Someone asked me recently if I thought a salesperson for a construction-related company should help provide leads, and how many. My answer – yes, they should help provide leads, and how many depends on the company.
Let’s start by working backwards, considering the amount of money the salesperson wants to make each year. I’ll consider $60,000 a minimum. In today’s world, I would not want to hire a salesperson who didn’t want to make at least $60,000 as an annual salary. It’s difficult to feed and clothe a family on less.
If you are paying an 8% sales commission, they need to sell $750,000 per year to earn $60,000 ($60,000 divided by .08 = $750,000). If your average job sales price is $14,000, that’s 53.6 jobs (or 54 jobs) sold each year to reach that goal. ($750,000 divided by $14,000.) (Of course, use your own sales goals and average job price, not mine!)
If your salesperson sells one job in four, then they need 54 x 4 = 216 leads. That’s about the maximum number of leads you’ll want one salesperson to deal with anyway – as I point out in the Markup and Profit book, we did a study once and compiled the stats on over 30 sales people regarding how many leads they should take to generate the most sales with the highest profitability. Turns out the top sales people produced the best at 18 leads a month. 18 x 12 = 216.
The company will not always be able to generate that many leads – especially if the economy is sluggish. It is then up to the salesperson to get out and make up the difference by generating their own leads. If you reach the middle of the month and not enough leads are coming in to average about 18/month, the salesperson needs a plan in place to generate the extra leads they will probably need to meet their sales goals.
When I was selling remodeling, if I hit the 15th of the month and didn’t have at least 12 leads in, I started going door to door around the neighborhood of jobs I had working to generate more leads. I knew from long experience that doing this could generate one new job for about every 22 – 25 doors I knocked on. So, if I needed 4 jobs, I had a minimum of 100 doors to assault. Depending on the weather, I could do those 100 houses in 4 to 5 sessions. What was important was knocking on the door. If nobody was home, I left a door hanger. If somebody was home, I gave them a short talk about why I was there, then either went on to the next house or they invited me in to talk. It was a numbers game.
I also spent a lot of time sending thank you cards, something I still do when you order from us now. If the weather was bad, I made phone calls to old clients or made follow up calls on jobs that hadn’t sold yet. I made sure that I placed at least 10 calls each day. No stories, no excuses, I had a family to feed, clothe and support.
Your salesperson should be compensated for any leads they bring in. If they generate the lead and sell it, their commission should be increased by at least than 2%. That means they are paid at least a 10% commission on that job. Since your advertising budget should be a minimum of 3%, consider the extra commission part of your advertising expense. Extra effort calls for extra compensation.
Now, if your salesperson doesn’t like having to help generate leads for the company, my suspicion is there are other things they also don’t like to do. That of course, dumps the work on somebody else. Generating leads should not be an option. The only option is working for your company and helping your company and themselves grow and prosper, or finding a nice, quiet, easy, low-paying job with your competition.
Pay Salespeople Fairly: Commission Sales
Paying a Salesperson: Commission on Sales, not Profit
The Downside of Commission Sales
Penciling a Salesperson
The Salesperson’s Real Job
Referral Fees and Sales Commissions