Hiring a salesperson

[andre]

I was considering looking into hiring a sales person to increase business. My thoughts were 100% commision since I cant afford to pay a salary. I was wondering if there was anyone doing something like this and if so, what type of lead source were you using and were there good results and what type of percentage were you paying. My thoughts were in the 5% range. I would appriciate any advice

[njandpa]

Just a couple of thoughts. Your sales person would basically work for free until a sale is made and you are paid? Under your % if the sales person sold for you $500,000.00 in sales you would pay him $25,000. There should be more profit in there to increase the %.
Keep workin at it and you'll figure it out.

[andre]

Yes I know, this is why I put it out there to get some feed back. I thought maybe a part time person. The truth is I am a 2 man shop and can't afford a salary plus commission person but need to keep the flow of business comming. I'm tired of the up and downs and am looking for a way to increase what I am doing. I dont do commercial business, I have not taken the time to develop that approach. So I am doing some head scratching

[andre]

Maybe a 10 percent comission would be more appropriate for a 100 percent commission job.

[andre]

Steven, I respect your opinion and it seems you have some experience with this. But personaly no one will ever run my shop but me.
I think some of the issues you discussed could be handled with non-compete clauses in an independent contractors agreement.
And personally I was thinking of hiring a smart and pretty young lady. Maybe I could find a smart college student who could make some calls part time and just do some lead generation.
Just thinking out loud and thank you for your response

[CajunCNC]

Good luck . . . .

Steve :-)

[dakers]

Steven, you said some great things.
The problem our company would have hiring a sales to go out and cold call and bring in new business is:
1. training on what to recommend to customer if you are a custom shop that works with a variety of methods and materials.
2. A good sales person can sell alot but he needs to know our company can deliver what he sells and on time with quality during peak seasons. That is a problem for us and i think the really good sales people want to hook up with a company that has great volume potential so they do not have a cap on what they sell and how much they make.
3. Will the local market support the sales person
4. will i provide leads and advertising
5. will we be competitive so he does not lose sales just because i have to add more money to job to pay sales person.
6. car and insurance expense, phone expense. that can eat up a sales persons commission to some extent.
7. can the person hold out long enough for his efforts to start paying off. He can see alot of people in 3 months and hardly make any money. so he quits then even a year later what he did generates work.
How would you pay him for repeat work where the customer contacted the shop and not the sales person. Non compete agreements, etc.

i am speaking of my business not yours. We have paid sales people a draw plus expenses and even the best of them have gotten discouraged over 12 months because we have so many issues that require knowledge in the custom sign business. the permits and zoning issues are a mountain for us to deal with before a sale or sketch can be made.
I would think your business is easier because of that. We had one guy who is now making over $100,000. a year selling life insurance and he could not make more than $1,000. a month selling signs. He tried very hard and had some good sales in the beginning. I am interested in this subject.
We are probably going to do more direct marketing and really focus on who we want to sell to and what we want to sell. I am not a sales person but i wish i could do what Steven suggests. that would really help us.

[woodworx]

Sometimes the easy answer isn't the best. In addition to that, there might be more than one answer depending on the type of company you run, and the kind of person you are.
I am reminded of the old hiring adage that states, "Only hire someone who can do your job better than you." For some it could be easy, but most likely the task is much more daunting than one can imagine. Again wouldn't it be easier hire a pretty little girl to run the phones? Most likely not. Then your payroll goes up. Now you have more work to do because that girl needs a paycheck.

In the end, isn't it about getting more money in your pocket with less work?

#1 determiner in how your business grows is the sales you bring in.$$$ Which coincidentally is a direct reflection of what kind of person you are and how determined you are to make what you want of your company. Do you think you can find someone who more determined to make your company grow than you? I would strive for as much control as of your future as possible. Don't put your business in someone else's hands. You could loose it faster than you know.

In developing a business, you also need to develop a business system which can operate even if you are not physically there. We all took our first steps in automating our business by buying a bot. Now don't you wish there was a bot to do your payroll, sales, marketing, and estimating!

Think about how much time you put into learning your own business. You are the master of your company, and you decide how much business you can handle.

[CajunCNC]

Having sold on salary plus and straight commission before, the below represents my opinion only. If you hire a "straight commission" sales person you have no way to demand loyalty. How do you know when he finds a prospect he will bring it to you and not one of your competitors?

Then you have the old "house account fight". This will of course require you to divulge your entire customer list and pricing structure to your new employee. You really want to share that info? When he and you part ways, will he use that info as bargaining chip to get a better gig with a competitor? Also, the first time he comes in the door with an "order" from an established customer you are not going to want to share. You will assume you would have got that sale anyway. That's a regular fight that gets very intense with a straight commission salesperson almost daily.

