The question of what to pay BSC salespeople is one of the most discussed topics within our industry. Do I pay salary only? Salary plus commission? Commission only? And if I pay commission, how much and for how long? When clients ask me which is the best way to pay a sales staff, my answer is—absolutely. There are about as many ways to compensate salespeople as there are salespeople, but in this article we want to address what I consider to be the most popular and effective plans.
First, however, I want to emphasize the importance of testing sales applicants prior to hiring them. Remember, these are salespeople, and sometimes their best sales pitch is the one they use on you in order to get hired. Find a good testing company that can profile candidates, and make your decision with the help of these profiles. Countless times over the years I had my people wanting to hire a particular individual because they interviewed well, but I was relentless in requiring the profile tests. In many of those cases, if we had we gone with our gut instincts we would have made a terrible hiring mistake. This is a very important decision. This person represents you in front of prospective customers. You must do everything you can to ensure you make the right choice when hiring.
Now, let’s look at some of the most common compensation plans for salespeople.
One positive aspect about using this method is that if you have a real super star salesperson your company will greatly benefit from the low cost of acquiring new business. But let me also note that if they are really good and are on salary only, you won’t keep them long because they will want a bigger reward for their efforts.
My opinion is that if a potential sales representative wants a “salary only” position, they are not very confident of their ability to bring business in the door. If you agree to pay them in this manner, you will almost always end up making them a “former” salesperson, and the only one that made any money will be them. I strongly recommend against using this method if you’re serious about growing your company.
Nearly all of the companies I’m familiar with use some variation of this method. It usually consists of a negotiated “livable” base salary plus a vehicle allowance. Determining the commission structure is usually the tricky part. Here are a couple of plans that I’m aware of.
Plan 1: This structure pays an ongoing monthly commission for as long as the company has the account. This provides the sales repto receive one, two, or three percent of the monthly billing, with no more selling needed to that account. Some organizations require the salesperson to make a regular monthly call on the account they sold to “make sure” everything is going okay.
I don’t agree with a salesperson being responsible for “public relations” after they have sold the account. You want to start a real war in your company? Have a salesperson meet with a customer to ask them how the cleaning is going. If cleaning isn’t going well, you have now made an operations manager out of your salesperson. Not only will you have a war on your hands, but the time the salesperson is spending in operations is time taken away from selling, so you lose twice—operations chaos and no new sales.
You can probably guess that I truly believe salespeople should sell, and operations people should operate—period. Some have told me they pay the one, two, or three percent to the salesperson to make that public relations call and “earn that ongoing commission.” My philosophy about this is two-fold: First, I don’t agree with paying the ongoing commission, and second, if you insist on paying it, it’s worth the money to keep the sales person out of operations.
Before we go on, I think it’s important to mention that I firmly believe you pay an attractive commission ONE TIME, provide the appropriate support to the salespeople, and then expect them to produce.
Plan 2: In this plan, the salesperson receives a percentage of the monthly contract amount payable 30 to 45 days after the contract is started. The percentage can be anywhere from 15 to 50 percent. The percentage is determined by the labor percent that the job has in the second full month and the type of account that is sold. Let me explain how this works.
It’s important that the owners, top management, and operations sign off on the pricing of the job. Once this is done, the salesperson is paid on the second month’s labor percent. Why the second month? My experience has been that many times the first month’s labor is over-budget for a variety of reasons, not the least being just cleaning up the building to your company standards. I don’t think the salesperson should be penalized for that needed extra labor. By the second month, you should be on budget, and then you know what you can expect the labor to be from then on. The lower the labor is sold at, the higher the commission paid IF the account is one of your targeted market segments. This brings us to the next part of the equation.
Each company should direct their sales efforts toward the types of accounts they prefer to clean (manufacturing, owner-occupied offices, medical, etc.) You then pay higher commissions to the salesperson for bringing in accounts that are your targeted segments. For example, my company targeted manufacturing facilities and medical buildings, such as one-day surgery centers, private hospitals, etc. We paid very handsome commissions to our salespeople for bringing in those types of accounts and coupled with the labor percent in the second month. It doesn’t mean we didn’t clean other types of accounts; we just didn’t pay as high a commission for them. A good salesperson will learn in a hurry where to direct their efforts. If they can get a $3,000 commission on a $6,000 manufacturing account versus a $600 commission on a $6,000 tenant-occupied building, they learn math in a hurry.
I successfully used this method for several years, and it allowed us to increase our customer base and DO IT PROFITABLY in the market segments that we wanted to grow. We paid handsome commissions, but we also accomplished what we wanted.
I’ve personally never used a straight commission structure, nor have I had anyone with knowledge of the industry want a straight commission career in BSC sales. With a 90 to120-day lead time usually needed to make the call, generate the interest, do the walkthrough, present the proposal, and secure the signed agreement, the sales rep needs quite a significant cash reserve until sales begin to be made. An exception, of course, might be that successful sales person you secure from a competitor that already has the contacts. But in those cases, there’s usually the issue of a non-compete contract with their previous employer, so you are unable to take advantage of their contacts.
