Commission-only sales position -- typical rate?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
mister_sparkle
Posts: 196
Joined: Wed Dec 11, 2013 5:58 pm
Location: Chicago

Commission-only sales position -- typical rate?

Post by mister_sparkle » Tue Nov 15, 2016 11:15 am

I have a friend who works in real estate at the moment and has been offered a sales job with a company that specializes in build-outs of customized retail and restaurant interiors. Jobs range from $50K on up, with a typical contract being worth around $100K. He is wondering what sort of commission would be typical for this type of sales, keeping in mind there is no base salary, just commission.

Does anyone have any experience in this area? If so, any tips as far as structuring the compensation?

User avatar
tinscale
Posts: 346
Joined: Thu Dec 17, 2009 11:16 pm
Location: North Carolina

Re: Commission-only sales position -- typical rate?

Post by tinscale » Tue Nov 15, 2016 7:05 pm

The company that offered him the position won't tell him the percentage or whatever?

young-ish
Posts: 35
Joined: Fri Apr 15, 2016 12:10 am

Re: Commission-only sales position -- typical rate?

Post by young-ish » Tue Nov 15, 2016 7:12 pm

It varies depending upon the industry, value of sale and if there is a recurring (annual) commission.

A 20% payout for new business sales is common. Expect lower for existing client sales (renewals/product upsells).

TRC
Posts: 1838
Joined: Sat Dec 20, 2008 5:38 pm

Re: Commission-only sales position -- typical rate?

Post by TRC » Tue Nov 15, 2016 8:47 pm

tinscale wrote:The company that offered him the position won't tell him the percentage or whatever?


+1. He should ask a few questions:

What's the quota?
What's the on target earnings for hitting quota?
How is the compensation plan structured? Ask for a copy of the plan with the T's & C's.
What happens when you exceed quota? Are there accelerators?

User avatar
David Jay
Posts: 4095
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Commission-only sales position -- typical rate?

Post by David Jay » Tue Nov 15, 2016 8:58 pm

young-ish wrote:A 20% payout for new business sales is common. Expect lower for existing client sales (renewals/product upsells).


I think it would depend greatly on the effort required to acquire customers (how many sales "walk in the door" and how much is cold calling, for instance) and the complexity of the quoting process.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

young-ish
Posts: 35
Joined: Fri Apr 15, 2016 12:10 am

Re: Commission-only sales position -- typical rate?

Post by young-ish » Fri Nov 18, 2016 5:59 pm

David Jay wrote:
young-ish wrote:A 20% payout for new business sales is common. Expect lower for existing client sales (renewals/product upsells).


I think it would depend greatly on the effort required to acquire customers (how many sales "walk in the door" and how much is cold calling, for instance) and the complexity of the quoting process.


It depends. I have worked in call centers where the new business commission was the same regardless of acquisition method. If a prospect called our 800 number and they bought after two minutes on the phone you got 20% of the sale. If you went searching through the newspaper for a lead, mailed them a sample product, sent three emails and called them six times before they finally said yes...you still got 20%.

User avatar
David Jay
Posts: 4095
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Commission-only sales position -- typical rate?

Post by David Jay » Wed Nov 23, 2016 10:14 am

young-ish wrote:
David Jay wrote:
young-ish wrote:A 20% payout for new business sales is common. Expect lower for existing client sales (renewals/product upsells).


I think it would depend greatly on the effort required to acquire customers (how many sales "walk in the door" and how much is cold calling, for instance) and the complexity of the quoting process.


It depends. I have worked in call centers where the new business commission was the same regardless of acquisition method. If a prospect called our 800 number and they bought after two minutes on the phone you got 20% of the sale. If you went searching through the newspaper for a lead, mailed them a sample product, sent three emails and called them six times before they finally said yes...you still got 20%.


We may be talking past each other. I am not talking about different commission levels based on the specific order, I am talking broad-brush about the overall compensation package. Two examples:

1. An established business where the customers call me and I am essentially an inside-sales "order taker" - that position likely does not warrant a 20% commission.
2. A complex product that requires multi-month process to: develop a specification (in conjunction with the customer), estimate, quote and negotiate a relatively low value order (say, under $200,000) where the effort required means I may only close a handful of orders a year. I would not be willing to accept 20% in that case, I would require a lot higher rate in order to make enough to live on.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

printer86
Posts: 58
Joined: Mon Apr 25, 2016 8:45 am

Re: Commission-only sales position -- typical rate?

Post by printer86 » Wed Nov 23, 2016 12:01 pm

If there is not a written sales compensation plan that is signed by both parties, don't take the job.

Jack FFR1846
Posts: 5885
Joined: Tue Dec 31, 2013 7:05 am

Re: Commission-only sales position -- typical rate?

Post by Jack FFR1846 » Wed Nov 23, 2016 12:09 pm

If nobody has any clue whatsoever here, take last year's sales that you'd take over (if there are some number of sales people, divide by # of sales people).....take an acceptable compensation number..... divide the second by the first and there's your percentage. That'll get you a ball park. If the number looks unreasonable (say it comes out to 80%), then the job doesn't make sense to take.
Bogle: Smart Beta is stupid

Post Reply