You have to remember, this person you hire will become the new face of your business, good or bad. If he handles business poorly it will hurt you. If the customers he gains like him, they will follow him, regardless of who he is selling for. It will be him they trust and feel they can count of. Sales and service/production have always been at odds with each other. When he makes a sale and all goes well, all the customer will hear is how he handled and managed their order personally. When things go badly, he will be telling them what a bunch of idiots they are at the shop, (your shop). He has to keep himself looking good to keep that customer happy.

Is this person you hire capable of becoming a competitor?

My advice, hire or replace one of your people with someone that can run your shop ! ! ! You go out and sell, you go out and firm up existing relationships. The new guy will never set foot in your existing customers office, they would be a house account, no commission there . . . Those accounts while slowly disappear . . This way you can come and go, free to check on your shop's operation and develop new accounts.

[andre]

Justin you make some good points. You guys are obviously doing some big business. Maybe I am over reaching. I have owned the Bot for going on 3 years and have taken on big jobs that I would not have before. I'm sure you did not get to where you are now overnight, I'm trying figure out how to grow forward. I'm certainly not going backwards, business has increased each year. I have a pretty good idea on how much work I can handle, now I just need to get that work. Any ways I make progress even if its slow.

[butch]

Andre
I looked at buying a furniture shop a while back. They commissioned a company to market their product. The company was much like hiring a personal salesman, except they were not responsible for travel, expenses and such. It was costing them 15% for every sale, and required commision on future orders from their costomers they had recruited. It took a small shop from $50,000 the first year to $180,000 the next year. If they would have had some better management practices in place they would still be in business.
Butch

[Ryan Patterson]

I have been on both sides. I was employed at 100% commission and hired a sales person when I had my shop. When I was employed the going sales commission was 16% of the sale. The sale was not just selling the cabinetry it included designing and field measuring. I had to see the job through from start to finish. There is a problem paying commission on the total sale price. If the sales person makes a mistake on the pricing and the job does not have enough profit margin to pay the commission I losing job just lost more. The way I did it was based on net profit and was a 50% split. This way if the sales person did not price the job or measure correctly the commission is reduced. If the job goes as planned I found the average commission paid was 15% of total sale. There are a few things that will discourage a sales person the biggest is a shop not being able to produce the product. Paying on net profit means the more you pay out in commission the higher your profit.

Ryan

[andre]

Butch, thanks for the story, that sounds like something I could wrap my mind around.
Ryan thanks for the input, that obviously take a skilled trades person to accomplish. I like your idea on paying strictly on the profit end not on the whole job.

[Brady Watson]

Andre,
Find one of these guys in your area and ask them their thoughts on your situation: http://www.score.org/index.html

-B

[myxpykalix]

The type of individual you might hire sometimes has more to do with the type of business you have, but not always.

First off they have to know what they are talking about. You can't hire a car salesman to jump in and sell cabinets.
(at the risk of being deleted by admin)
The old adage of "Sex Sells" is true here. Even on cold calls it is far harder to say no to a pretty woman than some man who walks in your door.

In my video production and video stores businesses I had almost exclusively all women salespersons. Most worked for me for years and it was usually a base salary against a commission so if they sold nothing they made a small base salary (assuming they made contacts) or commission which ever was greater.

Due to the economy another source of more loyal, less competitive employee is a retiree. You don't want some cranky old fart but someone who might need to come out of retirement to make ends meet who was in woodworking who has a general knowledge of what you do.

A good example, my "mentor" who is a physically fit but 85 year old man who can get around but can't climb on roofs anymore. He has been a carpenter and woodworker for 60-70 years. He has tons of old clientele who he can't really service anymore. I teamed up with him and although he doesn't even own a computer he understands enough to sell finished jobs to his customers and brings the work to me to cut for him and we and a couple helpers go and do the installs.

Frankly he makes more money than me on jobs because he needs it now which is the way I want it. Because i couldn't repay him for the education he has given me. The moral of the story is that this is a sales situation that works.
This is a salesman who will be loyal and not look to steal your clientele or business. With the way things are going these days I would think you could find plenty of this type of qualified help needing work.

Both situations have worked for me. I haven't worked for anyone else since i was 19 and spent one winter working at the steel mill.

[dakers]

I got some advice from a friend who was raised in an orphanage and went through the depression.
He told me financial independence is achieved not through what you make but through what you spend.
He was "cheap" and i did not want to be "cheap"
somehow i liked the theory you have to spend money to make money. Well we have a current burden rate based on fixed expenses that dictates our pricing. We are small company with seven people but the burden rate is high. It seems like a catch 22 situation. More employees mean more space and equipment is needed. plus the enormous bookkeeping and accounting requirements for a samll growing company. Somewhere in the growth curve they say you make enough money to hire a full time bookkeeper. We spend about $45,000. per year now in bookkeeping and accounting costs.
My Son talked me into getting a big building and said the building will be the best employee you ever had. It really was not.

