think I can get more money for this job and I want to make more money for my sales work I could just add $100 to the job and take home $150. I have done that in the past and it was his perspective that if I can get more money for a job then I should get that money anyways and it should just mean a higher profit for the job. So rather than me taking home $150 on a $1100 job I should make $55, from the bosses perspective.

Ok, I take back my previous rant. Your boss is sticking to the deal. It is you who is changing the terms of the deal without agreement from the boss, with the exception of the "past practice" aspect of things. As in, he let you get away with taking the extra $100 off of the top a few times before, in spite of the fact that it is not what you agreed upon with him. So, he has just thought better of that decision to let that slide, and wants you to abide by the originally agreed upon commission percentage.

Every dawn is a new day, I say. If you are finding that the five percent commission is not nearly enough to keep you interested in continually pursuing sales leads, you should come up with a percentage that you think really makes it worth your while to keep trying to sell. Propose it to the boss as a more fair and reasonable number.

It is not unusual for someone to give something a try, only to have them conclude the work is harder than they thought and worth more than they are currently being paid. Time to renegotiate, in that instance. If the boss refuses to bump it up, and you feel it is not worth the doing of it at the old rate, tell him you are no longer interested.

That way is honest and fair and all out in the open.

I talk too much, I know. I should just let you handle your own affairs. I do wish you the best of fortune in this endeavor.

Tim

 

[treehumper]

JT, the job was simply worth more, ie., the value proposition for the client was at the higher price. As a matter of fact, it may have even been higher if you had understood them better. You also mislead yourself by thinking you only had to add a $100 to make an additional $100 f0r yourself. At a 5% commission rate you needed to sell that job at $3000 to make triple your commission unless the owner set the price and then said he would pay any amount over that to you.

What you might want to do is agree on a sales quota with your boss which he will pay you 5% up to that amount. If you exceed your quota then a higher rate will apply to those dollars above the quota. Let's say 10%. E.g, quota of $5000/wk and you sell $10,000. The first $5K you make $250 and the next $5K you make $500. That way both of you win as long as the numbers are related to a higher man hour rate, instead of just increased sales volume.

 

[CanadianStan]

I work at a relatively small company (8 full-time employees, 2 co-owners, dad does maintenance / paper work), and one of the owners does all the quoting. The other owner runs a crew, and I run a 2nd crew.

At other companies, based on the commission rate, isn't the sales person making WAY more money than anybody on the crew? I've seen quoted figures of $200k doing sales ...

Now, I'm not saying that the salesperson doesn't deserve that per se, but doesn't anybody else see a gross imbalance in earnings between the guy writing up quotes, and the crew actually completing the work? If I knew the sales guy was double, tripling or quadrupling my salary, I don't think I'd feel very motivated at work, 100' + up a tree risking my life (hypothetically) ...

 

[TimBr]

Why would the amount of money that someone else makes affect how motivated you feel about your work? Again, it goes back to what I was saying earlier. Even the people above the salesman get pissed off when they see him making huge amounts of money. But he cannot earn those sums unless he's at the same time generating big revenue for the company, and steady work for an entire group of people.

If you saw that that kind of money was available as a salesperson, and you thought that you could do as well or better, but your company refused to give you a chance, I could see being mad or unmotivated.

If you have no desire or ability to sell, however, how can you get mad at the situation? I'm not qualified to be an NFL quarterback, so why should I be upset when a team decides to pay a guy millions of dollars who is qualified? It is apples and oranges. The sales guys are the rainmakers. With zero sales, there is no work for anyone.

That is my take on things.

Tim

 

[ward]

I seriously doubt that it is normal for arborist salespeople to be making $200k a year. You'd need to have a very large company with limitless customers somehow willing to pay that extra %10 premium on each bid. I just doubt its possible. I'm guessing that owner/salesman is the usual arrangement and that the cost of the extra sales is essentially eliminated. The difference between $1200 for a removal and $1000 for a removal in my market is the difference between success and failure. All the gladhanding and social schmoozing aside, for most people its an economic calculation (within reason). Unless that salesman is a real "it that stinks" (ee cummings), I doubt the success rate for exorbitantly priced work is going to be very high. Go ahead and drive yourself crazy with a 20% success rate.

I suspect its also why your boss is offering you only 5%: he knows any more than that and his profit margin for the work goes down to low and your success rate goes down too.

 

[treehead32]

I agree with ward and Timbr. Sales can be easy, anyone can do it. Being a great sales person is not so easy.

The average salesperson has a low salary and a 3-7% commission in our area (I asked around the last few days.) The 7% commission people only got commission! no base pay.

