Business question - commission structure

[jarrettolson]

I know there are a lot of small business owners on this forum so I thought I would give this a shot.

We are a small security service company (locks, safes, alarms, cctv, etc). Our guys get an hourly rate (over $20 an hour), overtime possibilities and then a percentage of all goods and labor sold (5.75%). This equates to roughly about 60k a year plus some year end bonus's. I want to motivate our guys to up-sell a wider selection of our products to our existing customers when they are on a job. My thoughts are that an up-sold product outside of what is on the service call slip would result in an additional 5.75% (11.5% total) on the labor and goods contained in that up-sell. This can result in a lot more money in our techs pocket which I think is great. My problem is that not every tech is capable of installing every service we provide. What are some ways you would split the commission?

Example: Tech 1 is on a simple rekey and speaks to new homeowner about the value of an item we sell/install. Tech 1 quotes and sells this to the homeowner. Tech 1 is not licensed as an alarm installer but Tech 2 is. Tech 2 does the installation. How would you split this up?

Thanks for your thoughts,

Jarrett

 

[fmo24]

I have no experience with this but it is an interesting proposition. I was thinking the guy doing the upsale is acting more in a salesman postion so he may get a lesser share. Not sure which is more important, getting the sale or a quality install of the product.
Curious to hear what people have to share.

 

[pronstar]

I don't own a business, but am curious as well.

Just thinking out loud...seems like upselling a product the guy can install himself should be worth a bit more commission to him. And upselling a product he can't install should still put money in his pocket, but to a lesser degree - maybe he splits the commission with the installer.

This way, the guys can work together as a team - "I'm gonna up sell this so that John can install it, since he threw me a bone with an install last month" - with the end result being increased sales overall.

 

[Enen]

I would think in most cases sales and installation would be separate.
With your business model, I may consider some kind of reward system that would motivate Tech 1 to train to install everything you sell.
With the current scenario, I may consider a 50/50 of the additional commission,split between the techs. If they both get half of a commission, Tech 1 may train, and Tech 2 may step up his sales effort.

 

[OutCole'd]

Without Tech one opening and getting his foot in the door for tech two, tech two would never get the opportunity to make the sale. They both have important parts of the upsell, and would need to be compensated. How to do this fair? Maybe split 70% to tech two and 30% to tech one on any install that Tech two has to get involved with. This would also motivate tech one to grow to do his own sales and installs.

 

[zhandfull]

I would think for up selling a customer on a job, tech I gets the up sell commissions of 5.75% on extras plus his original work order earnings. If he can't do the up sell install then a second work order is issued for tech II to do the install for standard base pay and his typical 5.75% on a second work order. Seems fair to me.

 

[JBS]

I would think for up selling a customer on a job, tech I gets the up sell commissions of 5.75% plus his original work order amount regardless if he can do the job or not. If he can't do the install then tech II does the install for standard base pay and his typical 5.75% on a second work order. Seems fair to me.

Exactly thanks for typing up my response.

 

[NdaWind]

Keep It Simple for you and the tech's. You sell it you get $$$

 

[plaster dave]

Without Tech one opening and getting his foot in the door for tech two, tech two would never get the opportunity to make the sale. They both have important parts of the upsell, and would need to be compensated. How to do this fair? Maybe split 70% to tech two and 30% to tech one on any install that Tech two has to get involved with. This would also motivate tech one to grow to do his own sales and installs.

I like this idea. Nothing motivates like making more $$.

 

[zhandfull]

I see problems with kicking sales commissions down to installers that didn't sell. It creates two different rates of compensation for doing the same work. In the end this will cause problems and disagreements between installers and what job work orders they are getting. It will only cause the company and the boss problems in the long run. It's simple if the installers want to make more money they learn to up sell.

With that said, our business bank tellers have been trying to up sell me and others from our company. It's really annoying to me, almost enough to change banks.:thumbsdown

 

[lakemadness]

Who makes the initial sale? Do you have salesmen? Or are your sales/techs the same?

