How do your sales compensation plans compare?

Jason Cannon

November 21, 2015

Compensation plans among sales staff can vary greatly but generally, they all include some mixture of base pay and commission.

The right mixture can be tricky as managers seek to offer a base salary high enough for sales personnel to meet basic necessities, but low enough that sales commissions become a vital part of a paycheck.

“We have a very good pay plan, but it tends to be a lower salary with higher commissions,” says Dennis Boswinkle, sales manager for Nacarato Volvo Trucks’ dealership in Nashville, Tenn.

Marrying the right person to the right compensation plan is also a key factor in keeping your staff motivated, he adds.

“If you’ve got somebody making $40,000 to $50,000 a year and they’re comfortable with that level of pay, they’ll never be the salesperson that you need,” Boswinkle says.

Chris Marsh, sales manager for Tri-State Trucks, says compensation plans vary for the level of experience each sales person brings and that commission structures are tiered based on gross margin of the sale.

Open communication, Boswinkle says, also is a key factor in making sure sales staff understand the importance of hitting their sales goals, and how their sales performance impacts their co-workers.

“All my guys know what it takes to pay the bills here,” he says. “They know what we need to have a healthy bottom line. We talk about that very openly.”

Nacarato tries to balance dips in demand for new trucks by honing attentions on its used truck lineup.

“When new is off, used is on,” he says of trends in the new and used truck markets. “When new is on, used is off.”

Jason Cluck is now with Nacarato Volvo as well, but in his past life at Arrow Truck Sales he said his employer’s pay plans were 100 percent commission based, and offered a base pay for the sales person’s first six months.

When sales commissions exceeded the base allotment, Cluck says the employee would be paid the higher of the two amounts. After the first six months, all employees are transitioned to full commission.

Managing a staff of commission only personnel poses unique challenges.

“Dealing with commission-only salesmen, you have to motivate them in down months,” Cluck says. “If they lose a deal they can get down on themselves because there’s no pay. If they start losing deals, you have to slow them down and remind them of good past experiences.”

According to 2013 survey conducted by Randall-Reilly, more than 55 percent of all respondents said sales staff were compensated through a mixture of salary and commission. Another 23.4 percent were on a straight commission plan. An additional 13.8 percent were on plans that called for a draw against a commission.

A whopping 75.4 percent of respondents said sales commissions were based on the gross margin of sales ticket. However, 13.4 percent said they paid commissions on the actual sales price of the truck.

Nearly 60 percent of the respondents said their commissions ranged from between 20 and 30 percent, and the survey’s average commission was 21 percent.

More than 40 percent of respondents said they did not offer additional sales incentives to staff, but others did offer bonuses for selling options or add-ons (28.4 percent), meeting department sales goals (22.8 percent) and meeting personal sales goals (17.9 percent).

Nearly 50 percent of those surveyed said rookie sales personnel could expect to earn between $30,000 and $50,000 in their first years.

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