The only way to make 200k would be if you are bidding a lot of large jobs like HOAS or commercial properties. We did 60k in bids one day just from 3 estimates. If you have those on a regular basis, I suppose 200k is within reach. If you are mostly residential, then 200k would be difficult.

Anyone that thinks they deserve 15% commission can take my role as owner and deal with everything. I'll sit back and enjoy for 4 weeks until you ask for previous your role back

 

[treehumper]

If they were just writing bids/quotes/estimates they wouldn't be earning big bucks. What they are doing is SELLING. There is a whole art and science coupled with significant knowledge and training. On top of that they have to manage the customer pre and post sale.

There's a reason they earn good money.

 

[CanadianStan]

Why would the amount of money that someone else makes affect how motivated you feel about your work? Again, it goes back to what I was saying earlier. Even the people above the salesman get pissed off when they see him making huge amounts of money. But he cannot earn those sums unless he's at the same time generating big revenue for the company, and steady work for an entire group of people.

If you saw that that kind of money was available as a salesperson, and you thought that you could do as well or better, but your company refused to give you a chance, I could see being mad or unmotivated.

If you have no desire or ability to sell, however, how can you get mad at the situation? I'm not qualified to be an NFL quarterback, so why should I be upset when a team decides to pay a guy millions of dollars who is qualified? It is apples and oranges. The sales guys are the rainmakers. With zero sales, there is no work for anyone.

That is my take on things.

Tim

No, I totally understand. I was just very surprised at how much some sales guys were making. Last year, my 8-man company grossed around $1.2 million ... all sales done by the owner. At 5%, that gives a relatively comparable salary of $60k. I guess it puts things into perspective.

I agree that it takes skill to be a salesman, and that he's earning his money.

I guess I just kind of dream of a system where the sales guy makes a commission, and maybe the climber and / or ground guys also got a commission. Maybe 1% per guy? I know that at my company, even that 1% would make a big difference to the employees' level of motivation and commitment to the company, in terms of "Safety/Quality/Production." I find some guys have a hard time staying motivated and working hard when they're paid hourly. I've had numerous groundies, and even climbers, tell me "just relax, we're paid by the hour" when I have the opposite mentality of "Let's go! Let's get this job done!"

I don't rush or cut corners, but I most definitely hustle, and the minute I hit the ground I'm dragging brush, hauling logs or I grab a rake.

TLR The sales guy earns his keep, and I think a system could successfully be implemented to also impart a percentage-based commission on the crew actually completing the job.

If they were just writing bids/quotes/estimates they wouldn't be earning big bucks. What they are doing is SELLING. There is a whole art and science coupled with significant knowledge and training. On top of that they have to manage the customer pre and post sale.

There's a reason they earn good money.

No I totally understand, I've done some quoting for time to time for my boss and I understand how hard it is to sell work. I've also heard a lot of complaints about sales persons who had no arboricultural experience and who underbid jobs just to sell more work and make themselves money.

 

[treehumper]

I've also heard a lot of complaints about sales persons who had no arboricultural experience and who underbid jobs just to sell more work and make themselves money.

That's where the crew can give them positive feedback (instead of griping) that can help their estimating. Any salesperson who underbids for too long will not last. The company will see that it's not making money and either train them or let them go. No different than any other crew member.

 

[ward]

Just going to put this out there. When sales arborists are used--not owner/sales persons--but employee sales people, it would be an ideal occasion to submit an additional cost of estimate because of the additional expense of the sales person. There truly is another bundle of expenses. The free estimate paradigm that we currently inhabit, forces the company to try to hide that cost or include it in other ways. Clearly, having to account for an additional 10% premium to cover the cost of the salesperson is going to show up somewhere in the quote. Why not make a stand here and say: here is our cost of the initial sales visit and estimate (say $100, a smaller fraction than a large quote would but still with 8 bids, salesperson can make $800 revenue.). No more free estimates! (said from a hypocritical free estimator)

 

[easyphloem]

I've been full time sales since 2003. It will suck your soul dry, and make your hair turn grey. I make good money, and I know that some guys in the field see me riding around in my car, pushing the pencil, and think "he's got it made".

I need to sell $20,000 per week, 52 weeks per year, minimum, to hit my goals. I do it, but it takes a toll talking to that many stupid and irrational people.

I get up at 5AM, read the local news while drinking coffee. Get in to the office by 6:45 and start emailing clients back, and setting myself up for the day. In the busy season, I see an average of 12 properties per day, about 6 face to face meetings. My phone never stops ringing or buzzing from email notifications. I get home around 6PM. When I go on vacations, I get frantic calls from clients about our crew not doing the job right. I can never get away from the phone.

