Salesperson Commission and ROI

[Pool Hero]

We service pools and would like to bring on a salesperson. Due to our slim profit margins, if we pay a salesperson to pick up the account, we'll need to service that account for several months before breaking even depending on much his commission is. My question is, how many months is acceptable?

[Fulcrum]

How about a salesperson that is on salary rather than commission, and have said person do more than just sales when in the store or not drumming up new work?

[Pool Hero]

We can't support anymore indirect costs. Everyone here must pull their own weight. Besides, I'd rather have someone whose sole responsibility and income depends on sales. We try to keep everyone separated. In other words, everyone here has a rigid job description and sticks to it.

[billbenson]

How about a salesperson that is on salary rather than commission, and have said person do more than just sales when in the store or not drumming up new work?

You wouldn't get a decent salesman that way.

You have a chicken vs egg problem. Without a good salesman you won't grow but if he sells you can't pay him. Salesmen are money driven. You won't keep anyone if they don't make any money.

Beyond that, you need to set up a structure so they can close deals. From what you have said, I doubt you have one.

You didn't say what your business was, but if you don't give the salesman at least $60K with a path to over $100K in most industries they won't stick around. There are exceptions, but it doesn't sound like you have someone to do the hand holding that a junior salesman will need.

[Paul]

We service pools and would like to bring on a salesperson. Due to our slim profit margins, if we pay a salesperson to pick up the account, we'll need to service that account for several months before breaking even depending on much his commission is. My question is, how many months is acceptable?

Pay him whatever it takes to increase your base of customrs, even as much as whole season. In a business that operates on year to year renewals or long term contracts you can't always match the commission directly to intitial profit.

if you break even on the first season of service and retain the majority of customers for multiple years you are building a profitable future.

[Pool Hero]

You wouldn't get a decent salesman that way.

You have a chicken vs egg problem. Without a good salesman you won't grow but if he sells you can't pay him. Salesmen are money driven. You won't keep anyone if they don't make any money.

Beyond that, you need to set up a structure so they can close deals. From what you have said, I doubt you have one.

You didn't say what your business was, but if you don't give the salesman at least $60K with a path to over $100K in most industries they won't stick around. There are exceptions, but it doesn't sound like you have someone to do the hand holding that a junior salesman will need.

We're in the the swimming pool service industry. I appreciate your insight. Fortunately for us, we don't have the cash flow issue you're referring to.

One of the reasons for this question is beacuse I am concerned that our industry standard commission rate would be less than desirable for him therefore producing undesirable results. We have found a way to get him to 50k annually. However this also means our time frame to reach an roi almost doubles when compared to the rest of our industry.



Pay him whatever it takes to increase your base of customrs, even as much as whole season. In a business that operates on year to year renewals or long term contracts you can't always match the commission directly to intitial profit.

if you break even on the first season of service and retain the majority of customers for multiple years you are building a profitable future.

This was exactly the perspective I was looking for. Thanks.

[Pool Hero]

Maybe I would get a few more opinions if I got a little more specific. On average, our customers retain our services for 58 months. At the commission rate it would take for a salesperson to be able to reach 50k annually, we would breakeven in 9 months.

[Paul]

With an average retention of 58 months and a break even of 9 months you have a good model. It may not seem that way in the short term but you have to look long term. I don't know what an alternative strategy would be to develop a larger customer base.

If it strains cash flow you MAY be able to build some kind of commsission payout based on the 9 months, maybe.