Author Topic: Sales folks, let me get your input  (Read 3866 times)

stein79

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Sales folks, let me get your input
« on: November 08, 2016, 11:58:37 AM »
I have been with my current employer since Aug. 2015.  It is a family owned business (I know the family) with a good niche product that is relatively new to the market.
Additionally, the sales cycles are extremely long 12-18 month+ for production orders of good volume. 

When I was first hired, they said that they were hopeful I would reach sales in the $1-1.5MM in about 18 months after starting.  This number was purely a guess.
Over this full year, I expect to be in the 200k range which the company is pleased with.  I have a lot of good projects that are pending, just need more time for proofing by the end user before they order volume quantities.  Additionally, the other two salesmen are not in the 1-1.5MM range and they have been with the company longer than me.

I am paid a base salary that I can live off of, especially if I reduce wasteful spending.  And, I am paid 6% commission on the gross margin of the sale.  If I were to reach the $1.8MM range, my commission rate would increase to 10%.  I negotiated the figures with them based on my expectations of where my sales would be from their thinking when I started, that is way off so I am behind compensation wise from what I expected to make.  In fact, they stole me away (my own choosing) from another industry where I would almost certainly have made about 20-25% more money this year than I actually have.  But, I expected when I started and still do that the long term advantage in compensation is with this company and industry.

My question(s) are:
- Should I wait until January/end of fiscal year to ask?
- Or, should I wait until more of the big projects start going through? 
- Should I expect a (cost of living) salary bump or expect to be at the same base for my whole career?

Any suggestions or comments are appreciated!

EndlessJourney

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Re: Sales folks, let me get your input
« Reply #1 on: November 08, 2016, 01:03:11 PM »
Were the other salesguys hired on the same time as you?

If not, how is the territory split up between you and the other sales guys? Geographically? By vertical?

If so, were the quotas reduced when you were hired on? Are the quotas public knowledge within the sales team?

If you all were hired on at the same time with an assumptive quota in the absence of any prior sales figures (new product), then you all need to renegotiate based on the overall number attained. I'm guessing the business had an idea of what total sales would be between the three salesguys. All of you didn't make that number as a team, so everyone's individual quotas should go down to reflect the reality of the marketplace.

Annual sales quotas are always set at the beginning of the year to model growth projections from the last year. You already have 12-month trailing data on sales (both yours and the team's). If you're going to go in to renegotiate a quota reduction, ask them what they project growth at and ask for a quota that's in line with last year's numbers + that projected growth.

stein79

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Re: Sales folks, let me get your input
« Reply #2 on: November 08, 2016, 01:16:13 PM »
Thanks for your reply Endless, both of the other employees have been with the company a year or so longer than myself. 
As far as territory, 1 employee focuses on a specific market segment that I do not cover.  The other salesman and I cover the same markets but split leads evenly when they come to the company and of course we prospect for our own in addition to that.  There is currently not a divider on territory, we could have customers that are right next to each other in theory, but since the majority of communication is via phone or email, it doesn't matter.

The sales figures I mentioned aren't quotas, more of a general prediction that was based on throwing a dart in the dark in my opinion.  So, there's no negative to not meeting the number that was thrown out there when I started.  The numbers are public knowledge as the other salesman that covers the same market as I do is effectively the sales manager. 

What I gather you're suggesting is that come January, I discuss renegotiating the expected sales amount along with my commission rate? 

felizcortez

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Re: Sales folks, let me get your input
« Reply #3 on: November 08, 2016, 01:19:10 PM »
Is the base salary a function of your total targeted compensation.  E.g. If you hit your sales targets you are expected to make $100k and you get a 30k base salary, your expected compensation would be a 30% Base 70% commission split.

I'd be curious what they targeted you to make at the 1.5M sales level.

I agree with the previous poster, that the Quota for next year should be based on the new growth projections now that they have some history under the belt.

Longer more difficult sales cycles typically have a higher draw/base pay level.  Otherwise people won't last until they can start building up a pipeline.

stein79

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Re: Sales folks, let me get your input
« Reply #4 on: November 08, 2016, 01:28:40 PM »
Is the base salary a function of your total targeted compensation.  E.g. If you hit your sales targets you are expected to make $100k and you get a 30k base salary, your expected compensation would be a 30% Base 70% commission split.

I'd be curious what they targeted you to make at the 1.5M sales level.

I agree with the previous poster, that the Quota for next year should be based on the new growth projections now that they have some history under the belt.

Longer more difficult sales cycles typically have a higher draw/base pay level.  Otherwise people won't last until they can start building up a pipeline.

