The biggest question in hiring and maintaining a sales workforce often is how to pay them. The answer, however, is that there is no one right answer. Frustrating as that may be, there are options to consider. Whether it’s hourly pay, salary, commission or a combination of the parts, compensation needs to be based on the needs, market size and share, and profitability of each individual company.
While there isn’t a universal prescription for sales compensation out there, there are several ideas about what can be done.
Melani Kodikian, CERP, president, A to Z Party Rental, Montgomeryville, Pa., says she has talked to several people about how to structure a sales staff and has heard about several options, including paying a sales force as a team sharing goals, getting paid a percentage tied to one’s annual pay, getting a percentage based on revenue from one year to the next, profit-sharing and being responsible for a certain amount in sales. Deciding what will work best for her company is the hard part, she says.
“The outside salesperson is on the road and constantly meeting with clients, but when the client calls in to update their order, inside sales handles it. The inside salesperson manages a high volume of calls from businesses and homeowners, and the outside person caters to the event planners and caterers. The difference between the two positions is their main focus. The person outside is responsible for bringing in new clients, and the person inside is handling current business and walk-ins. I don’t think any one person is more or less valuable than the other,” she says.
“You want to be fair and give the staff an incentive, but you don’t want to give the shirt off your back doing it. It’s hard to find that happy medium and keep everyone happy, including the bottom line,” she says.
Kodikian attended the sales presentation at The Rental Show 2013 in Las Vegas and said she was interested in what Joe Taylor from Classic Party Rentals had to say about sales structure.
Taylor, who is the sales/marketing manager for Classic Party Rentals, McCook, Ill., says, “Our compensation is comparable to others in the industry and is a mix of hourly, salary and commission, based on job type. We compensate our team for achieving goals for their territories, for our location as a whole and for our safety record,” he says.
“We have a fanatical focus on safety. A significant percentage of the business we do is in tenting and much of that business is in clearspan structures, so safety is extremely important. Anybody in the organization that has the opportunity to earn commissions
has a safety aspect to it,” he says.
Before he joined Classic, Taylor worked in a smaller rental operation for more than a decade and then with True Value Co., providing small business consulting and purchasing support for rental company franchisees. He says the biggest question from rental companies always has been, “How do we pay sales staff?”
At Classic, Taylor says he wants salespeople to grow business throughout the year. “The trap you can fall into with a straight commission program is you can have someone who lands one or two big events and then feels they can sit on their hands the rest of the year. That’s why I prefer a salary plus a commission program,” he says.
“The goal for me is to grow our full business portfolio throughout the whole year. You want to encourage year-round work and opportunity, but you have to have the rental product, too. If you swing for the fences and knock it out of the park because you have a rock star salesperson and then your company can’t provide what they’ve sold in a professional way, then you’re in trouble. It’s a pitfall I’ve seen happen with several smaller, but rapidly growing event rental providers. You need to provide the style and scope of the business to your new salesperson, and work with them to sell it correctly, so that everyone on the team has a clear vision of where the business is headed,” he says.
Benno Jurgemeyer, CEO, Sunstate Equipment Co., Phoenix, says it’s also important to promote a team culture with the compensation
structure for salespeople.
“As you know, most rental companies run their sales compensation based on a monthly draw and commission structure, so most of the sales rep’s compensation comes from the commission. As such, they are going to spend a lot of time making sure they get credit for every deal they are involved in. This certainly incents the person to work hard and close transactions, but it also has a tendency to promote a culture that is less team oriented,” Jurgemeyer says.
“At Sunstate, we have always worked with a compensation structure that is based on what I will call a ‘salary and bonus’ structure. Both programs provide the sales rep about the same total compensation, but our program derives a majority of the total compensation from the salary, with the bonus making up the difference. We believe this type of program promotes a much stronger team environment, which is a better match for our business model,” he says.
Kenny Puff, president, Westchester Tool Rental, Elmsford, N.Y., agrees. “It’s really a cumulative team effort to make a customer satisfied. For me, compensation has to be done team-wide. Also, how many times in this business are you servicing a customer without actually making a sale? That salesperson should be compensated for the effort. It’s all an education process — educating customers, educating employees and l try to make sure I learn something new every day as well,” Puff says.
