I am often asked the question, “How should I compensate my sales rep?” Janitorial business owners want to see their business grow at a faster rate, but they lack the time to make it happen. Therefore, they turn to hiring a sales rep. But many are unsure how to pay in such a way that promotes success. How can they develop a compensation plan that attracts good candidates, but also promotes and ensures the kind of sales you want in your business? I have personally seen sales compensation plans that created apathetic sales reps and others that accidentally encouraged the wrong type of sales. So let me offer three suggestions for crafting that perfect sales compensation plan.
With any base salary, there is a narrow road with ditches on both sides. The first ditch is a base salary that is so low that it will not attract the caliber of individual you want. Sure, a good sales rep will be able to make his/her living on commission if necessary, but a salary too low shows little trust in the person. Additionally, there can be dry spells in the commercial cleaning industry, and you want your team to know you’ve got their back. The other ditch is to pay the sales rep too much where he/she is not sufficiently motivated to make more sales. In my experience in the industry, the sweet spot for a base salary is somewhere between $45k and $65k per year along with a good benefits package.
At the end of the day, ongoing profit is the end goal of sales. Therefore, you want to pay commission that is tied to new account profitability. If commission is tied to revenue, number of sales, or some other metric, you could incentivize behavior that is detrimental to the company. My suggestion is to pay a multiple of the budgeted monthly profit, with the stipulation that operations approves of the budget before the sale is made. A multiple of 1.5x – 3x is appropriate, depending upon the base salary. For commercial cleaning companies trying to hit between $500k – $1M in new sales per year, this should amount to $20k-$50k in sales commission.
The final step to a good sales compensation plan is a commission structure. This is the rules and regulations portion of the commission plan. For instance, you only want to pay commission on certain types of jobs. So you may pay zero commission for residential or retail jobs if those are jobs you don’t want to pursue. Another component of the commission structure is the payout. I recommend that sales commission doesn’t start getting paid out until the first check from the customer comes in. Additionally, commission should be spread out over a period of 3-6 months so the sales rep has some vested interest in ensuring the accounts gets off to a good start. To download the sales position profile (1 page) and commission structure (2 pages) we use, click here.