Hi Feliz,

The base is not a function of the total compensation, it is X and doesn't change based on commission.  Total compensation is theoretically uncapped. 
As far as what I would make at the 1.5M level, it depends on what gross margin the product was sold at.  It ranges from 25%-40% and of course there are outliers.  I would say my average for the year is probably 33% or so.  I have to reach a "cross over point" to get from 6% to 10% commission, which is determined based on the total sales volume and gross margin.  So, the higher the margin, the lower the total sales can be to reach that and vice versa.  At 33% margin, I wouldn't get to the 10% tier until i'd sold over 1.8xxM.   
The "cross over point" is determined by my base salary.  So, if my base was lower, the point that 6% commission goes to 10% is also decreased.

Sorry for all the math!

EndlessJourney

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Re: Sales folks, let me get your input
« Reply #5 on: November 08, 2016, 01:41:30 PM »
The sales figures I mentioned aren't quotas, more of a general prediction that was based on throwing a dart in the dark in my opinion.  So, there's no negative to not meeting the number that was thrown out there when I started.

There most definitely is a negative! You don't get paid! Base doesn't count - salesguys eat what they kill. I don't know any salesguy that's happy not making commission and not getting into accelerators. That's not a sales position, it's a punch-the-clock-warm-the-seat job.

If the bar is set too high, the company is going to have a retention problem.

What I gather you're suggesting is that come January, I discuss renegotiating the expected sales amount along with my commission rate?

Definitely. Sales is all about upside. If there is no chance of you over-attaining, then make that dissatisfaction known to management. 12-18 months sounds like a complex sales cycle, it would be a shame to start from zero again on all the leads you have in the pipeline if you walk out of the company for another job that's got a more attainable quota!

stein79

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Re: Sales folks, let me get your input
« Reply #6 on: November 08, 2016, 01:52:30 PM »
The sales figures I mentioned aren't quotas, more of a general prediction that was based on throwing a dart in the dark in my opinion.  So, there's no negative to not meeting the number that was thrown out there when I started.

There most definitely is a negative! You don't get paid! Base doesn't count - salesguys eat what they kill. I don't know any salesguy that's happy not making commission and not getting into accelerators. That's not a sales position, it's a punch-the-clock-warm-the-seat job.

If the bar is set too high, the company is going to have a retention problem.

What I gather you're suggesting is that come January, I discuss renegotiating the expected sales amount along with my commission rate?

Definitely. Sales is all about upside. If there is no chance of you over-attaining, then make that dissatisfaction known to management. 12-18 months sounds like a complex sales cycle, it would be a shame to start from zero again on all the leads you have in the pipeline if you walk out of the company for another job that's got a more attainable quota!

Yea, great points thank you for the feedback.  I have been in sales for 6 years and have never been in a position with sales cycles so long.  However, the sales cycle isn't something that I or the employer can control.  Additionally, I still think the long term potential is very good, i'm just frustrated waiting on it to get there.

As to your last point, are you saying it would be a shame for me to start again at zero if I left/was let go or that the company would lose those leads if I left, as I do not think that would be the case.
Someone would take the helm on them even if it meant them being over worked and probable delays on the delivery and/or minor irritation from the customer.  But, with the time investment most customers become invested in our product after testing it for so long so they will stick with it unless there's lots of problems (rare) or a competitor gets lucky at the right time.

tooqk4u22

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Re: Sales folks, let me get your input
« Reply #7 on: November 09, 2016, 06:57:15 AM »
Everyone seems to be blaming the company/goals but are you sure its not the sales person that is the problem?

Feel free to renegotiate, but if none of the sales people are hitting their numbers then maybe they need new sales people.  At best, if they lower expectations then they might need less sales people or will need to reduce comp. 

It is a double edged sword.

stein79

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Re: Sales folks, let me get your input
« Reply #8 on: November 09, 2016, 07:06:11 AM »
Everyone seems to be blaming the company/goals but are you sure its not the sales person that is the problem?

Feel free to renegotiate, but if none of the sales people are hitting their numbers then maybe they need new sales people.  At best, if they lower expectations then they might need less sales people or will need to reduce comp. 

It is a double edged sword.

No, I don't think that is the case.  As i'd previously mentioned, the sales cycles are long because of the required testing phases by the end users.  Several of the markets we sell into (such as medical) have vigorous testing requirements and lengthy time tables associated with them.  Additionally, the product is very niche. 


BlueHouse

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Re: Sales folks, let me get your input
« Reply #9 on: November 09, 2016, 07:39:25 AM »
Everyone seems to be blaming the company/goals but are you sure its not the sales person that is the problem?

Feel free to renegotiate, but if none of the sales people are hitting their numbers then maybe they need new sales people.  At best, if they lower expectations then they might need less sales people or will need to reduce comp. 

It is a double edged sword.

