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Billys Blog

Commission Structures...Survival of the Fittest

February 21st 2013

Posted by Billy Booe

The promotional products industry is entering an interesting age. For the first time, distributors are starting to evolve their consolidation and compensation models. Though model changes are nothing new, consolidation has been a mainstay on the supplier end for well over 15 years, to see it on the distributor side, though, is a heel turn in this industry. I'm watching this trend unfold daily, as part of my responsibilities at Activate! involve evaluating the comp plans of our competitors. 

 I talk with sales people, account executives, distributor owners, IC’s and our vendor partners on a daily basis. Subsequently, I compile a lot of intelligence during the process.Right now, commission structures of many of the industry’s leading promotional distributors are changing.

From my desk, I think it is safe to say the days of the traditional 50-50 split are gone. Many distributors splits now range anywhere from  55/45 to  60/40, or they are cutting services and support which used to be standard. Moreover, distributors are charging their sales people back for support, marketing, phone calls, postage, copies, credit card fees, the cost of money and the list goes on and on, and on…

12 months from now, distributor compensation models may have a completely different landscape, especially when coupled with the impact of covering the costs of medical insurance benefits for both employees and independent contractors.  These factors, along with many other variables, will forcibly change the commission structure. Here is the other simple truth - It costs far more to run a distributorship today than it did ten years ago. People, technology, communications, infrastructure, and benefits are all extremely expensive, and those related costs will continue to rise. For the vast majority, it will be too late and they will no longer be able to compete or, in some cases, fold entirely.

We have a pretty good flow of distributor sales people who visit Activate! looking for a new home so I get the horror stories first-hand. One having to go so far as to put order deposits on their personal credit cards to get an order processed because their employer is having credit problems. These conditions are a reality for many people.

At least once a week, I receive new perspective on how lucky I am to work for a company like Activate!. We never have to deal with issues like that. Our executive management team and  board of directors keep us ahead of the curve on these types of challenges. Change is rarely a warm and fuzzy process however it is inevitable. We recently changed our compensation model because we wanted to offer our employees the very best benefits package in the industry. We currently cover 75% of our employees’ medical insurance costs and our goal is to get to 100%. In addition, we have just instituted a safe harbor company matching 401k plan which is great for all employees, but especially the top performing sales people.
 

At Activate!,  we invest in all of our employees – not just our sales people. We have a meaty benefits plan, work in a productive office environment, and have all of the latest technology and communication tools at our fingertips. We can still service the traditional aspects of the business, but we’re also poised for growth and ready to take on the challenges the changing future of our industry brings with it.

I was recently at dinner with a good friend who has come into a substantial amount of money. He asked if I would be interested in starting a new distributorship which I would run and he would provide the funding. After 60 seconds, I said thanks but no thanks…   Based on what I have learned, I would never want to run a distributorship again because it would take far too much effort, money, time, and talent to build a company which can compete with Activate!  Why go thru that process when I have everything I need right now…right here…  How about you?

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