(This column originally appeared in the Philadelphia Inquirer)
Three of the top 10 most recession-proof jobs were in sales, according to a study released earlier this year from compensation research service Payscale. For most of my clients, this is not a surprise. When the economy slows, business owners and managers look to reduce overhead. But they are loath to cut back on anyone who can generate more revenue.
“The people that deserve to make the most money are salespeople,” said John Oliver, president of the National Association of Sales Professionals, an online community that provides training and other support tools for salespeople. “They’re bringing the sales that pays for every other salary, including the CEO.”
No one will argue that salespeople aren’t important. But the biggest challenge most business owners face is not whether they should retain, or even hire more in a slow economy. It’s how to best compensate their sales professionals to keep them motivated and bring in more business. It’s not an easy question to answer because there are many factors to consider.
For starters, it’s important to recognize that compensation depends on the nature of the job … and even your industry. Should you pay straight salary? Commission? A combination?
Jeff Zinser, a principal at staffing firm Right Recruiting in Blue Bell, said that if the job is transactional where a salesperson can makes a number of sales a day in a retail shop or complete a sale a few times a week — like selling roofing services or air conditioning systems to homeowners — then salaries can be lower and compensation can be commission-based.
But if making the sale involves months or even years — such as selling an airplane or a big-ticket piece of machinery — then you’ll need to pay a higher salary and add on a commission or bonus when it’s completed because pushing a salesperson to always be closing isn’t always the right approach.
“There are hunters, and there are gatherers,” he said. “The last thing that company should do is incentivize that salesperson heavily by commissions if their job is not transactional.”
Once you figure out the balance between salary and commission, you’ll next want to answer the next obvious question: How much?
According to Miriam Eiseman, a long-time sales executive who is now the cofounder and chief sales officer at Express Employment Professionals, a Bryn Mawr-based recruiting and staffing firm, salaries have to be competitive both locally and in your industry. Eiseman mentioned good places online such as Payscale, Indeed or LinkedIn to compare salaries. But that’s just the first step.
“After that, you’ll have to determine how you want to calculate commissions,” Eiseman said.
Most companies Eiseman works with pay their salespeople on their “top line” revenue amount, rather than on the gross profit of a sale (which is the net of gross revenues less direct costs). The reasons vary, but mostly it’s because it requires less accounting and less disclosure because, Eiseman said, “sometimes business owners are reluctant to share their profits with their employees.” But to her, this is not a deal breaker.
“When I was working as a salesperson, I never knew what the gross profit was on anything I sold,” she said. “My employers didn’t tell me because I don’t think they wanted to tell me. But as a salesperson, that was fine by me, as long as I got the revenue in I didn’t have to worry about anything else.”
A commission-heavy compensation plan should also take into account upfront the amount of time a new salesperson may need to get up to speed. Zinser said he’s not averse to guaranteeing commissions for new salespeople at least for the first few months on the job but is also clear about when he expects to start seeing results.
“It’s fine to do this to help the new salesperson maintain their current lifestyle, but then it’s important have a clear timeline for when this ends,” he said.
But paying your salespeople doesn’t stop with just the person who closes the deal. That’s because a sale oftentimes involves more than one person. Because of that, Oliver says it’s important to recognize everyone involved.
“Whether it’s someone on the outside meeting customers, someone on the inside making phone calls or the customer service representative ensuring delivery, everyone should get something,” he said. “Even the intern who makes calls and sets up appointments provides value and should be incentivized.”
Eiseman said it’s important that whoever is responsible for keeping a customer should also continue to receive some sort of commission.
“You can pay your salesperson a commission for bringing in the sale, but you should consider a smaller percentage going forward for holding on to the customer,” she said.
All of these tactics will help to motivate your salespeople, but in the end, compensation can only go so far. That’s because good salespeople — like any good employee — usually have the aspiration to succeed.
“It really doesn’t matter how much someone gets paid if they don’t have what it takes because a good salesperson has to have the drive to make sales,” said Eiseman. “I can teach anything, but I can’t teach that innate desire.”