No, I don't think that is the case.  As i'd previously mentioned, the sales cycles are long because of the required testing phases by the end users.  Several of the markets we sell into (such as medical) have vigorous testing requirements and lengthy time tables associated with them.  Additionally, the product is very niche.
With a long sales-cycle, an unproven product, and little history of what is an attainable goal, you should be negotiating for a non-recoverable draw (then phasing into recoverable draw at 18 months) against commission.  When the company says they think you can make $x, then have them put their money where their mouth is.  Have them pay you what they have told you you're capable of making and then when the sales start rolling in, you move into the recoverable draw phase. 
Some people balk at this idea because they think salespeople have to earn every penny of commission, but don't look at it that way.  There is always some risk, learning curve, and startup cost in hiring an employee, and assuming the company did its due diligence on you, then you shouldn't be shy in expecting the company to eat those start up costs.  Your "long-term advantage in compensation" is unfairly falling on you.  They hired you because they think you can do the job, you should be compensated fairly. 

Here's a link that describes draws and how they work. 

https://www.cpsa.com/articles/what-is-the-difference-between-a-recoverable-and-non-recoverable-draw

Goldielocks

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Re: Sales folks, let me get your input
« Reply #10 on: November 11, 2016, 02:48:58 PM »
The best way to get the most concessions (money) from your employer is to wait until the first big project pays off, it acutally lands sales $ in the company accounts receiving, and you accept the 6% commission, .... then go in and ask for the 10% commission on all your next sales.

If I was the decision maker, it is easy to ok to future money, especially for a sales person who "wins" and is proven -- especially when it is just a slice of the extra future sales.

Also, there is the subtle threat (not stated) that you will leave and they will lose 12 months of a sale cycle for the others, if you do leave before those land.

Should be a Win for you.

BlueHouse

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Re: Sales folks, let me get your input
« Reply #11 on: November 11, 2016, 05:38:06 PM »
The best way to get the most concessions (money) from your employer is to wait until the first big project pays off, it acutally lands sales $ in the company accounts receiving, and you accept the 6% commission, .... then go in and ask for the 10% commission on all your next sales.

If I was the decision maker, it is easy to ok to future money, especially for a sales person who "wins" and is proven -- especially when it is just a slice of the extra future sales.

Also, there is the subtle threat (not stated) that you will leave and they will lose 12 months of a sale cycle for the others, if you do leave before those land.

Should be a Win for you.
In a professional sales environment, commission rates are usually non-negotiable (every one gets the same rate).  But quotas can be different, territories can be different, and caps can be negotiable.    Also, if you leave in month 11 of a 12 month sales cycle, the customer is still primed to make the buy.  You just won't benefit.  Many companies love to see salespeople quit right before the big sale is ready to close.   

Goldielocks

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Re: Sales folks, let me get your input
« Reply #12 on: November 12, 2016, 09:28:50 PM »
The best way to get the most concessions (money) from your employer is to wait until the first big project pays off, it acutally lands sales $ in the company accounts receiving, and you accept the 6% commission, .... then go in and ask for the 10% commission on all your next sales.

If I was the decision maker, it is easy to ok to future money, especially for a sales person who "wins" and is proven -- especially when it is just a slice of the extra future sales.

Also, there is the subtle threat (not stated) that you will leave and they will lose 12 months of a sale cycle for the others, if you do leave before those land.

Should be a Win for you.
In a professional sales environment, commission rates are usually non-negotiable (every one gets the same rate).  But quotas can be different, territories can be different, and caps can be negotiable.    Also, if you leave in month 11 of a 12 month sales cycle, the customer is still primed to make the buy.  You just won't benefit.  Many companies love to see salespeople quit right before the big sale is ready to close.
He already mentioned that 10% was a going rate, for those that exceed a base line.  The only ask is to step up to the next level early.

For start ups, owner operated companies, flexible companies, that is very easy...   and from the description where they did not know really what reasonable sales target would be, this sounds like a smaller "flexible"operation where commissions aren't set.


soccerluvof4

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Re: Sales folks, let me get your input
« Reply #13 on: November 13, 2016, 11:00:55 AM »
I guess I go back to your original post. Some like this.  They wanted me to do 1-1.5 million the first year but there happy I am at 200k. To me that is your negotiating place. You said it was a guess. Interesting that they had to guess what to expect with other sales people around. That would be my angle. I would for sure try to renegotiate since no one else has attained those numbers.  Whenever interviewing for a sales job I think the most irrelevant questions besides can I grow is what your asking me to do been done before , how recently, how many are deceiving that and are they still here.  Good Luck in whatever you decide to do BUT as long as you are courteous and respectful about it , everything is negotiable without harm but just remember you might not get what you want. That is why my favorite say is and always has been in business you dont get what you deserve you get what you negotiate.

 

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