There are lots of opinions on how to pay a salesperson. But here is the bottom line: your salespeople have to be able to make a good living and provide for their family or your system won't work.

A salesperson needs to pay their bills. In my opinion, today, that means they need to be making at least $4,500 a month. I personally would not hire anyone that did not want to make at least $60,000 year, but maybe I expect a little more of those who would work for me.

Salaries, base plus commission, or any kind of a guaranteed pay gives a salesperson a reason to not sell. Sales is hard work, and working on straight commission gets folks up and to work, and making money. I started selling remodeling in 1969 and with one brief, painful exception, I always worked straight commission. I've turned down countless offers from companies offering work on a salary or base plus commission. that wanted me to work on a salary or a base plus commission. I'm not interested. Because not only does straight commission keep me working, it also means the sky is the limit. And I'll set my own salary, thank you very much.

Straight commission should be based on the sales price of the work and nothing else. Commission based on gross profits doesn't work. The salesperson has no control over the job once it is turned over to production and if something goes wrong in production, the salesperson should not have to pay for those mistakes.

I have talked with many successful contractors whose sales teams do very well not only for themselves but for the company as well. Those selling new homes are paid anywhere from 1% to 3 % of the sales price. Those selling remodeling or restoration work earn 6% to 8%. Specialty salespeople earn 6% to as high as 10%. And they all can earn additional bonuses for such things as zero complaints (from clients, subcontractors or suppliers), generating their own leads, gross profits that exceed a company minimum standard, no change orders, exceeding annual sales goals, etc.

If you treat your sales people right, you'll make far more money than you'll ever save by trying to beat them out of a dollar. If you owe them, pay them. Hold them accountable for all the work they do, but if they do their job correctly, pay them fairly and on straight commission. Then sit back and watch them sell.

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Dylan
Dylan
July 2, 2018 4:27 pm

Hello, Im living and working in California doing Seismic Retro fitting of apartment buildings. The jobs are usually 80k to 250k on average and I would say our average sales person make 2- 6 sales a month. They initially offered me 3% but now are backtracking and most sales are only 2%. I have a very large sale about to close and was thinking about leveraging it for a new commission rate. What would you say is fair? 5%?

Jason Winchester
Jason Winchester
April 28, 2016 9:13 am

I am a salesman for a remodel company. I’ve been doing this particular job for 5 years now. We have grown from a $750k a year company to a $2.5m a year company in that time. I am in the process of getting ready to start renegotiating my salary. When I started I had no experience in construction sales & estimating. I had been a carpenter and a foreman for the previous 5 years for the same company. My current salary is $40k a year base and I make a 1% commission on sales that hit our net profit margin… Read more »

mhoriz
mhoriz
July 26, 2015 11:31 pm

hi..i want to ask about commission rate, how much incentive we have to give when a person-in-charge to get a new project in a construction company had closed/get a new project?

Trini
Trini
February 13, 2015 3:49 am

In regards to this salesperson who is on straight commision…. In your opinion, is this guy self generating all of his own leads or is he working off of all of the leads that come in to the office?

Adam Klein
Adam Klein
August 10, 2012 3:16 pm

Just came across your blog, some awesome tips for those in the industry. You’re obviously well-versed in construction, contracting and building. I wasn’t really sure the best way to reach you, but I also know some of your readers may be looking to increase their knowledge and could benefit from checking out the new Owens Corning Architectural Information Center. It’s our comprehensive resource for new and old builders, architects, specifiers and contractors who need to learn new guide specifications, complete additional training, read about commercial products, see updates on Sustainability and more! Owens Corning HVAC Duct Solutions Thanks and keep… Read more »

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