If a company makes 25% gross on sales but depends on their sales people to get the word out. How should they pay them? Assuming 5% cover's over head.
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Originally posted by Im calling you out
If a company makes 25% gross on sales but depends on their sales people to get the word out. How should they pay them? Assuming 5% cover's over head.
They deal drugs and pimp hos.
They should pay them as much as it takes to ensure growing profits for the company. If you pay them too much you may get customers but you will be giving away some of if not all of your potential profits. If you don't pay them enough your quality of workers will suffer and you will have no profits to give away.
Also, if you have large fixed costs you will want to ensure a certain level of sales to help cover them, and thus may want to pay high commissions to ensure that volume. High variable costs and you really can't afford to pay out large commissions because each customer brings new expenses.
Will their be repeat customers? If so the commissions need not be as high because the employee essentially gets an annuity out of the deal.
What % would be fair compensation? If you're selling $10,000 worth of goods a week on commission 5% would be decent on a part time basis ($26K a year part time). If you are trying to attract full time employees with only 10K in sales you'd probably need more than that.
So commission requirements are unique to each industry and even within business. Just some ideas to think about more than an answer.
Depends on what your selling.....
In answer to your headline? Most don't. Most won't even try and most have a two income family or live with their parents in order to make a living that way. I did it for a few years in my twenties but had a wife's income to cover the slack times.
In reality every small businessman is working on straight commission so its not much different than that. The best salesmen usually snag the largest most profitable accounts and if you don't pay them well...they have the skills and contacts to take them to a competitor or go out on their own. You have to walk a thin line of paying a commission salesman enough to stay, but not enough to hurt your profit needs. Its not surprising to see top salesmen make more than the owner. Then get fired or rework the commish so that he feels screwed. Bad move on owners part.
Haven't seen an advertised commission only job in a while though. Seems like they have been turned into independent contractors where there is less responsibility for the employer.
Lets use a restaurant in this intstance. The restaurant pays a marketing company 25 % of the sales that comes into the stores as long as the consumers use a particular card. The card identifies the actual sales man of the marketing firm. So the firm makes 25% once again. If each salesman is in charge of 5 stores I assume that it is not going to take long to get each store at a $2,000.00 per week. The goal is 5,000 + per week Of course the sales potential is endless. What do you think?