Commision based sales

[conned tractor]

If I have a product and I employ people to go out selling it to retailers on a commision basis - how is the commision usually calculated. (As I can't sell - just not made that way as a geeky nerdy type ).

The product sells to the retailer at, say, £15 per unit and they are likely to buy in anywhere from a few units to tens of units per week depending on the size of the retailer. There are many of this type of retailer and plenty of sales opportunities within a small radius. There are also large sales opportunities by getting into a distributor/ supermarket, but these are a little way down the road yet.

The smaller sales will only generate a couple of quid a week for the sales guy, not enough for the bus fare, but there are lots of them. However the larger sales could generate, hundreds/week for a mornings work.

Does it usually taper of with respect to time? Or with respect to volume?

Is it normally paid up front? What if in the future, the sale falls through?

No idea how it generally works.

[doodab]

Often there is a tiered scale so you get e.g. £1 per unit if you shift 10 units a week, £2 if you shift 50, up to a maximum of say £5 per unit for someone shifting 200 or more units a week. The timespan over which sales are counted could be daily, weekly, monthly or longer and usually there is some sort of a bonus / incentive for being salesman of the month or similar as well.

Payment should be after the sale is made. You don't pay people commission on things they might sell.

You also have to ask yourself if the salesmen should be free agents with 100% of their income coming from commission or if they are actually employed for e.g. minimum wage + commission, which you might not want to do.

You can also look at getting them to "invest" in marketing collateral and stock etc. A lot of catalogue schemes work like this, most of the sales monkeys loose money at it, personally I consider it a tulipty way to do business but YMMV.

[Halo Jones]

Commission is only paid when you are paid else you could be in situation where the buyer goes bust & you have paid the commission: e.g. a rolling contact for 12months with 1000 units per month could be a big commission payment but if they go bust after 2 months your out of pocket.
Commission is normally paid a month in areas to give you a chance to go over the paperwork / do the calculations.
As for rate: are the units likely to be sold individually or as repeat business? If there is a high saturation rate then the lower the commission.
Standard commission payments can get complex & you will need legal review to the agreement.

Another way is to sell the units to the salesmen & then it’s up to then to decide how much they sell the units for thereby generating their own commission & less paperwork for you, the down side to this is that you need salesmen with capital.

[alreadypacked]

You could also look for salesmen who are already selling in your field, (like car spares shops) they might be interested in some extra income and they already have the contacts.

[conned tractor]

Thanks both. It's definately not a simple thing to calculate.

So the commision usually goes up with volume....I'm suprised by this....although I expect it give incentive to sell lots.

Business will likely be repeated as it's a consumable item....hopefully forever (in a perfect world).

[Sysman]

Payment should be after the sale is made. You don't pay people commission on things they might sell.

I once worked for a company who paid their sales force commission on shipments in a quarter. What happened was that stuff would get shipped to customers who hadn't placed an order, or simply sit in a truck in a layby for a couple of days.

Commission is only paid when you are paid else you could be in situation where the buyer goes bust & you have paid the commission: e.g. a rolling contact for 12months with 1000 units per month could be a big commission payment but if they go bust after 2 months your out of pocket.

Very true. The insurance companies had (still have?) a scheme for clawing back sales commissions when end clients cancel policies, savings schemes or pensions within something like 2 years. If you aren't big enough to do that, you probably can't get the commission back.

[MarillionFan]

Thanks both. It's definately not a simple thing to calculate.

So the commision usually goes up with volume....I'm suprised by this....although I expect it give incentive to sell lots.

Business will likely be repeated as it's a consumable item....hopefully forever (in a perfect world).

A lot of wholesale companies who visit retailers do not tend to have their own dedicated sales staff. The smaller ones tend to user agents.

Agents are paid commission anywhere from 10-20%. They are paid any type of retainer.

In gifts for example an agent my represent 5/6/7 different suppliers with different products. They tend to have their own client list and visit shops to their specific area. So if the customer doesnt want something from supplier A, maybe supplier B has goods.

Maybe this would better idea to start with than hiring a dedicated person.

What product are you looking to sell?

[Paddy]

If I have a product and I employ people to go out selling it to retailers on a commision basis - how is the commision usually calculated. (As I can't sell - just not made that way as a geeky nerdy type ).

The product sells to the retailer at, say, £15 per unit and they are likely to buy in anywhere from a few units to tens of units per week depending on the size of the retailer. There are many of this type of retailer and plenty of sales opportunities within a small radius. There are also large sales opportunities by getting into a distributor/ supermarket, but these are a little way down the road yet.

The smaller sales will only generate a couple of quid a week for the sales guy, not enough for the bus fare, but there are lots of them. However the larger sales could generate, hundreds/week for a mornings work.

Does it usually taper of with respect to time? Or with respect to volume?

Is it normally paid up front? What if in the future, the sale falls through?

No idea how it generally works.

If you employ commission based sales people and if they end up selling nothing you are bound by law to pay them at least the minimum wage. There is no way around that.

[conned tractor]

A lot of wholesale companies who visit retailers do not tend to have their own dedicated sales staff. The smaller ones tend to user agents.

Agents are paid commission anywhere from 10-20%. They are paid any type of retainer.

In gifts for example an agent my represent 5/6/7 different suppliers with different products. They tend to have their own client list and visit shops to their specific area. So if the customer doesnt want something from supplier A, maybe supplier B has goods.

Maybe this would better idea to start with than hiring a dedicated person.

What product are you looking to sell?

I was hoping to reveal all shortly, but my disputes with the other director are holding me back. I will reveal all but not when we're in dispute.