Sales commissions are a vital part of any company that employs a sales team or business development team to bring in new leads. Commissions have been part of the business world for a long time, and they remain a popular compensation feature today.
But as a sign shop owner, how do you handle your sales commissions? How do you do it the right way so everyone is happy and making money?
Here at shopVOX, we’re happy to explore this topic with you as you work within our software to make your shop run more efficiently.
When Should You Pay a Sales Commission?
The best-practice answer to the question of when you should pay sales commission is that you pay when a sale is completed. Of course, you’ll have your short-and long-term sales cycles, but you should always coach your sales team that this is a good thing for them, since they will be paid commissions both in the here and now and in the near future.
We’ll refer to a long-term sales cycle as any sale that takes longer than 30 days to produce. A shorter sales cycle usually lasts less than 30 days.
In the sign business, long sales cycles are usually for channel letters, light boxes, monument signs, and the like, just anything that has to go through design, production, quality control, and other complex processes.
Short-term sales cycles are easier, and it is these types of sales that will make up most of a salesperson’s portfolio. Sign products that are often sold in short-term sales cycles include banners, flags, and anything that doesn’t need a permit for a customer to put up.
What Is the Typical Commission Rate for Sign Shop Sales?
You as the sign shop owner will decide how to compensate your sales team. However, if you want to keep your team’s turnover low, it’s crucial to keep your employees happy with the right amount of commission.
There are three ways you can compensate a salesperson.
Hourly only
Commissions only
Hourly and commissions
In all cases, the salespeople will be hitting the phones, hustling, and doing what they do best. You may not have a lot of success finding someone who will work only on commissions and yet still produce frequent sales for you.
The sweet spot in the sign and print industry is the last option, the hybrid model. You can have those employees physically there in your shop five or six days a week making money but also being rewarded for every sale they make.
Another benefit of this model is that, when your sales team is always present in your shop, you know that every lead and customer you’re working with talks to them specifically. The right training will ensure that every customer gets the same experience.
Commission Rates
Now, the question becomes: what percentage of the sale do you give your salespeople as commission?
A good answer is 10%. We’ll get into specifics soon, but this is a good flat rate: pay your salespeople 10% on every sale they make, no matter how big or small.
Now, keep in mind that 10% is for sales the salespeople achieved on their own through their respective channels. You can and should set a different commission structure for inbound sales. These are the ones that come in simply from a phone ringing.
In these cases, you may want to go lower, say, 5% or 7%. That’s because your business, on some level, paid for that phone to ring. It doesn’t matter whether your methods were PPC or social media ads; it took money to run those ads, and so the money must be made up with a lower commission.
The same inbound sales commission can apply for walk-in customers or those who simply reached out on their own to a salesperson.
In-House and Vended Leads
Then, there are the leads that can come in either through in-house or vended means.
Take the example of a $5,000 vehicle wrap. A customer calls in to your shop asking for a wrap, and you quote the job but then outsource the work to a third party.
Because this work is vended, or outsourced, a sensible commission model for this job would be to reduce the 5% or 7% or a normal inbound lead to 3% or just something lower than normal and with which the salesperson would be comfortable.
The point is simply for commissions to make the most business sense for you, not to make your sales team stress about only making this or that amount of commission.
Give Power to Your Sales Team
Here is another vital point. Sign shop owners, and really the owner of any business, in most cases have to give up some power to the sales team.
Each of your salespeople has to own his or her sales. They have to nurture them from start to finish, developing relationships with their customers along the way. You never know: maybe customers prefer speaking with their salesperson rather than you as the owner.
It can be tough for business owners to relinquish this power, but trust us when we tell you how important it is to do this.
It will also help your business to hire only those salespeople who have the win-every-job mentality that we’ve written about previously. Only with this attitude will your salespeople be able to develop short- and long-term sales cycles that produce commissions with which they can live.
What Is Being Sold?
Whether you’re new to the sign business or a seasoned veteran, you know that certain items in the industry come with certain profit margins.
Projects that are more involved, such as exterior electrical signs, typically involve a lot of expense and time and so don’t produce huge profit margins. Banners, on the other hand, can usually make you a lot of money.
For this reason, it’s a good idea to set your commissions to correspond to the category of product you’re selling.
Related to this is the concept of having your commissions increase or reduce on a sliding scale based on the salesperson’s performance. If a salesperson takes a $1,000 proposal and makes it $850 just to make the sale, the employee should earn 8.5% on that sale since it essentially cut into your shop’s profit.
Let shopVOX Help You Track Your Expenses
No matter how you choose to run your sign shop’s commissions, know that you should always have control over your shop’s finances. shopVOX’s print shop software tracks your orders, vendors, payments, and invoices for you so you can stay organized all in one place.
To learn more about how our product can help you, or to try it for free, get in touch with us here at shopVOX.