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I hope you can help me gere because I'm loosing sleep over

Customer Question

I hope you can help me gere because I'm loosing sleep over this issue. A dear friend of mine has his own HVAC business for 10 years now, he is as good as it gets or better. I have been an administrator and sales manager for most of my life in different industries. He offred me to work with him as a sales manager and I agreed, and now I perform as a sales manager, I do the commercial sales, I get all the leads for residential sales and call to screen the call and dispatch technicians or my residential sales person.
The owner and I agreed on a basic salary of $45,000 + commission, the problem is that he (nor I for that matter) doesn't know how to figure the commission part, he has never had a sales manager before or commercial sales for that matter either. He is paying the Residential salesman 50% over net profit, but we have no clue on how to figure out my commission part.
I want my salary to be fair to the both of us, I am in charge of sales activities and direct supervision of salespeople (only one right now). Analyze sales statistics and industry reports, determine sales goals and strategies, plan and develop sales training, project sales and determine the profitability of HVAC product and services. I take all leads from companies and screen them and diapatch sales or techs, I design sales promotions and design all marketing materials, update website content and visit potential businesses for commercial sales of service agreements and equipment.
Thanks.
Submitted: 7 months ago.
Category: Job
Expert:  Mark CPA replied 7 months ago.

Hi, my name is Mark. I will be happy to help you with your questions.

Expert:  npvadvisor replied 7 months ago.

Hi. My Name's Lane. I can help here. I've been consulting to small, medium and large businesses for 30 years. It doesn't look as if the other expert is coming back. I have a different answer.

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I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

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It's no surprise that you're losing sleep over this, not only are you faced with something for which there's no magic formula, you have to balance designing a compensation system with possible prece[tion that you've staked the deck in your favor.

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And while, again, there’s no secret formula that will help your business find that middle ground, (that point where every employee who makes up the sales organization feels fully motivated to deliver results), there are some best practices that can help companies like your's, hoping to expand, design sales compensation packages that incentivize optimal performance from every sales function.

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First, you must, As Stephen Covey points out, begin with an end in mind. Don't just arbitrarily puck numbers. Sit down with the owner and ask yoiurselves WHAT IS our end in mind... What are we trying to get to here.

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In most expansion stage software companies, sales executives are charged with all aspects of the company’s sales distribution model, the relationship and accountability of the sales and marketing departments, and driving (and ideally exceeding) quarterly targets. HENCE, SALES EXECUTIVE comp should be based on meeting specific sales goals and profit targets, as well as a manager or executive’s role in helping achieve key corporate objectives.

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As such, sales exec compensation should be based on meeting specific sales goals and profit targets, as well as a manager or executive’s role in helping achieve key corporate objectives.

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One of the best practices in this area is allowing the sales EXECUTIVE (you) be able to double their compensation or more ... but only if certain stretch goals are met... This is usually done by having that base salary, a commission that still maintains a 20% profit margin for the owner ... and then a bonus when highly desired (typically GROWTH in revenue) goals are met.

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I'm attaching a spreadsheet made available to the public by OpenviewPartners (I have no association) which can be an excelllent place to start. as it rfelates to playing with the numbers, analyzing different scenarios.

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The spreadsheet is really designed with Business Development Reps in mind, but can be a good frame of reference.

Expert:  npvadvisor replied 7 months ago.

The bot***** *****ne here is determining ehere thenowner wants his organization to go ,,, if youhope to design a sales compensation plan that can help him get there.

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To do that, simply start with your revenue goals and objectives and work backward. For instance, if you want to bring in $1 million in new business, how many deals will you need to close to get there? How many opportunities will you need to actually close those deals? How many leads will you need to generate those opportunities?

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Finally, for your employees’ sake, try to keep thing as simple to interpret as possible.

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THis goes hand in hand with another best practice ... be sure that evedry individual knows where the company is trying to go and can get excited about it with you ... The comp plan, itself, should clearly illuminate their path to financial success (as the company succeeds).

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Not doing that can cause your sales organization to focus on the wrong activities and objectives, or spend an inordinate amount of time thinking about how reach their targets (analysis paralalysis) — and both of these can really cause inertia.

Expert:  npvadvisor replied 7 months ago.

Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

Otherwise I’m working for no crediting at all here

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Thank you!

Lane

I hold a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Expert:  npvadvisor replied 7 months ago.

P.S.

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A frame of reference (may be stating the obvious) for pay levels in your specific industry is also helpful.

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Thes three can hale with that:

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http://www.indeed.com/salary

http://salary.careerbuilder.com

www.salary.com

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From a very high level, it's important to keep these things in mind:

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Sales goals, performance measures, payout formulas, and the sales cycle of your business.

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Hope this helps get you started ... let me know if you have questions.

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Lane