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Salesmans Commision


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What is a fair percentage to pay a salesman? Do you base if off the profit of the job or on the total sale?

I have a a great guy that is bringing in new clients and work and I want to reward him for the efforts, but I dont want to overpay him that new work becomes less profitable that its not worth doing. I hope this makes sense. So if anybody has some insight please share!

 

This is really a great question. I have struggled and continue to struggle with this question. I have made many mistakes dealing with this and have not really settled the matter.

 

The closest compromise that I have reached is that I have a sales team paid a base and commissions. For example, their work entails keeping up to date and servicing the account, plus deriving a 1.5 to 3% of the gross billing above the cost of their base. There is a one time commission on new account acquisition too. A very good sales guy should be bringing you about $2.5mm is gross business minimum. You want good credit worthy accounts that pay on time and no hassles collecting your money.

 

Having said that, this questions always leads me back to the most fundamental question which is, how much should I be making out of my business for my time and investment?

 

I am certain that you will reach a point where you will have to choose to take your money and run from the industry, or stay invested and continue to work in the business.

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You're not going to find a magic commission number. We worked with our business coach for months to establish pay matrices for techs and SAs that reward their performance, satisfy overtime requirements (very important) and meet our profit goals. If you can do all this on your own, you are a genius. If not, get a business coach.

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  • Have you checked out Joe's Latest Blog?

         3 comments
      Got your attention? Good. The truth is, there is no such thing as the perfect technician pay plan. There are countless ways to create any pay plan. I’ve heard all the claims and opinions, and to be honest, it’s getting a little frustrating. Claims that an hourly paid pay plan cannot motivate. That flat rate is the only way to truly get the most production from your technicians. And then there’s the hybrid performance-based pay plan that many claim is the best.
      At a recent industry event, a shop owner from the Midwest boasted about his flat-rate techs and insisted that this pay plan should be adopted by all shops across the country. When I informed him that in states like New York, you cannot pay flat-rate, he was shocked. “Then how do you motivate your techs” he asked me.
      I remember the day in 1986 when I hired the best technician who ever worked for me in my 41 years as an automotive shop owner. We’ll call him Hal. When Hal reviewed my pay plan for him, and the incentive bonus document, he stared at it for a minute, looked up, and said, “Joe, this looks good, but here’s what I want.” He then wrote on top of the document the weekly salary he wanted. It was a BIG number. He went on to say, “Joe, I need to take home a certain amount of money. I have a home, a wife, two kids, and my Harly Davidson. I will work hard and produce for you. I don’t need an incentive bonus to do my work.” And he did, for the next 30 years, until the day he retired.
      Everyone is entitled to their opinion. So, here’s mine. Money is a motivator, but not the only motivator, and not the best motivator either. We have all heard this scenario, “She quit ABC Auto Center, to get a job at XYZ Auto Repair, and she’s making less money now at XYZ!” We all know that people don’t leave companies, they leave the people they work for or work with.
      With all this said, I do believe that an incentive-based pay plan can work. However, I also believe that a technician must be paid a very good base wage that is commensurate with their ability, experience, and certifications. I also believe that in addition to money, there needs to be a great benefits package. But the icing on the cake in any pay plan is the culture, mission, and vision of the company, which takes strong leadership. And let’s not forget that motivation also comes from praise, recognition, respect, and when technicians know that their work matters.
      Rather than looking for that elusive perfect pay plan, sit down with your technician. Find out what motivates them. What their goals are. Why do they get out of bed in the morning? When you tie their goals with your goals, you will have one powerful pay plan.
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