How to Compensate Your Salespeople
Compensation, regardless of the position in a dealership, is always a hot topic. How much can I afford to pay? What level of performance do I have the right to expect as an owner from my people? How do I know whether I am paying too much, or just as bad, not enough, and then risk losing my good people to a competitor? While I could do a day-long program on compensation programs for dealerships, in this blog I want to just focus on the sales department for both inside and outside sales people.
Let’s start with those people you have working sales at the store, handling walk-in customers, internet leads and inbound phone calls.
In our system, we like to begin with a base amount that the salesperson can expect to get on a weekly basis. Our base for inside sales people is based upon the level of activity they do. If they make 20 contacts per day, or about 2.5 per hour, they would have a base of $400 per week and receive 10% of the net profit from the sales they produced. If they have a base of $500 per week, we would require them to produce 25 contacts per day, or a little over 3 per hour and again, they would get 10% of the net profit from their sales. Finally, if the dealership chooses to pay them a base of $600 per week, we would expect to see a daily activity level of 30 contacts per day. This is either through walk-ins, phone calls in or out, and internet leads and they would also earn a commission of 10% of the net profit on a sale. I would leave it up to the salesperson to decide what level of income they were willing to commit to and then hold them accountable to that level of documented activity each day.
As you transition from inside to outside salespeople, the activity count still determines their base per week. The difference is in the numbers. First, an outside salesperson could not physically interact with 20 people a day, so we make the first level at 6 documented touches per day to give you a $400 per week base and still 10% of the net profit of the sale. At the second level, you are required to complete 8 documented touches, which will let you earn a base of $500 per week. The third level moves the sales person to 10 documented touches each day for a base of $600 and 10 percent of the net profit from the sales that they produce.
There are as many ways to create compensation programs for sales as there are dealerships in North America and I don’t think one is necessarily better than the other. We keep ours simple to administer – your salespeople turn in a log sheet at the end of each day, or if your software has a CRM as a part of its functionality, you can run a report to pull the activity of each salesperson for the day. Based upon that information, you can determine if they are hitting their activity goals and adjust their base upon that. Regardless of the system you use, I would encourage you to tie some part of their compensation to activity to give you the ability for both the salesperson and your dealership to hit their sales goals for 2018.
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