Commission Only Sales Agents

sully13

Hi,
Looking into the idea of hiring sales reps/agents on a commission only basis.
This could be an add on line to a reps existing ones.

My products would be sold into schools and creches.

Does anyone have experience in this area?
How to go about hiring and what sort of commission to pay.
Also what our of pocket expenses would you be expected to pay?

I have also looked for a contract template but had no look

Any help or pointers greatly appreciated.

thecommander

sully13 wrote: »

Hi,
Looking into the idea of hiring sales reps/agents on a commission only basis.
This could be an add on line to a reps existing ones.

My products would be sold into schools and creches.

Does anyone have experience in this area?
How to go about hiring and what sort of commission to pay.
Also what our of pocket expenses would you be expected to pay?

I have also looked for a contract template but had no look

Any help or pointers greatly appreciated.

Anyone decent won't work for commission only. If you're confident in your product and that it will sell well then you should be offering a salary + commission.

drunkmonkey

If there commission only they'll need to be self employed or have a way of invoicing you for any work.
You'll just be paying them on invoice, they are not employees, you have no hold over them and they will have no entitlements like a normal employee will have.

All their expenses are their own. They just invoice you for sales made.

Remember these people will be representing your brand but will have 0 loyalty to you, it may be better take them on as sales reps but have targets in place and be prepared to let them go quite quickly if they are not paying their way.

If you haven't you'll need to register as an employer if your taking on some staff

kennryyr

I really dislike buisnesses that want to hire people on a commission only basis. If you want to get any half decent salesperson you need to offer some form of a wage.

Do you not have enough faith that your product will sell?

Offering commission only really is not the way of going about building morale within your sales team.

Jean Passepartout

People aren't idiots, just because a business hires sales staff on a commission only basis doesn't mean they don't have faith in their product selling. It actually means they have tremendous faith in their products selling, but lack the ability to properly oversee a sales team.

Commission only ensures that the individuals employed are self starters with the ability to generate consistent sales. At the end of the day its a simple matter of, performance = pay. The more sales you make the more pay you get, the less sales you make the less pay you get, simples.:pac:

thecommander

Jean Passepartout wrote: »

People aren't idiots, just because a business hires sales staff on a commission only basis doesn't mean they don't have faith in their product selling. It actually means they have tremendous faith in their products selling, but lack the ability to properly oversee a sales team.

Commission only ensures that the individuals employed are self starters with the ability to generate consistent sales. At the end of the day its a simple matter of, performance = pay. The more sales you make the more pay you get, the less sales you make the less pay you get, simples.:pac:

Anyone that works on that basis will jump ship as soon as a better off comes along. Fine maybe in door to door sales or chugging, but not if you're trying to build a business.

Jean Passepartout

A person working commission only is target driven, and yes I would imagine should they get a better offer else where they would jump at it, who wouldn't. Although the same could be said for a person who is receiving a salary. What if one employer is offering 25k p.a. plus commission and another is offering 30k p.a. plus car plus commission. People aren't stupid, there going to go where they are getting the best deal.

I don't agree with your point

Fine maybe in door to door sales or chugging, but not if you're trying to build a business.

The bottom line here is that a business that hires on a commission only basis is more than likely a small business, with little or no cash reserves. They need to get their product "out there" to customers quickly and efficiently. Hiring a sales person for 30k+ plus car plus commission is not possible for them at this stage so they hire commission only. I would assume however that as a business becomes more successful that commission only staff are brought over to salaries.

sully13

Thanks for all the comments. I agree with some points. Obviously if you can afford to pay a basic salary + commission it would be the best way to go.
But as a small business its just not possible for us to pay a base salary.

Any suggestions on commission rates - products range from €5 - €200 and our average order value would be apx €300

Jean Passepartout

Nobody can really tell you what % rate of commission you should allow a sales person when they are working commission only.

You will have to look at the figures on paper and focus on;
> How many calls per week could x sales person make
> How many sales per week could x sales person make
> What will x sales person need, own laptop/car/phone etc... (who pays for all of that???)

Work out using your current sales figures (I'm assuming here that you currently are the businesses only sales person) what rate of commission would provide a reasonable wage. If you cut the rate too low, your not going to attract anyone into the position if you place it too high at the end of the year both you and your sales person will be out of a job.

relaxed

commission only is wide and varied, some people are happy selling repeat business to regular customers for a small % each time, as once they are signed up the hard work is done, and as time goes by they could have multiple lines on behalf or multiple suppliers and do quite well.

On the other hand there are terrible jobs like calling to houses in the evening try to sign open Vodafone or eircom etc., and having read thread on boards before this is horrible work, as you only get paid once for the house.

A lot of insurance brokers effectively work on commission basis on behalf of insurance companies, mortgage protection, pension policies etc.

Before Ryanair and the internet travel agents were in a similar position getting a nice % from the airlines for tickets sold.

Peterdalkey

Be very careful to make sure you fully understand the rights of a commercial/commission agent, especially after the arrangement is terminated or breaks down. This is worth a read as they do have significant rights. http://www.mhc.ie/publications/item/286/who-is-a-commercial-agent-do-i-really-care/

UBERTILT

Hi Sully,

I have access to a huge database of Creches in the Republic. Perhaps you might PM me with details of the product?