It i strange. In the 1970's when we were small we had my wife,me and a helper and did much better financially than anytime since. When we had 27 employees we had to have people who did nothing but information management which was crucial to success. However we personally did not make as much take home as we did in the 70's as a small company.
I think everyone and every business is different but i regret taking a step forward to grow beyond about 3 people. But that is just me.

We do have two full time sales persons who do not leave the office. She makes about $600. per week plus small commission. The other one makes about $400. per week and a larger 10% commission. He works out of his home for us doing internet sales.
I do not think there is a perfect solution for us.
we will continue to struggle to find the perfect balance but i feel very responsible for our people which weighs heavy on me.

[chodges]

There are some really educational responses to this thread!

We are a mid-sized (8 employees) sign company, and our approach to growth through salesmen has been just a little different ...

I bought this business 4 years ago from a couple who had owned it nearly 40 years. Their growth had been very stagnant because of long-term personal obligations that distracted them.

Once I had satisfied myself that our production team was capable of handling their work without much of my intervention, I began spending more of my time out of the office selling. Over time, this has become my primary responsibility. Our gross sales have nearly doubled in 4 years.

We make a tremendous variety of signs, and we relied on these capabilities to expand our customer base for the first 3 years.

About a year ago, I decided to hire a salesman. My goal was not to obtain someone else to take over my sales duties, but to sorta' "divide and conquer" our growth objectives by adding something new to our product line.

It took a while, but I found a salesman who had owned his own sign company in Florida for 24 years. A divorce and subsequent re-marriage found him out of business in Florida and moved here to Tennessee. His niche was primarily illuminated signs, with an emphasis on neon. He did all the selling for his former company, so there was a lot of experience for us to draw from.

This has worked very well for us. There are virtually no "collisions" with our existing customers vs. new customers, because illuminated signs are something we never offered before.

Our salesman is paid a nominal $8 per hour, plus a 10% commission and 20¢ per mile as a gas allowance. This past year, he earned us about 2.5 times his salary.

I realize we were lucky to find such an ideal candidate, but maybe the bigger lesson is to look for ways to expand your business using salesmen who can open new markets for you rather than just trying the same old things.

[bcondon]

I am not sure my example will map to this discussion but my Dad, was one of the best machinsts around. He was one of those guys who taught all the younger guys and held mini classes at lunchtime in the shop. He passed away a fews years back, and the BEST compliment he got was from another machinist, now about 60 that said your Dad taught people. When we asked him why he wasn;t afraid of the younger guys taking his job, he said he was "good enough" to find work.

He was a one or two person shop after he retired (and then only worked 40 hours a week). His method of getting business was to get his names to professors at MIT in Boston and offered to help te grad students doing cool projects like Wind Mill Design (turning rotors) , some manufacturing/packaging projects (packing sardines). So on Saturday morning, there would be "future" engineers showing up at the door, Dad would set them up to run the machines and they got an education on "building what you design" and didn't charge them anything.

As the local machine shops went out, his workload went through the roof because each one of these young men either remembered my Dad or told someone else.

Before he died, he worked on the Space Shuttle and Indianapolis 500 cars (monitor screens mold systems, hold downs) Medical equipment, and just had an interesting array of projects.

My son is studying to be an industrial engineer and pretty handy. he is not around very much but he always comes out when the machine is cutting, and I get to learn from him about manufacturing process.

I am not sure how this would adapt to your situation, but getting into the colleges and providing some opportunity, or in Boston, we have the Co-op program at Northeastern U where you actually work in your field as part of the curriculm. You go to school 5 years for a 4 year degree but come out with some great experience.

Does any of your schools have Co-op programs?

I found a small Mechanical Engineering school (Western New England College in Springfield Mass) that had a FULL machine shop and the young men and women were required to use all the equipment. In the competitions for building Robots and cars etc, then came in the top 3-5 while some of those "big name schools" came in around #10.

I started at NU and found I did NOT want to be an Electrical Engineer!

I really like the comment to give up the shop and head onto the road.

Have a good evening!

[woodworx]

Bob,
Your story applies to everyone! The most important point of this story is the generosity your dad gave. Each of us gets trapped in the mentality of "What's in it for me, and when is my day coming?" Your dad said the opposite. He said, "How can I help you?" Each of those students remembered your dad for the inspiration he gave them. This is what creates a successful person, and in-turn creates a successful business.

[andre]

Bob, thanks for the story. I've always opened my shop up to other woodworkers, as did my father before me. Maybe I will look into reaching out to the local colleges.

[servant74]

It might seem odd, but as a marketing technique, reaching out to local 'hacker' or 'maker' or 'builder' groups could be a source of non-competitive community inspiration. Even local high school drama departments (always want to build scenery), model train groups, Scout posts, work with local school wood shop teachers. Even get some 'interns' over the summer or 'co-op' shop workers from a high school.

The problem is none of that brings in cash directly, but it is the way to get known in the community.

Oh yes, the Chamber of Commerce, Kiwanis and the like, are all 'good things' but take up personal bandwidth to support them.