Winter,
2011
“Will
home improvement contractors pay a commission?”
This
is one of the most frequently asked questions by people interested
in starting a Homeowner Referral Network (HRN) business and the
answer is:
“Yes!”
Good
contractors (who are good businessmen) know the value of a good
job lead. They know how important it is to continually expand their
client base and to stay busy during their slow seasons. But you
don’t have to take my word for it.
I
recently read an article in daily 5 remodel (one of my favorite
industry newsletters!) entitled “Solutions: Hiring A Salesperson”
and several prominent industry gurus weighed in on the subject of
how to compensate home improvement salespeople.
Here’s
what two of them had to say:
I
firmly believe that paying a salesperson with a salary, by the
hour, or with a base plus commission is a mistake. It gives salespeople
a reason to stay in bed in the morning.
If
you want salespeople to produce, pay them by commission, with
a percent of total sales.
I believe that 8% of the total sales price with the potential
of up to 4% more as bonuses for a job well done is reasonable.
I have many coaching clients across the U.S. and Canada who use
that with success.
-Michael
Stone, Author
Markup and Profit: a Contractor’s Guide and Profitable
Sales, A Contractor's Guide
How
much gross percentage to pay the salesperson? That is up to you,
but it cannot be so high that it reduces the dollars the company
needs to earn to cover overhead expenses and generate net profit.
When to pay the salesperson? Consider paying one-third of the
commission when the contract is signed, one-third when the job
is completed/done and the final payment is received from the client,
and one-third when all the trade contractor and supplier invoices
have been received and paid. That way, the salesperson has a stake
in the outcome and...it will also keep the salesperson interacting
with the client after the sale is made.
-
Paul Winans, Consultant
Remodelers Advantage
As
you can see, paying a commission to salespeople is common practice
in the home improvement industry. And, outsourcing sales to
an HRN is an ideal solution for home improvement business owners
who can’t hire a full-time salesperson or who prefer not to
handle this aspect of their business on their own.
If
you’re still considering the launch of an HRN and would like
additional information, please let me know.
Regards,
