Benefits vs. Non-Competes
Each year we look at distributor sales compensation and find that most distributorships offer a variation of the commission plus formula, where salespeople earn what they are paid, based upon their ability. It is a fair and straightforward process, whereby a given amount of revenue produced by the salesperson creates a specific cost to the distributorship.
Of course, fairness is in the eye of the beholder. For employers, it may be disturbing if a few accounts become large enough that the salesperson does not have to work very hard to achieve a reasonable income. That person may have little incentive to chase new business. He or she is also a prime prospect for leaving the company to establish a separate distributorship. Despite non-compete contracts, there is a chance that any large accounts held by that salesperson may not continue as customers.
For the salesperson, continual increases in out-of-pocket costs for benefits and expenses can be irksome, as well as a perception that the workload for some may not be quite as heavy as for others.
In some cases, it might be appropriate to use a team sales approach as accounts grow larger. If more than one salesperson is involved, the client would be more apt to identify with the distributorship, rather than the individual. Split commissions would also be an incentive for a salesperson to broaden his or her client base.
It might also be a more fair arrangement to create an agreement where increased levels of sales success (as defined by the company) generate higher percentages of benefits absorbed by the distributorship. This could help keep the salesperson more focused on sales and less interested in greener pastures elsewhere.