You will end up with desperate people lying about your products in order to get sales in. Your customer services calls will then increase.

sully13

But if you cant afford to pay a salary it really is the only option.

relaxed

sully13 wrote: »

But if you cant afford to pay a salary it really is the only option.

Or you could knock on the doors of schools and creches yourself?

If you believe in your product you will be able to sell it yourself surely?

You will probably find the staff in schools and creches quite helpful and sooner or later somebody will probably give you the name of other salespeople that might be interested in selling your product.

Ultimately the product needs to be worth selling and margins good in order for anybody to take it on.

sully13

I have and the response was very good and a few orders have come in... but to make it financially worth while it would need to be done on a larger scale across the country and thats just not feasible for one person

Fries-With-That

Hi,

I echo some of the points raised by previous posters with regards to commission only sales agents.

It might be worth your while hiring a sales person on contract for a short period.

The way this works is your hire the person on the understanding that they are going to produce sales for your business.

You have to set a minimum sales target to justify their salary/phone/van.

I have no idea what your profit margins are so it would be difficult to offer advice as to what commission rates you should pay.

For example you decide to pay someone €400 per week +mobile phone + an expensed van(fleet hire) +an allowance towards fuel nominal value of €50 per week.

Would 15 orders per week @ €300 per order pay you and your salesperson.

If they fail to make your minimum set target you deduct a percentage from their wages but if they go beyond your minimum set targets you also have to pay extra commission.

You have to be aware also that cold calling to schools and crèches is not a viable option(unprofessional) so your salesperson has to develop pipeline, who pays them whilst they promote and make appointments with your prospective clients.

The bottom line is you have to work out how much a salesperson is going to cost you , include everything in your calculation, figure out how many sales they need to produce to allow you to cover this expense.



Regardless of the commission rate they are on, 100% of nothing is nothing

herthabsc

I agree on commission based with incentives & expenses. Something that can be worked out with the sales man in question. We have to be realistic and for many new startup companies we simply can't afford to pay a salary starting off. If we get successful then certainly this will change. I am doing sales myself but need a 2nd person to help out.

The way I see it, the route you can go down is a eager, ambitious, willing to be learn and be successful young person or a retired person who has contacts, wants to continue in sales, is financially safe and likes the product or service in question.

Is there any websites that you can have people who are interested in commission based type jobs or where you can post without be ripped off? (I have put in Linkedin etc but am exploring other avenues)

SeanSouth

I can tell you now hiring field sales people in that business will not work for you at all.

and that's from a person with 15 years experience of business to Schools and Creches

Field sales is fast becoming a thing of the past. Sales is done online,also by telephone and in conjunction with sophisticated targeted marketing techniques.

Schools are completely cash strapped at the moment. Your product needs to be an "essential" and it needs to be extremely competitively priced. If the order is a reasonable size, the school is obliged to get three quotes and the lowest one wins.

Any rep worth his / her salt will cost you a minimum of 60 to 70K when you factor in salary, commissions, car, diesel, subsistence etc etc.

Unless you have an amazing "must have" product you will need to handle the sales in a way that wont bankrupt you

herthabsc

SeanSouth wrote: »

Sales is done online,also by telephone and in conjunction with sophisticated targeted marketing techniques.

I agree totally with that. A field sales person came to me the other day and asked for €200 to €250 per day to keep him on the road. I told him that is not how I want my business to be run. Online and by telephone with a good targeted marketing strategy is key.

Peterdalkey

The costs of keeping traditional external sales reps cold calling on the road has become prohibitive over the past 10 years for most businesses. Salaries, motoring costs, especially fuel and the low number of calls that can be made in a day etc have forced companies to take costs out in this area. There are exceptions of course, capital equipment and other big ticket items still need face to face for closing but these visits are generally in response to a well researched and qualified enquiries/leads. Also those selling to pubs and food outlets/supermarkets are generally involved in seeking better space/positioning etc for their products, dealing with promotions and general customer service items.

People are generally so busy with their jobs that they no longer have time to see sales reps unless they have a particular interest or need. Visits by sales people are generally by arrangement and are rarely speculative.
The move to online/telesales however is a slow burn and it can take a very long time to build sales to a significant level. In my experience you still need to have capacity to be able to have someone in the company make customer visits, generally at the customer request.

The key to success in remote selling scenarios is to have absolutely cracking helpful people on the other end of the line and wow the buyers with good pricing and fabulous service/delivery. You can safely assume your competitors have just that along with quality websites and promotional materials.

One caveat in these tough times, no matter how well you do it, if your target market likes your offereing but has no demand/budget, you are going to struggle big time.

sandin

The only person talking sense here is peterdalkey - commision only is almost the norm for most smaller brand goods. Same system operates in most countries, however they are not called "sales reps" - this would suggest you want them to work solely for your product.

What you are looking for is sales agents.

Absolutely standard in the footwear, clothing, gift and household industries and even in the food industry (smaller niche brands) - Even a brand such as Converse is operated by an agent (he has a large operation with staff & warehosue and only sells converse, but is still a commission only agent).

If you have some customers already, simply ask them to recommend an agent they work with on other stuff - get a few names together and see who is the best.

But as peterdalkey posted above, there are rules and regulations surrounding this method and make sure you understand them.