 

[jarrettolson]

Who makes the initial sale? Do you have salesmen? Or are your sales/techs the same?

No dedicated salesmen, our techs are also the salesmen. This additional commission would only be for upselling in the field.

I am thinking both need to get a kick of the upsell pie. It would not be very motivating to talk about something you can't install if you are not at least getting some kind of benefit from it. I also think it would help (like others have mentioned) to motivate the tech that cannot do the install to learn more and train to install other products making themselves more profitable and also opening up more opportunity for the business.

I have been scratching all sorts of ideas with how to do the split. % parts vs labor and the increased commission gets split at this point (parts % to seller and % labor to installer)? Looking into some companies that show tremendous growth and they all have very complex commission structures, I don't know if a simple 50/50 or 70/30 is going to be seen as motivating.

Thoughts?

 

[WildHorses24]

More important than how much is "buy-in".... have a meeting with the techs to determine whats a fair deal for everybody. Once you decide your cap, let them decide how to get there, that way they "own it" and there's no excuses or complaints once implemented. Since the whole thing was their idea!
Have you thought about a straight $ monthly/ quarterly/annual bonus based solely on upsales for all to share equally? Or setup teams and have them compete against each other. ..

 

[zhandfull]

No dedicated salesmen, our techs are also the salesmen. This additional commission would only be for upselling in the field.

I am thinking both need to get a kick of the upsell pie. It would not be very motivating to talk about something you can't install if you are not at least getting some kind of benefit from it. I also think it would help (like others have mentioned) to motivate the tech that cannot do the install to learn more and train to install other products making themselves more profitable and also opening up more opportunity for the business.

I have been scratching all sorts of ideas with how to do the split. % parts vs labor and the increased commission gets split at this point (parts % to seller and % labor to installer)? Looking into some companies that show tremendous growth and they all have very complex commission structures, I don't know if a simple 50/50 or 70/30 is going to be seen as motivating.

Thoughts?

Maybe I'm thinking about this all wrong. Why would you want to pay an installer more on a up sell job if they didn't sell it themselves verses a typical job you send them out on?
If you want to motivate the installer to sell and learn new installs. Give them 3% for the up sell jobs sold and an additional 2.75% if they do the work themselves.

 

[Chipster27]

Have you thought about a straight $ monthly/ quarterly/annual bonus based solely on upsales for all to share equally? Or setup teams and have them compete against each other. ..

The only problem with the "everyone wins a participation trophy" is that it sets up an "Obama" incentive program. Those that don't bust their ass get compensated by those who do. Our company changed our commission structure last year to one like that. We had a team of three, two of us are driven to succeed the third was more passive. It sucked as we're still "paying" for his lack of drive. Luckily this year we moved our third wheel to another seat on the bus. Now there are two of us and were going to kick ass.

Team approach would be good if it was comprised of guys with contrasting experience that can work off each other. Hardware/locks paired with alarm experience. When I managed our sales team I combined 10 smaller areas in to 5 large ones, then paired seasoned reps with rookies. Our leadership though I was nuts, but it worked and we were the number one region in the country. Why? I paired contrasting reps together, one seasoned guy and one rookie in a territory. The goal wasn't to have them joined at the hip, each had their own book of business (like techs with service tickets). Seasoned guy was good with customers and building value in our products/service but lacked the desire to turn over rocks looking for business. Rookies had energy and turned over rocks but couldn't create desire or articulate our value propositions. Together they were unstoppable. They would split deals 50/50, it was a financial symbiotic relationship that still allowed them independence and a partner to grow their territory and experience.

Keep the plan simple so a tech can easily determine what he will make and keep in mind that compensation drives behavior. If you have a higher margin product/service put a plan in place to help drive that business. Nothing will motivate a tech to increase his knowledge like watching him give money away for a product or service he's not trained in. This is a win-win as your techs will want to learn more products/application and your margins will increase because you're not sending a second tech out to the customer. It also mitigates the risk that the customer will "cool off" and lose interest in the proposed service.

