I’ll split it with you 50/50

So today I was sending emails back and forth with a long lost friend (well not really) from Wisconsin who is starting his own web site design company after working for three years at another one, and driving 3 hours one way to work every day.

His name is Jim and he is looking for tips and advice and especially wanted some feedback on his idea regarding commissions.

He’s thinking about doing a 50% commission on web site sales. Here’s what he said:

Do you think a straight commission paycheck is fair? I’ve interviewed a few people that I really thought were great salespeople, but they tended to want a salary + commission. I would think a high commission percentage like that at 50% – they would be doing fine, but the 3 people I’ve talked to all didn’t like that part of it. I hate to offer a salaried position because I think if they are straight commission they would feel more motivated to actually get the accounts – what’s your thoughts?

Leave him any advice you have in the comments.

7 responses to “I’ll split it with you 50/50”

  1. I think straight commission is basically a bad deal for the main reason that people tend to become complacent. Contrary to popular belief that high commissions motivate people to go out and get more and more, I believe that only happens with a very small handful of driven, rock-star sales people. Reality, is people tend to become with the status-quo, and once comfortable with the income they’re bringing in – settle for maintaining that.

    Also, there’s the motivation factor. Commission salespeople are basically independent contractors. Happy and content to work for you whenever they’re darn well ready. There’s nothing there (like a regular salary / benefits) to keep them dedicated to your cause. The thought being that generally speaking, folks don’t start really appreciating until they think that there’s a possibility it could go away. For example, we don’t appreciate our jobs until we get laid off or fired.

    What’s an independent commission only salesperson got to lose? Answer – nothing.

    In order to make this work, I would think there would need to be some type of incentive, on top of the 50% commission (which, actually I think is way too much – discussed in next paragraph). Something guaranteed referrals, hot calling lists, a product / service that’s so extraordinary that people are going to be lining up outside your door…

    50% commission? Don’t give up the farm in order to get some milk dude. At that level, honestly, who’s project / client is it? That’s just asking for all kinds of problems.

    Sorry for the novel. Hope it made a little sense.

  2. Smart thinking Mark, it’s true everything you say. Money doesn’t always motivate people. Even giving the sales guy a larger commission could motivate him to sell less. Good thoughts all around.

  3. I’ve been thinking about this a little bit and had another thought. I think a big issue is expectations.

    Is the salesperson supposed to prepare his own sales materials? Do you have to be involved in sales pitches? Do you have to go to the sales meetings and where do you get involved? Who pays for sales materials? What if the sales guy wants to send out a mailer that costs $$$ to do? Do you give him a marketing budget?

    I think other things to think about include… equipment, repeat business commission? Are you splitting all business with the salesperson or only new business that is brought in?

  4. Add –

    Gas, lunch / dinner, 3 martini cocktails, entertainment…

    I he can afford to pay out 50% commissions, then I guess we can assume he is looking to sell some costly web design services, and all this and more can go into wooing a potential client.

    Do you recompense this salesperson for their efforts in winning a client, or only if they close the sale?

    Are their costs billable on top of the commission or part of it?

    So many questions for what’s more than likely going to be sub-status-quo sales performance.

  5. So Mark – I’m the guy that Chris has been talking to and here’s a question for you, if I were to set a minimum amount in cash that they would be required to bring in to retain their position – would you think that they would stay motivated?

    Also in answer to your sales materials question, I have already assembled a great materials book which I have been using myself and have successfully sold several accounts with, and figured it would work for the new rep – so that stuff is already set to go.

    You think 50% is too much? What would your suggestion be and why? My average sale in the type of design market I’m in is around $1000 a year, so my thought being that if he cold called 40 hours a week and even got only 2 sales a week, he’s making $1000 a week, that’s $52000 a year, and I am also bringing that in with only one rep, meanwhile of course I’m developing the projects. With that sales model do you think 50% is too high still? I mean it’s true he has potential of making way way over 6 figures (how can you NOT get more than 2 sales a week knocking on doors 40 hours a week in towns like Milwaukee?) – but I thought that would be a fair incentive plan – what’s your thoughts?

  6. Hi Jim –

    I guess my question back to you would be, if you are paying a salesperson pure commission, do they really have a “position to retain”?

    Regarding the 50% commission, I go back to the issue of the potential for “whose client is it” type questions. Full commission salespeople are notorious for taking “their” clients with them to the next shop they go to. Why give them more of an argument in their favor as to client ownership by giving them 50% of the deal?

  7. Be clear on one thing: Are you paying for leads and then you close the deal or is your sales person responsible for writing proposals, and getting the deal signed and the money in the bank?

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