globetrotter
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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).
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).
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