How much sales commission to pay?

[dlip]

Hi!
So I design and build websites; and my friend asked to join with me; he focusing on sales. How much percentage of the project revenue should he get?

Some of the sales I would have gotten even without him; others not. After he joined, together, we worked on raising my prices. I obviously 5x more work than him and invest far more time.

Is there a standard rate for such an arrangement?

Also, how do I determine sales I would have gotten anyway? Does he just get a percentage of all my sales, even those I would have gotten otherwise?

And, thirdly, recurring projects from the same client - is it standard the sales person gets a percentage of that?

Thanks!

[PrintDriver]

The salesmen I know get anywhere from 8 to 15% of the sale for commission. Some work on straight commission (the higher end of the percentage,) some work on a draw (the lower end of the spectrum,) where they get paid, but have to make up their percentage in sales for the month. If they don’t make their draw, eventually they will be let go unless there are serious external circumstances (like a pandemic perhaps.)

Usually they only get commission on sales they make, not sales anyone else brings in. Who did the work, him or you?

Continuing clients is a percentage of each sale. The idea being the sales rep is your “constant contact” keeping your clients coming back. Even if the client just calls out of the blue, if it is your sales guy’s account then it’s his commission.

Word of advice. Come up with a working contract stipulating who gets paid for what. Nothing puts an END in FRIEND like disputes over money.

[Smurf2]

Completely agree.

The way it is here is there is a base salary for sales - it’s quite low, approx €20k per annum.

Then they get a percentage of the sales depending on the scope of the project. The idea - as PrintDriver noted - is that they are the contact and they handle all the communications. That is bringing the job in - delivering you the files/briefs etc - they take on the task of emailing/calling/visiting (if appropriate).

You send the Sales guy the proofs - he sends them on once he’s happy with them. You don’t know, you could be working on something, and the client has called your sales rep with a last minute change. But you have sent directly to the client - could lead to the client being annoyed the last minute change wasn’t communicated.

Your sales guy handles the account. From things like

• getting them in the door
• being the face for the client
• following up after the job is done to see if there are other things that you can you do for them
• trailing lapsing customers and trying to get them back with you
• following up with queries

I always give the sales guys the task of any queries that have come in

• must be followed up by 10am.
• All quotes that arrived after 12pm need to be submitted to the client the same day or 10am the following day.
• All quotes submitted to be followed up by 10am

It sounds like a lot - but it’s not. It keeps the ship sailing and communication between client and you moving swiftly.

Once I had a guy email me out of the blue, no idea who he was - asking for an urgent turnaround - query came in at 12pm - I had a quote back to him by 12.30pm - the job had gone, someone else got it.

It was beefy one too. The guy came back and said my price was better but he had to move on it.
Based on that alone, we still do nice business together and have formed a good relationship.

[dlip]

Thank you both for your help!
@PrintDriver you mention 8-15%. Is that for web design/development work? It doesn’t go higher than that? Is 20% or 33% insane?

In short, I do want to keep my sales person around as without them, I feel leads would dry up, but the current situation I feel is greatly taking advantage of me. My sales person doesn’t do “sales and marketing.” He answers phone calls when leads come in, and some leads he does go out and call himself. But that’s the extent of it.

So a little more background:
I was doing this web work freelance even before he came along. Now he’s come along and he made the phone calls forward to his phone. The thing is, a lot of leads would come in anyways. Should he be getting his commission for those, too? If they called my phone I could have closed the deal myself. How do we track which leads came because of him and which didn’t? It gets tricky. Whose to say the word of mouth came because of him, or regardless of him?
Also, if I do online marketing and my marketing creates a lead, how do I track that, too? I certainly wouldn’t want him getting a percentage of that. But if he handles the phone calls, how does that work?

Thank you!

[Smurf2]

Make it so that you’re the only one that can take in new work. You are the initial point of contact. Then assign the sales rep to clients, introduce them and say Sales Rep A will be your point of contact.

[PrintDriver]

That’s a tangled mess. And it sounds like someone is taking advantage of you. I’d take a good look at that “friendship.”

I’m guessing you don’t have a contract between the two of you either.

I don’t know about commission for digital work, but sales reps don’t get 33% of the sale. You’ll price yourself out of the market covering that for overhead (you are covering for that kind of overhead, right???)