A discussion on sales compensation would not be complete without talking about vehicle allowance payments. I have used methods where I provided the vehicle and also where they provided their own vehicle and received a monthly allowance. I feel very strongly both ways.
When you provide the vehicle, you are in control of the appearance your company projects, plus you’ll also be comfortable knowing the vehicle is properly insured and maintained if you are paying all the expenses. But if the salesperson provides their own vehicle, the assurance is not always there. You have to be sure they carry the proper insurance coverage, and you need to keep an insurance certificate on file, which sometimes slips the mind of even the best manager.
Finally, because gas prices are currently in such a state of flux, the entire discussion of who provides the vehicle is one that requires very careful consideration and research, as gasoline is likely to be a major investment.
Discussing how to manage salespeople can sometimes be a difficult proposition, since we salespeople are a strange lot. That said, there are several procedures that should definitely be in place if salespeople are to succeed. Some of these procedures include the following:
1. When you hire a salesperson, I think it’s very important to have them out in the field at night helping to clean a building. What, you say, a salesperson cleaning? The salesperson will likely say they are in sales, not operations. But let me throw it back. How will a salesperson know what the company does if he or she doesn’t experience it for themselves? They can train in the office in the afternoon and work in different cleaning environments in the evening. I’m suggesting that one week of training, if done right, will give them a basic understanding of what we do. If they won’t do this, you may want to question their desire for the position. You’ll get push back on this, but don’t give in. It’s critical to their success in the long run.
2. Establish sales goals early. Let them know on day one what the expectations are for new business each month. If you have your company statistics, let them know how many proposals they will need to deliver in order to close one sale, and then ask them to beat that ratio. In fact, offer an incentive if they can improve the ratio of closes you are now experiencing.
3. Require a daily report of their activity. It’s important they understand this is not because of distrust, but rather by reviewing their daily work you may be able to help them by making a phone call or two, or you may even want to go with them on a call because you know the people in that facility.
4. Every Monday morning or Friday afternoon, hold a staff meeting that includes sales, operations, human resources, administration, and top management. This meeting should last NO LONGER THAN 30 MINUTES, and it should provide the sales department an opportunity to explain the accounts they are trying to close. In this way, human resources and operations can begin to plan should the potential accounts be secured. If the sales department is working on an account that will involve 20 part-time staff, five times per week, it’s important that these departments can, at the least, start a process of determining the labor, equipment, supplies, etc. they will have available to start the account. This is a critical meeting and should be held weekly without fail, so everyone is functioning on the same page. Remember to keep it short and informative. The staff members can discuss some items outside the meeting format if need be. The only thing that should keep someone from this meeting would be a funeral—theirs.
5. Be sure you are providing the proper support for the sales department through the use of executive brief mailings, hit list mailings, e-mail marketing, social media programs, customer/prospect luncheons, telemarketing, etc. I am a strong believer that salespeople should not be walking the streets making cold calls, but rather working in a coordinated effort with the other internal processes you are using. Your company should have definite market segments you are pursuing, and the sales staff will be most effective if they are working on those prospects and not walking up and down the street calling on everyone.
6. In a follow-up to number 5 above, it’s important that salespeople are NOT doing the busy work involved with these different programs. They should NOT be putting their own proposals together, etc. It’s important that salespeople are in front of prospects. Remember, they can’t sell anything to the people in the office. If you have a sales person that wants to do these things, reduce their compensation, and hire them as a sales office clerk.
Salespeople, just like the operations and administrative staff, are a critical part of your journey to success. It’s important to get the hiring and compensation package correct and then give them the training and support they need to succeed. Good salespeople in a service-related business are difficult to find, so it is incumbent on us to do things right to help them succeed.
In a future issue, we’ll discuss what I consider to be the components of a successful sales proposal. After all the work that is done to secure the appointment and walk-through, it’s critical that the presentation be as professional and complete as possible.
It’s impossible to cover all the aspects of compensating and managing salespeople in a short article, but hopefully we’ve given you some tips that will help you become more successful. Happy sales management!
Richard (Dick) Ollek is the senior consulting partner for Consultants In Cleaning, LLC, where he provides consulting assistance to Building Service Contractors. Prior to forming Consultants In Cleaning, LLC in 2005, he owned and operated his own cleaning and facility services company for 34 years after managing another company for 9 years. He has written 3 books for the industry on selling, human resources, operations and do’s and don’ts of contract cleaning. He also writes a weekly blog that is read in 14 countries and can be accessed through his web site at www.consultantsincleaning.com. He also is a principal in tripodcast.com which produces an every Monday morning FREE pod cast at www.tripodcast.com. In addition, he produces CD’s and DVD’s that can be accessed on the Consultants in Cleaning web site. Dick can be reached at 573.873.9500 or through his website.