When I worked in sales, whether I was selling remodeling, new homes or any other specialty, I always worked on straight commission only. I refused to work for anyone who wanted to pay me a salary, or a base plus commission, or an hourly wage. In my opinion, those pay schemes only give salespeople a reason to stay in bed in the morning.

I’m a firm believer in accountability. If I don’t sell, I don’t eat. It’s real simple. That’s accountability.

Pay should be based on performance. If you’re hiring a salesperson, have a good set of ground rules that both you and your salesperson work under. And the rules don’t change unless the change is mutually agreed on by all parties. Our book, Profitable Sales; A Contractors Guide does a good job of defining the salesperson’s job and what the company must do to support the salesperson. It also has some basic ground rules for the relationship, giving your salesperson the security of knowing they will be fairly compensated for their work, based on the amount of effort they expend.

As Zig Ziglar said many times, sales is the highest paying hard work and the lowest paying easy work there is. If you get out and hustle, you’re going to make good money.

Pay based on performance works as long as the company owner is honest. If the company owner is constantly looking for ways to pencil their sales staff, it all falls apart. That’s one of the main reasons I tell contractors to never pay based on net or gross profit. It is way too easy for the books to be “adjusted” and the salesperson is almost always the one who comes up short. And if the production department isn’t doing their job well, the salesperson ends up paying for their screw-ups. Salespeople should be paid a percent of total sales, and they should be paid as checks come through the door.

The same holds true for the work of a job superintendent (or foreperson). If you’re in charge of the jobs you are building, and you’re paid an hourly wage or a monthly salary, there isn’t a lot of incentive to get things done. There is the pride of doing a job well, and there’s the threat of losing your job if you don’t produce, but both of those incentives have their limitations. Sadly, too many people who work for a salary or an hourly wage do just enough to keep their paycheck coming in.

Job supers or forepersons should be paid a percent of the sales price of the job, and should be paid based on what percent the job is complete. That way the job stays on schedule and a good super or job foreperson can make very good money.

Here again, the rules must be set in writing between the company and the person running the jobs, and those rules can’t be changed or adjusted unless by mutual agreement.

I’ve seen field crews who were paid based on the amount of money the estimator put in the job for their particular part of the job. Demolition, concrete, framing, roofing, they got paid based on the estimate for that job. How much they made by the hour was determined how fast they got the job done. If you think about it, isn’t that almost the same as how you pay your subs?

Are you doing the best job you can do as the owner? Make your salary straight commission. If you’re the salesperson, pay yourself a commission based on the total sales price of the job. A normal commission is 8%. If you do that, will you be able to keep your bills paid and your family fed?

Pay your employees based on performance and provide a good service to your clients. Then everyone will be happy.

Comments from Michael

I spoke with a coaching client this week who is dealing with a long-time client who, for the first time, asked for a price breakdown on a job he quoted. This relationship goes back several jobs and years, and it caught our contractor off guard to say the least.

Gang, itemization or transparency or whatever term you call it is dumb. There’s no nice way to say it. It doesn’t improve your ability to sell your work. It doesn’t make you more professional, and it doesn’t result in higher quality jobs. If you think it does, then why don’t all professionals do it? Your doctor doesn’t do it, nor does the hospital or your lawyer or your dentist.

Tell the folks right upfront that if they want any kind of itemization there will be a charge of $75.00 an hour for that service. It’s a lot of extra work, it’s not necessary, and when it’s done, they won’t be able to compare your prices to anyone else’s even though they think that’s what they’ll do. I can’t compare two itemized quotes, and I’ve been rattling around this industry for ages. Every job is different, every contractor will build a different job, and every contractor will estimate the project differently.

Don’t be afraid to stand up and say, “This is how we work.” You can find that in the Profitable Sales book as well.

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Carleon King Leo Beard
Carleon King Leo Beard
October 15, 2019 7:43 pm

I’m working for a warehouse company called National Distrubution that ships out alcohol of all varieties. I’m sure we unload pallets of atleast $75,000- $100,000 work of product a night. A permanent employee makes $14-$15 an hour and a temp makes $10. We get nothing for production but get pushed to do so. Is there anyway that this could be investigated ? Should we get paid alot more ? Atleast $20 an hour compared to the production we are kicking out.

William Hale
William Hale
December 18, 2013 6:35 am

We always pay people based on the work they do. We have established scale for each craft, (roofing off and on $80.00). Use good judgment some projects have a higher degree of difficulty and of course will cost more. Economy of scale is also important; we consider a roof project to be 30 sq., single story, hip and gable, 4-6/12 pitch, 1 attic vent, kitchen vent, furnace vent, 3 plumbing vent stacks, 3 sheets of 1/2″ plywood, anything else has to be accounted for in the estimate and agreement. Unit costing can be applied to almost any craft; if not,… Read more »

David Schaumberger
David Schaumberger
August 17, 2013 6:13 am

In my area, the labour laws are pretty strict about this idea and its generally pooh poohed upon. I like it because as a business owner I can see the benefits to both my employees and myself. The trick to making this work is correct estimation, having seen a couple of jobs blow up this year from hiring new employees whose working style is not even close to my own, I have had to adjust my mark up to recoup a loss, I know now that I cannot estimate for my working style on site. Talking to those involved in… Read more »

Roland
Roland
August 15, 2013 11:03 am

how will you gauge the quality of work if each of the crews are targeting to meet the time and budget performance? each trades person will want to outdo each other, which in my opinion is not good. i hope you can prepare another article to broaden this performanced based salary scheme.

Paul Beck
Paul Beck
August 15, 2013 6:42 am

Michael, do your banks require an intemized cost breakdown in order to get a construction loan?

Peter Sutton
Peter Sutton
August 14, 2013 12:03 pm

So Michael, are you saying that a job super should only be compensated by job percentage along with no reg. pay ?

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