The other part of this is, are you paying based on the sale? or on the profit of the sale? I could maybe see 30% on the profit part, but not on the whole sale.

And yet another part of this may be, are the sales worth the cost? if you are only doing $100 here or $1000 there, is there any reason to have a sales guy? Or is he generating 5-figure sales to justify that drawdown on your salary. It is very odd for a single freelancer to have a sales rep. If, as you say, the calls would have been coming in anyway, he is freeloading. Sorry.

[Steve_O]

All of your questions are things that should have been ironed out before your friend joined you – including solidifying his exact role. A few more things to consider. Could the work he’s doing be just as easily done by a virtual assistant? (Not the going to see people, but VAs can field calls, qualify leads, etc.) Is this your friends full time job? If so, he’s going to be looking for a salary that he can live off of. I don’t think it’s realistic for him to expect that you can fill enough billable hours to support your needs and his. Is it time for you to scale up and have multiple developers so that the friend can generate more sales and not swamp you? Should your friend be more of an independent representative and rep you as well as a print designer, logo designer, illustrator, photographer, etc.? Under that scenario, the friend would have multiple streams of income vs. just you.

[PrintDriver]

Taxes get complicated too. Who is the employee? Who is the employer? What Steve describes could fall under “studio.” Who carries the insurance, the bond if needed? The legal fees?
None of this is something to enter into on a handshake.

[dlip]

Wow, thank you all for your helpful replies! So I want to give a little more context.

So I was building these custom donation sites; takes a lot of time to build up the platform and to make each custom (custom design + functionality). Charging a premium. I was making a certain amount of sales, but my salesman’s involvement has increased leads and he is closing more deals. But aside from closing sales, it’s still all me doing all the work. His sales work is a sliver of the work I do. Aside from working on each site (design, dev etc); and building up the platform; I also work on our marketing site; branding; online sales workflow; all support documentation; online marketing etc etc.

To make matters worse, we entered as “equal partners” (33% each), with him and actually a 3rd guy who does absolutely nothing, but I think my salesperson only feels comfortable if that guy is involved.

SO:

1. So what is the lowest percentage I can take for myself that would not be taking advantage of me? Could he argue he’s handling all sales, so that’s 50%? He could argue they’re only signing up and we can charge a higher rate because he’s involved. If so, when does the 15-20% sales commission model come into play?

Does it make a difference if:
a) Projects that are custom and take time - Here is where I see me getting the highest percentage
b) Projects that I can churn out really quickly - Should we get 50/50 here?
c) Deals from clients I had before we partnered up - I should get 100%, no?
d) Deals from marketing I do myself - I should get 100%, no?

3. And what about the fact that I do several roles? Should take give me a higher percentage, or a set “salary” for that work?

Thank you!!

[Steve_O]

I said this in my first response, and I’ll say it again. This is all stuff that should have been worked out before hand. I think the best case scenario is that the original agreement / partnership / whatever be dissolved and you start again from the ground up — if that’s even feasible. Personally, I don’t think a service company whose sole revenue is based off of one person’s billable time can support a full-time rep. Based on the latest information you’ve provided, you’re also talking about three different things: sales commissions, salaries, and the partner’s profit sharing. You keep asking for a magical percentage that’s going to be equitable and make everyone happy, but that’s not your problem. As far as I can tell, you have a massive organizational structure problem that needs to be solved.

[PrintDriver]

What ^ he said

[Eriskay]

I don’t know – Will your projected income equal or exceed what you made as a one-man band?

@dlip

“equal partners”

Seriously? Will they pay for their shares of your hardware, software, and assorted overhead that you already coughed up?

@Steve_O

This is all stuff that should have been worked out before hand.

@Steve_O is absolutely right.

[dlip]

Thank you all for your insight, all very helpful! Yes, should have worked this all out at the beginning, but this is where I am, trying to fix it up as best as I can. So basically, I wouldn’t have many sales without this person who came in to drive sales – so giving him a high percentage of the profit makes sense (lets say 40%).

The question I have is the word of mouth sales, which a high percentage of the sales are turning out to be – which I think we’re both indirectly responsible for (me for building a product people recommend, him for driving the initial sales that spreads the word). Does it make sense to identify which came from word of mouth and he should get a smaller percentage for those, or is it standard for him to receive the same percentage for those as well?

Thanks, as always.