To the OP, PM me, I might be able to help your business grow. I work for Stanley/Best, our dealers are looking for subs to do work for them. We have at least one national partner that seems to be a little light in the SoCal market.

 

[Carlson-jet]

As an installer/salesman I can say without a doubt your percentage scheme is crap at best and will lose you good employees.

Set a price as to what the product costs and what the floor/installer salesman makes on it. If I can sell it at 50% more then what you charge while on the site, that is what I get as an installer. The installer gets going rate for installation and nothing more. As an installer, I "NEVER" received any type of compensation from the sale. As a Salesman I never would split the sale with the installer unless I fucked up. Don't mix apples and oranges.

 

[nowski]

I would crosstrain my staff so everyone has the same capabilities while adding value to your employees and business...

 

[Roaddogg 4040]

zI'm with Carlson Jet on this one. The guy that sells that product gets the sales commission and the guy that installs it gets his normal pay. There is no difference between a job order that was called into the office from a customer and an up sale order. There is no reason for the tech to get a commission from an up sale that someone else sells.

Steve

 

[Buoy]

I would concentrate on upselling items that are already on the truck.
Put it in the customers hands. Let them touch and feel it.
You already have the Tech there, and the truck is there. No additional travel cost and wasted travel time.

I recall upselling a guy a CO detector this way.
Just a simple plug it in the wall deal.
He got to look at it, touch it.
He says "How much"?
I said "$35.00"
Then he asks " why should I buy this from you, when I can probably go to Home Depot and buy it for $20-25"?
I just said "because I'm here now, and you have it in your hands".

He bought two

 

[sirbob]

What is the need to comp the installer on the sale ?

They guy that sells it should get the commission. Why would you feel the need to comp an installer on a sale he is an installer.

As somebody long before me stated - nothing happens until somebody sells something. The guy that sold the deal is the guy that keeps you in business and the installers working.

The examples stating that the seller should get the lower rate of the split are completely backwards in my opinion.

 

[jarrettolson]

I would concentrate on upselling items that are already on the truck.
Put it in the customers hands. Let them touch and feel it.
You already have the Tech there, and the truck is there. No additional travel cost and wasted travel time.

I recall upselling a guy a CO detector this way.
Just a simple plug it in the wall deal.
He got to look at it, touch it.
He says "How much"?
I said "$35.00"
Then he asks " why should I buy this from you, when I can probably go to Home Depot and buy it for $20-25"?
I just said "because I'm here now, and you have it in your hands".

He bought two

I completely agree. I have ordered several different small displays for each tech to keep in the van. Most of the items in a display are $60-200 items (parts and labor). If a tech can upsell one of these products they would get the whole enchilada.

But something like a $5,000 CCTV system is not on stock in the van, if a tech can sell that to meet a customers particular needs I want them to have some motivation.

 

[jarrettolson]

What is the need to comp the installer on the sale ?

They guy that sells it should get the commission. Why would you feel the need to comp an installer on a sale he is an installer.

As somebody long before me stated - nothing happens until somebody sells something. The guy that sold the deal is the guy that keeps you in business and the installers working.

The examples stating that the seller should get the lower rate of the split are completely backwards in my opinion.

I am beginning to think this same thing

 

[Buoy]

I completely agree. I have ordered several different small displays for each tech to keep in the van. Most of the items in a display are $60-200 items (parts and labor). If a tech can upsell one of these products they would get the whole enchilada.

But something like a $5,000 CCTV system is not on stock in the van, if a tech can sell that to meet a customers particular needs I want them to have some motivation.

OK
From what you've described here I think I have a better idea of where you're going.

Is Tech 1 actually signing the deal, or just planting the seed?

 

[jarrettolson]

OK
From what you've described here I think I have a better idea of where you're going.

Is Tech 1 actually signing the deal, or just planting the seed?

I want this to be an outside upsell program so tech one would need to sign the deal.

