For those of you waiting for the remaining Q & A from our latest home improvement webinar, we appreciate your patience. Now that all of our Spring programs have wrapped up, here is a summary of questions that were asked which we did not have time to address:
Q: Where do you find potentially high performing salespeople? (Robert, Mr. Sunroom Professional Remodeling)
A: I’m glad you added the word “potentially”, Robert. Some companies spend too much time trying to hire their competitors’ salespeople (usually a big mistake). A behavioral profile (or similar) taken accurately will usually determine whether an individual has strong sales traits (behavioral). Once defined, a strong interview process is suggested and then a training regimen, which assures the newly hired salesperson is selling via a successful (proven) sales methodology. Think about this, Robert – a great sales manager takes an ordinary person with sales/behavioral traits and trains him or her to be an extraordinary salesperson.
Q: What interviewing questions do you suggest to weed out the less qualified salespeople? (Kevin, Evergreen Window & Door)
A: Similar to the last question, Kevin. If you’d like to see part of the process in action, we have a video that demonstrates many sales interview tips.
Q: How do I pay salespeople on commission if they bring in a GPM of 40%. The problem I have always had is they want 10%. (Jim, Murphy Window & Sunrooms) and What percentage of the sale should I pay in commission? (James, Heartland Exteriors)
A: Directing my answer, Jim and James, to both of you – If you have a 40% (gross profit margin) there’s no reason not to pay 10% since your G & A and marketing costs should be allowing for a fair net pretax profit – however – the formula has to be regulated so the job is sold correctly. It is wise to combine it with a control so that if the salesperson doesn’t sell it, when the lead is turned back, it goes through a rehash by a third party.
Another however – to James – 10% commission should not be the standard for big ticket items (i.e. $25K to $50K and up). The commission should be worked out versus a sales goal which permits better than average earnings for the salesperson, but not sufficient to destroy their initiative. For example, a salesperson selling windows, cabinet facing or similar where the average sale is $8-$10,000, being paid 8-10%, has to be disciplined to sell 1 to 2 transactions a week minimally. The salesperson who is given leads to sell sunrooms, metal roofing or basement refinishing sells a $40-$60,000 transaction, so they should have a commission in the range of 6-8%.
Q: Should salespeople be compensated by salary or by commission? (James, J&A Associates)
A: When salespeople become truly accomplished, they tend to want an incentive system which compensates them for extra effort. In many organizations when a salesperson is hired, they are given a training compensation for 1 or 2 weeks (which is termed a draw) the intent of which is to make them feel secure during the training period. However, James, it all comes down to performance. If you have a specific percentage built into your pricing formula for commission, salespeople should understand they have to operate within the parameters to produce enough profitable revenue to cover the cost of what they are paid, no matter what you call it – salary – commission – or draw.
Q: What are your thoughts on paying overages to salespeople? (Gary, AA Home Improvements)
A: Usually a bad idea, Gary. Reason 1: an overly aggressive salesperson may overprice a contract purely to earn additional commission. Ultimately this is not good for customer satisfaction, which brings me to reason #2. An attorney general (any enforcement agency) will often single out a company and publicize the fact that salespeople in the company are incentivized to charge more to one company than to another. We have numerous case histories to support this, which show companies that have been driven out of business. Reason 3: if a salesperson makes more on one transaction it could incentivize them to sell fewer transactions earning higher commissions for fewer sales. The solution (except in extreme cases, where there are what we deem “God only knows” factors in price development) is that salespeople should be trained to use standard estimating practices, and if they run into special situations, they should call the office for a supporting price change.
Q: How do we successfully vet applicants? (Cheryl, Alcher Interiors, Inc.)
A: Each applicant should be subject to 2 kinds (forms) of job application. The first is a pre-employment application where you get specific information enabling you to ask interview questions which are pertinent to the information received. The other is an employment application. Here is where the applicant is under serious consideration. References should be checked and a background check drawn on the individual. To do so requires a release by the applicant giving you permission to seek out this information and draw such a report.
Q: Do I really want a salesman to do a HARD close? (Gary, Ferguson Industries)
A: I’m not sure what you mean by hard close. No one bearing the title of a salesperson should ever proceed into an attempt to get a sale without asking for it properly. This can be done without using tactics you might consider “high pressure”. The most common reason salespeople do not get an order is because they don’t ask for it – or – they don’t ask for it properly. Salespeople are not estimators (estimates are part of their job role). Salespeople have to do more than hand out written pamphlets and allow people to see samples, they have to be taught a sound sales methodology.
Q: How can a small company (1-2 employees) hire great salespeople? Most of them want to work for a larger company (at least 8-10 and up)? (Jim, Manley Enterprises)
A: This is more of a statement than a question, Jim and the statement may be colored by your history/experience. Great salespeople want to work for companies that have a good product, a sufficient supply of leads and a fairness in dealing with them. We have dozens of clients who have as little as 3 salespeople – all of whom sell over $1 million a year for these small companies with a strong local reputation and a smart selling system. Their incomes range form $80-100,000 a year and to say they have satisfactory employment is an understatement. You may be equating larger companies with more leads and that might make the company seem more attractive. Yet smaller companies can develop a satisfactory lead getting and sales program in which their employed salespeople do extremely well financially.
Q: What do you do when you have a great (your best) salesperson but their arrogance and personality continue to rub others the wrong way? (Nathan)
A: Nathan, we intentionally excluded your company name in case someone should see your response. However we received at least 3 or 4 similar questions.
If this is your best salesperson it says something about how the customer perceives that person. Great salespeople are frequently enjoyed and appreciated by their customers and disliked by their managers, those in production or even the office staff. The reason stems from what is known as “behavioral use”. Salespeople like this are often charismatic and articulate. They “light up” the conversation in the prospect’s home. They are loaded with anecdotes, stories about life and simple “chatter” that intrigues their prospects/customers.
Frequently they are the top producers. Management doesn’t have to love, admire or become social “bosom buddies” with them – they have to understand them.
I suggest you have this person behaviorally profiled to get an insight as to why there is such an appeal to the customer base while frequently a lack of appeal to management. They are not necessarily role models to other salespeople, but some aspects of their behavior, if replicable, are beneficial.
As long as this salesperson sells profitable contracts and doesn’t offend customers, you have to find a way to understand and deal with the behavior. I used to tell a funny story that went like this:
A client called me and said, “We have a salesperson who is constantly late for meetings, interrupts the sales manager when he’s talking, doesn’t get his paperwork in on time, makes outlandish statements about his ability and treats the production crews as if they were his personal ‘hired hands’.” He ended by saying, “What can I do about this?” My answer was, “Get rid of him!” He responded quickly by saying, “I can’t! He’s our best salesman!”
If there was a question which we did not address please e-mail our office at email@example.com, and we invite those of you who haven’t already to sign up for our home improvement webinar series.