Maximizing Results From Your Sales Team
The quick and easy answer to increase sales is to bring on a salesperson. However, not all janitorial contractors have salespeople, and for very good reasons.
Our industry is not as straightforward as it appears. Its unique sales challenges often make selling contracts more complex than providing the service itself. Additionally, managing salespeople is potentially volatile and touchy for any business, and can lead to missed sales, little-to-no return on your investment or even create bad blood among friends.
Why should a contractor bother to bring on a salesperson? When done right, sales grow much faster than normal and can produce exponential revenue growth. Also, to take a business to the next level requires some degree of competency managing sales people.
There are no hard and fast answers regarding when to bring on a salesperson, what to offer for compensation or how to evaluate their performance, but by addressing four categories, contractors can increase success and minimize headaches.
1. Compensation: Compensation for a full time salesperson typically includes salary, commissions (and/or bonuses) and a benefit package. Benefits are easy to figure out. They should match what you’re providing other management personnel. It’s figuring out the salary and commissions that’s more art than science.
Providing a salary reassures the salesperson they can survive until their commissions kick in. Contractors, however, prefer to keep it at a lower percentage of total compensation to keep the salesperson hungry and working hard to bring on new business.
Salary ranges generally fall in the 35 to 50 percent range of total compensation — meaning salespersons expect to earn another 50 to 65 percent in commission. However, even with the same salary percentage, the dollar amount of base salaries varies according to the contractor’s market. For example, in major metropolitan areas, salespeople require higher base salaries due to the higher cost of living. Additional considerations for adjusting base salary include: contract size, pricing development and whether the salesperson is bringing existing business to the company.
When it comes to offering commissions, three areas matter: new business development, rebidding existing contracts and project-based work.
New business is the primary reason for hiring a salesperson, and commissions are typically calculated as a percentage of revenue, or profit, and paid monthly or quarterly.
Salespeople may believe they’re entitled to another commission when contracts they’ve sold are rebid and re-secured. If you ask for the salesperson’s help on the rebid, he or she deserves to be paid a commission. This requires you to do several things intentionally and in advance of the rebid:
- Inform your salesperson (in writing) when hired of your rebid policy.
- When you want their help on a rebid, ask clearly and early on.
- Get the most from them on rebids so you feel good about paying the commission.
One-time projects — also called TAGS for being “tagged” on to the base contract — and can include services such as carpet cleaning, window washing or pressure washing. When outside the contract, project-based work is much more profitable.
Contractors direct salespersons differently when selling project-based work to existing customers. Some contractors want the salespeople to continue to sell higher-profit TAG work to customers with whom they’ve just secured the base contract. Other contractors prefer salespersons to focus only on new business development.
There are also sales opportunities for large project-based work to non-customers; these may include metal and stone restoration, cleaning of the exterior building shell or cleaning an unused warehouse for an event.
In all cases, commissions are typically calculated as a percentage of revenue based on a sliding scale of actual net profit, and are paid after the customer’s payment has been received. For example, if net profit is 40 to 75 percent, pay the salesperson 5 percent of the total billing. If net profit is 76 to 99 percent, pay 10 percent. If net profit is greater than 100 percent, consider paying 15 percent of the total billing.
2. Performance Expectations: The greatest area for potential failure between contractor and salesperson is their performance expectations. Contractors expect increased revenue in a specific time period in return for their investment in a salesperson. The questions are how much and when.
To determine sales expectations, BSCs first need to calculate a salesperson’s total costs. In addition to base salary and the expected commissions, add in:
- Payroll expenses and benefits;
- Automobile lease, insurance, taxes, fuel and maintenance;
- Travel, meals and entertainment;
- Cell phone, wireless e-mail, laptop;
- Trade show attendance fees, association memberships and subscriptions; and
- Sales training, industry-specific training and association seminars.
Now, multiply the total cost by a factor between 7.5 and 15. Choose this factor realistically, considering the areas you control, your competition and the degree of difficulty in your market.
It may not be realistic to expect a new salesperson to produce your sales goals in his or her first year — it’s fortunate if they do, but it’s not a given. Even securing that first contract may take months, depending on the competition and size of contracts being pursued. It could take as long as three years before salespeople are meeting 100 percent of their sales expectations.
3. House Accounts: House accounts are prospects sold without paying a commission to a salesperson, and are another potential pain for contractor and salesperson. This means a contractor shouldn’t ask a salesperson to work on a house account, unless there’s some form of incentive payment, such as a bonus for securing the contract.
However, this doesn’t always happen. A contractor may “request” a salesperson to spend time and effort to sell a house account to justify their base salary.
A more fair-minded approach is to identify house accounts at the start of a salesperson’s employment. Similar to the rebid of an existing account, if you ask for the salesperson’s help on a house account, they deserve to be paid a bonus or commission.
4. Contractor Success Requirements: The most important thing a contractor can do to realize sales expectations is to put plans, policies and expectations in writing, and then communicate them clearly to the salesperson. Avoiding the “I said/No you didn’t” argument makes for a much more productive, long-term and enjoyable sales team.
There are a number of other success requirements for a contractor with a salesperson, such as:
- Sales goals and target markets should be clearly defined in writing.
- Proposal materials should be persuasive and current.
- Job costing should be realistic and competitive.
- Have good references and a healthy company reputation.
- Sales management should be visible, frequent, accountable and supportive.
- Sales training should be industry-specific and annually.
Sales commissions, though highly visible, are only one area of a contractor’s considerations and duties. Seeing the bigger picture involves recognizing that the salesperson not only brings in new business, but also creates your company’s reputation among your prospective and current customers.
Gingrich’s New Conservative Contract
By Dan Weltin
“Winning The Future: A 21st Century Contract With America” by Newt Gingrich
(Regnery Publishing Inc., 2005, $27.95 Hardcover, $16.95 paperback, also available on CD and audio download)
Former Speaker of the House of U.S. Representatives Newt Gingrich is author of nearly a dozen books, many of which cover American history. This passion for the founding fathers and the birth of this nation also permeate the pages of “Winning The Future: A 21st Century Contract With America.”
Chris Arlen is president of janitorial consulting firm Service Performance in Bainbridge Island, Wash., and author of “Revenue-IQ,” a free weekly sales blog and monthly article. Sign up on-line, e-mail Chris or phone (206) 780-2963.
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