 

[Buoy]

Does Tech 1 know enough about the product (you mentioned he isn't trained to install) to sell it?
And what are possibilities of losing a sale because of lack of knowledge.
What potential that Tech 1 quotes incorrectly, wrong product, makes mistakes in the bid that will cause problems at Tech 2's install? Or raise cost?

 

[jarrettolson]

Does Tech 1 know enough about the product (you mentioned he isn't trained to install) to sell it?
And what are possibilities of losing a sale because of lack of knowledge.
What potential that Tech 1 quotes incorrectly, wrong product, makes mistakes in the bid that will cause problems at Tech 2's install? Or raise cost?

Anything is possible as we all know. For each of the large quotes I have a custom made excel template spreadsheets to take the skilled knowledge out of the equation. We offer paid training, no reason for a tech not to know all products offered we send them to manufacture training and other trade training sessions throughout the year. One great thing about an outside sale like this is that we are already doing business with a customer and as long as the tech can portray that they are an expert in the field that they are on the service call for the customer will see value in their opinion. I do the best I can to try and limit any chance of a misquotes going out. Haven't been burned yet.

 

[Buoy]

Gotcha

I'm going with Tech 1 gets full commission.

 

[DaveC]

I agree with these guys. If Tech 1 upsells the product/service and closes the deal by himself then he gets the commission.

Unless Tech 2 (installer) actually helps close the deal WITH Tech 1 then he gets no commission on the sale. (i.e. Tech 2 must participate in the upsell or team-sale) If Tech 2 is just the installer and he did not help to generate the lead or close the sale, then no commission.

The commission should go to the guy who generates and closes the sale (an upsale where none existed before)

Then; maybe consider if Tech 2 has more skills to sell and install more products (skills that Tech 1 does not have) then have a tiered commission schedule for the products/services so that more complicated products have a higher commission schedule. This would be especially true if the more technical products/services have a higher margin. Then point out the higher commission schedule to those techs that don't have the skills and offer to train them. They learn a new skill and make more money for themselves (and more importantly for you) :thumbsup

If Tech 2 pisses and moans suggest to him that he should really work on upselling more during his appointments.

Afterall this is an upsell, they have already been given an outstanding lead from you by scheduling an appointment for them. Silver platter so to speak.

If I had a lead generator like this I would trample over someones dead body to get at the opportunity .....

 

[Mike Honcho]

I didn't read past page one but how about Tech 1 who sells something he can not install gets commission on parts (goods) and tech 2 gets commission on labor (install)? Seems straight forward to me what do I win?

 

[DaveC]

Also the answer would seem to revolve around the compensation (regular salary) that tech 2 will receive REGARDLESS for doing the actual install. Do you think that base pay is fair for the work provided during the install?

Good salespeople usually get shitty base pay and a good commission schedule so that a good salesman can kill it on the commission. (not a fair comparison since these are installers most of the time)

A real salesman gets no base pay and does not care for one. That will just slow him down anyway (not what we are talking about here)

 

[dezertrider]

We are coming up with a bonus structure for our employees. I just pulled the trigger on a better software package that allows us to track gross margin on our larger jobs.

Installers get paid hourly and we train them to become service technician where they can start on the bonus structure
Entry level technicians get paid on gross margin from there service jobs. If they find a system that should be replaced and they are able to get a sales person out to quote the job they will receive a small bonus if the job closes. Any call backs or errors reduce their margin reducing their pay. The faster he gets and the more products he sells the more he will make. The slower techs or the techs that just try to turn calls will make less
Technicians that sell larger jobs get paid off of gross margin on each job. All commissions are quarterly and have a yearend true up for the entire year.
I was once told you manage your sales people by their compensation plan. They will always sell on what makes them the most $$$

 

[Custom Truck Shop]

You could go a commutative route. Where if all the employees sell 500 units of product, then everyone gets a $ bonus. The folks that work hard still get more of the commission bonus, but it motivates the people that may not sell as much to sell more to reach that bonus. That's how the Chevy dealership I worked at did it, seemed to be fine. Just a thought.