“I do give a commission on sales of whole goods as an incentive to the sales force here,” he says. “We also distribute holiday bonuses, which is based on overall performance. In some places, the sales force is strictly commission driven. I don’t think that’s fair to everyone. In party sales, if you’re selling an event, that job includes operations, the dishroom staff, delivery personnel and so on. For tool rental, it is customer service, it is repair and your driver has to go out. When you look at the total picture, it takes the whole team to make the project successful.”
Rob Robben, CERP, owner, Robin Event Rental, Berthoud, Colo., says he believes having an outside sales person is essential. “A lot of people we hire to do sales have been in sales in the past. We have them sign on as an independent contractor and at the end of the year, we give them a 1099 form that includes the hourly wage, the commission and mileage. That way, they can work part-time and also work for others if need be. It depends on the individual. We have had salespeople work in-house full-time and have provided insurance for them. You have to fit it to the individual and the business,” Robben says.
“The way I structure it is a decent hourly wage, but if they want to make money, there’s a commission. What we’re really after here are orders and even if they are breaking even, at least they are out there keeping your name in front of the customer,” Robben says.
“The way that our commission is structured is our salesperson gets 10 percent of the order for a first-time customer and 5 percent on that person’s orders after. If the salesperson gets a specific order from one of our existing customers because of his work, then we provide a commission on that order. It’s amazing how many of our existing customers don’t realize all that we do,” he says.
“With outside sales, they use their own car and insurance, and then they turn in a mileage report for every customer they call on. That includes who they visited, what they talked about and what events they might do. All of that goes on file, so if the customer calls, we’re aware of whom we’ve made a connection with,” Robben adds.
Robben says the company’s culture also is important. “I thrive on positive reinforcement. We’ve all worked for bosses who give pats on the back and recognize us, and we’ve worked for bosses who don’t recognize us. They have done several psychology studies where they found that people respond to positive reinforcement and value that over money. That, to me, is really important. You’ve got to compliment them and work with them, and help them think outside the box rather than being critical.”
Greg Dugat, president, Prestigious Event Rentals, Houston, says companies also need to communicate their goals to their salespeople, inside and outside.
“For a smaller company, I’d say keep the pay structure relatively simple. My feeling is, at least with small to medium companies, don’t overcomplicate it. They want to see the carrot,” Dugat says. “I certainly believe your inside team can work off an incentive basis, too. Outside, it’s more based on revenue. Typically, there’s a little bit different approach with inside and outside.”
The important part with compensation, he says, is keeping all salespeople in the loop. “People want to feel a part of what’s happening. They might say it’s all about the money, but it’s not. We try to keep all of our team informed. We go over our performance and we go over our numbers. I believe you should share that — talk about where your goals are and talk about what your long-term plans are. I encourage our employees to form their own committees for projects, such as a new catalogue. I think they love that, that if they have an idea, they can pursue it. It’s so much more to feel like they are part of this,” he says.
“Our company’s done very well in a short amount of time and it’s because of that team. They are excited about what they do. There are so many nights I come out of my office and I say, ’You guys have to go home.’ They are the reason for that success,” Dugat says.
Taylor of Classic Party Rentals agrees that motivation is a lot more than just pay structure. “While a lot of it does come down to how you’re building your compensation structure, salespeople do this job because they love the business and they love building awesome events with the creative people in our industry,” he says.
“If you love what you’re doing, can pay your bills and save for retirement. That’s a happy worker and that’s important,” Taylor says.
“Investing in your people is important as well. If you have a person who’s calling on universities and hospitals, for example, they are going to be communicating with white collar managers and business leaders. The communication style they have may need to be revised a bit. Some salespeople can walk the walk and talk the talk, but can’t write an email to save their life. For people who don’t have strong writing skills, you need to send them to a business writing class and get them up to par,” he says.
“Recognition is just as important or more important than dollars,” Taylor says. “Buy them lunch sometime. I’ve got pizza for
50 coming to the office today. Also, say, ‘Thank you.’ Saying thank you to the people who work with you is important. It doesn’t happen that often. People are really taken aback if you sit down and make it a point to say thank you. That’s worth $500 sometimes. It really is. That kind of recognition is important. Make it a point to do that.”