The parts I like about sales is the freedom to make my day as good as I want it to be. If I am not jiving with a prospect, I politely break the wrist, and move on to the next opportunity.

No work gets done until it is sold, but it's not easy to sell everything. And, not everyone could stand the unending bullshit platter that a life of sales delivers.

The number one way to make you lose faith in humanity is to engage in a sales career.

SZ

 

[ward]

Steve, that's a lot of sales per week... here's to life in the fast lane!

 

[treehumper]

Just going to put this out there. When sales arborists are used--not owner/sales persons--but employee sales people, it would be an ideal occasion to submit an additional cost of estimate because of the additional expense of the sales person. There truly is another bundle of expenses. The free estimate paradigm that we currently inhabit, forces the company to try to hide that cost or include it in other ways. Clearly, having to account for an additional 10% premium to cover the cost of the salesperson is going to show up somewhere in the quote. Why not make a stand here and say: here is our cost of the initial sales visit and estimate (say $100, a smaller fraction than a large quote would but still with 8 bids, salesperson can make $800 revenue.). No more free estimates! (said from a hypocritical free estimator)

What's the difference? Whether it was the owner or an employee doing the sales call there was always an expense, ALWAYS. That the owner didn't account for it when they did the sales was just bad business practice. When they finally add an employee, they then need to add the expense. Much harder to do then having it already in place to begin with.

Every task that the owner performs needs to have a cost allocated to it. Basically, what the cost would be for an employee to do the same thing. This way as the company grows and these tasks are assigned to an employee it makes the transition easier.

 

[ward]

Agreed, Hump. I guess the point is that the public is so thoroughly conditioned to getting this service for free or having it concealed so cleverly in the quote that it doesn't notice, that having to pay for this service would seem irrational. Why pay for this service when X,Y, Z down the road will give me an estimate for free? This leads to a systemic problem with absurd consequences of a tree service offering work to a salesman that is insufficient to employ him stand alone as a salesman, but not quite large enough as to truly offset the cost of him anyway. See, we are all in this ridiculous spot.

 

[Evan Sussman]

I haven't had the opportunity to hire a salesperson. However, my plan and partly based off of a friend's company was to pay hourly. That is actually a point that can be sold to the customer because it can comfort them knowing that the sales is not high pressure, and they are less likely to so work it doesn't need to be done.

They would be paid the same hourly rate as a production crew. However I also know that at a certain point it makes sense to hire a full time sales person which that would not be. At that point I guess I would have to consider whether hourly or commission make sense, but I'm not sure why hourly wouldn't make sense as long as it was commiserate with their skill.

 

[jim454]

I've been full time sales since 2003. It will suck your soul dry, and make your hair turn grey. I make good money, and I know that some guys in the field see me riding around in my car, pushing the pencil, and think "he's got it made".

I need to sell $20,000 per week, 52 weeks per year, minimum, to hit my goals. I do it, but it takes a toll talking to that many stupid and irrational people.

I get up at 5AM, read the local news while drinking coffee. Get in to the office by 6:45 and start emailing clients back, and setting myself up for the day. In the busy season, I see an average of 12 properties per day, about 6 face to face meetings. My phone never stops ringing or buzzing from email notifications. I get home around 6PM. When I go on vacations, I get frantic calls from clients about our crew not doing the job right. I can never get away from the phone.

The parts I like about sales is the freedom to make my day as good as I want it to be. If I am not jiving with a prospect, I politely break the wrist, and move on to the next opportunity.

No work gets done until it is sold, but it's not easy to sell everything. And, not everyone could stand the unending bullshit platter that a life of sales delivers.

The number one way to make you lose faith in humanity is to engage in a sales career.

SZ

I have a buddy that sold commercial computer network installation Stephy. His response was very similar to yours. He pulled the plug and went back into the field as an installer. What's your plan?

 

[easyphloem]

At that point I guess I would have to consider whether hourly or commission make sense, but I'm not sure why hourly wouldn't make sense as long as it was commiserate with their skill.

You would hate to pay me hourly commensurate with my skills.

SZ

 

[easyphloem]

I have a buddy that sold commercial computer network installation Stephy. His response was very similar to yours. He pulled the plug and went back into the field as an installer. What's your plan?

I have no plan. Except keep being awesome at what I do.

Just kidding. My plan is to retire from sales and do consulting work. Maybe 10 years, maybe 20. Who knows. I'm mentally tough enough to withstand the constant barrage of homeowner stupidity.

SZ

 

[ward]

That's the spirit, Steve. Said with a very stiff upper lip--and with an iron fist in a velvet glove!