What's a Sales Rep Worth?
BFL&S spoke with the owners of the following distributorships regarding their compensation plans, as well as a variety of factors involved in developing an effective team:
- Midwest Single Source, Wichita, Kan., John Osborne, president and CEO
- Professional Graphic Communications, Sewickley, Pa., Mike Weinzierl, president
- S.W.M. Printing & Promotions, St. Louis, John Sanders, president, CEO
- Venture Corporation, Lewisville, Texas, Gary Dunlap, president
Not surprising, all of the contributors reported that their sales professionals earn a commission on their sales.
At Professional Graphic Communications, there are four inside sales reps, and Weinzierl and another representative make the outside calls. "The inside reps farm the accounts that we bring in, and they are paid a salary that varies, based on their performances. The other outside guy gets 10 percent of all sales. It's all based on performance," said Weinzierl. "We also offer paid vacation benefits."
"Typically, for the first year, our sales reps are given a draw, which we don't recover if they don't make it," said Dunlap. "Over the year, we track where they're at based on if they were on straight commission. At the end of that time, we can pay the difference, or, if they are in a negative situation, and we still want to keep them, we erase the deficit and they just proceed on straight commission."
Venture Corporation also offers a 10 percent additional commission on new customers and orders. "Employee health-care benefits are paid 100 percent—they are responsible for their dependents—and the staff receives two weeks of paid vacation," added Dunlap.
At Midwest Single Source, in addition to a fixed monthly allotment for cars (approximately $350) and basic cell phone and pager costs, sales reps are paid a percentage of each quarter's sales as a salary, and then there is a scale for commissions. "Today, the average commission is in the neighborhood of 10 percent to 15 percent, bringing the total compensation for sales to somewhere between 27 percent and 29 percent," said Osborne.
Twenty years ago, he noted that the company was paying approximately 35 percent. But, given changes within the marketplace and the industry itself, he was forced to make some changes. "Still, it was important to do the right thing in terms of offering a base salary that would get the house payments made and a commission—which is the accelerator of productivity—and yet get the cost of the sales process below 30 percent," continued Osborne. The company also covers 50 percent of health-care costs, including dependents.
Sales representatives at S.W.M. Printing & Promotions are paid a combination of draw plus commission. Sanders also explained that technically, the customers are considered the property of the company. "However, we all know that there is some ownership with the representative. There may also be situations where someone comes on board and we agree ahead of time to exempt certain accounts from our standing employee agreement on future non-compete situations, but any of the other accounts would be S.W.M. customers," he said.
As expected, non-compete provisions for sales representatives are required by all four contributors. "We have an employment agreement in which there is a non-compete clause included," said Sanders. "Everyone keeps calling these things 'non-competes', but the fact of the matter is that 90 percent of what's contained in the employee agreement deals with what I'm going to be doing for the employees. Still, everyone wants to zero in on the restrictive covenant part of the agreement."
The contributors all acknowledged that formal, structured sales training was not a common practice at their companies, but that staff members attended education seminars at trade shows and manufacturer training sessions. However, both Dunlap and Osborne mentioned that they plan to offer more to their reps in this area in the coming year.
"For the most part, we start everyone in customer service, and so the initial exposure is over the phone, not in front of the customer," said Osborne. "They stay in a customer service position for at least six months, and then spin out from there."
Dunlap pointed out that many independent distributors, including several members of his own sales team, received solid sales training while working for the major directs. Now, as the majors continue to decline, it's having an impact on this source of talented, experienced recruits.
Weinzierl noted that his weekly sales meetings serve not only to review sales activity, but to offer a great opportunity to look at what works and what doesn't, and to share tips for improving performances.
It is also at these weekly meetings that outstanding performers are verbally recognized. Likewise, at S.W.M. Printing & Promotions, Sanders reported that there is no formal employee recognition program, but employee accomplishments are noted and recognized throughout the year in various ways.
Said Osborne, "We indicate who is above quota in our monthly newsletter and acknowledge consistent top performers at the end of the year during our recognition program. Someone can have a great quarter and then fall off at the end of the year. Employees that pull the cart all year long are the ones we want to reward." He added that the salesperson of the year receives a plaque, as well as remuneration. In addition, everyone who is on target with their sales numbers is rewarded with either a paid trip or $2,500 cash.
The contributors reported that their sales staffs consist of a mix of seasoned veterans and new blood with strong potential. When it comes to hiring, Weinzierl said that it isn't so much industry experience that he looks for, but overall strong communication skills and good people skills. Osborne said he tends to hire individuals with minimal industry experience that he can work with and develop. One of his top sales reps was a young press operator when he came into the business. He started out in customer service and learned not only the business, but cultivated his socialization skills while making the transition from working strictly with machines to selling to customers.
"There are those with industry experience who have a book of business and are looking for a place to land it. Those folks may be looking for the highest return for their investment of that established business. The problem is, they're always looking to go upstream as soon as a better deal comes along," said Osborne. "I don't think that builds an organization, so we don't recruit people in that situation."
Still, he pointed out that there are a number of distributorships looking to bring people on board who are only going to cost them a percentage of sales. "They're not willing to invest hard money—their own money—into developing new people. They don't have to do anything except get a piece of the deal. That's no way to run a business," Osborne said.
Some seasoned veterans are heard to comment that the industry just isn't attracting the young talent today. "That may be true," said Dunlap, who added that one of his youngest sales reps is 32 years old. "People have to understand this business," he continued. "It is such an evolving business, and somewhat confusing as to who we are and what we do at times. So, the industry probably is not on the radar screen of opportunities that young people consider."
Osborne feels that part of his job as president and owner of a company is to always be looking for added resources and assets. "We're considering an acquisition right now that will mean three new sales reps if it works out," he said. "It's going to involve an investment of $400,000, so hopefully it will. But, we've invested that much in acquisitions in the past and it didn't work—it's always a learning experience."