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salespeople make the world go round

post #1 of 11
Thread Starter 
Do Salespeople Make Too Much Money?
By JAY GOLTZ
Good salespeople can make very good livings. In some cases they can make as much or more than the owner of the business they work for. I was told a story of one such company "” and a problem that it created.

A successful company had four salespeople who sold contract furniture. The contract furniture business is relationship-driven, and it requires a steady flow of new customers because most sales come from companies that are moving or expanding. Having a well-connected professional sales force is critical.

Things were going well. The four salespeople were bringing in millions of dollars in sales, and everyone was making money. The salespeople were working on a commission basis that was tied to the percentage of gross profit on each sale. The top sales guy had a particularly good year and bought a new house. He threw a big party and invited the owner of the company. The boss and the boss's spouse came and ended up touring the beautiful new home, on the lake, with all of the accoutrements. Guess what they talked about on the way home.


"Why is he living in a house that's nicer than ours?" asked the spouse. I wasn't there, but I am confident that when the spouse asserted that the salesman was being paid too much, the boss did a lackluster job of explaining how the business works.

A few days later, the top sales guy walked into the boss's office and suggested that they upgrade the cars they were providing the salespeople who were performing so well. No doubt still thinking about the house and the spouse, the boss promptly started screaming, "I'm already paying for too many Mercedeses around here!" The fallout began quickly. The top sales guy quit and started his own company. The other salespeople followed him. Before long, the boss was out of business.

I believe there are many morals to this story, including:

1. Be happy when your salespeople make money; it means you are making money.

2. Don't scream at people. Be respectful of everyone. No one has to put up with you.

3. Be sure that your commission structure works, even at high numbers. Will the compensation go beyond market rates if, for instance, the salespeople land a big account at a discounted rate?

4. Consider having your salespeople sign noncompete agreements.

5. Mixing bosses and employees at a party can be dangerous.

Most of my business life has been in retail. As I have expanded into the sale of art and framing to companies, I have had to change my thinking. In retail, you set up a store and advertise and people come in. In an outside sales business, your success is dependent on your salespeople. It is not an easy job.

Most people cannot take the cold-calls and rejection. A top salesperson can bring in many times the amount of sales of a mediocre one. Top sales employees are very valuable and should be paid accordingly. It is the boss's job (one of many) to be sure that the other employees understand why great outside salespeople are paid what they're paid and how we all benefit from the business they generate.

There is an old saying that salespeople love to throw around: "Nothing starts until a sale is made." I'd say that's a little too self-serving. I would argue that nothing starts until a product is made, a company is financed and about 20 other things happen. The fact is, though, that great salespeople are not easy to find, and they deserve to be paid more money than sometimes seems reasonable. They earn that money. If they are on commission, they only get paid if they make sales.

Behind every successful salesperson making big bucks, there should be a very happy boss (and spouse of the boss).
post #2 of 11
Moral number one should have been:

1. Don't ever listen to your wife!
post #3 of 11
That story sounds like a crock of shit to me, especially since it's told anonymously and secondhand, and just generally sounds oversimplified. How the owner sets up a commission structure that pays more commission than profit is sort of beyond me, or it is incredibly naive, and then to just suddenly blow up and change immediately because of something his wife said also sounds really crudely oversimplified. That's not to say that many of the points made aren't perfectly valid. It's just that the story seems overly contrived to make them.
post #4 of 11
Quote:
Originally Posted by Douglas View Post
That's not to say that many of the points made aren't perfectly valid. It's just that the story seems overly contrived to make them.

That's the point dude. It's like Aesop or the Bible.
post #5 of 11
Quote:
Originally Posted by Douglas View Post
..How the owner sets up a commission structure that pays more commission than profit is sort of beyond me, or it is incredibly naive...

As you said, this story is very naive. Nevertheless, we don't know the discount policy for big orders and the cost structure. Furthermore, the commissions structure is based on the sales prices. Hence the profit might decrease, while the quantity increases, so we cannot know the total margin for big accounts ....


Anyway, I was always told that if the salesmen have Rolls-Royce's, this means that the boss will have an helicopter !
post #6 of 11
the upward surge of mankind has been marked by eliminating salespeople
post #7 of 11
Quote:
Originally Posted by montecristo#4 View Post
Moral number one should have been: 1. Don't ever listen to your wife!
Exactly, sort of. The spouse had no place questioning the owner's method of doing business. The owner had no place letting her nagging and his insecurities conflict with his business practices. Certainly a non-compete would have been helpful plus when you have rainmakers you should probably give them a moderately long leash so they're happy (so if the fucker wants a nicer car you lease one in the company's name and give it to him).
post #8 of 11
Quote:
Originally Posted by montecristo#4 View Post
Moral number one should have been:

1. Don't ever listen to your wife!






That was the FIRST thing I expected to see when I saw "Moral of the story is..."
post #9 of 11
Quote:
Originally Posted by Douglas View Post
That story sounds like a crock of shit to me, especially since it's told anonymously and secondhand, and just generally sounds oversimplified. How the owner sets up a commission structure that pays more commission than profit is sort of beyond me, or it is incredibly naive, and then to just suddenly blow up and change immediately because of something his wife said also sounds really crudely oversimplified.

That's not to say that many of the points made aren't perfectly valid. It's just that the story seems overly contrived to make them.

Actually I would say for the relatively small business it was it sounds about right.

Many small business owners know what they are selling better than how they are selling it.
post #10 of 11
Quote:
Originally Posted by globetrotter View Post

4. Consider having your salespeople sign noncompete agreements.

Non-competes are evil. I would never sign one, and I would never ask someone to do so.
post #11 of 11
Quote:
Originally Posted by harvey_birdman View Post
Non-competes are evil. I would never sign one, and I would never ask someone to do so.

further, many states have right to work laws that may conflict with a noncompete.
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