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Billys Blog

When a Lucrative Commission Split Hurts your Bottomline

April 24th 2013

Posted by Billy Booe

In a typical week, I will talk with 10 to 20 different salespeople from all over the country.  They are at various stages in their careers, so I am treated to a wonderfully diverse set of perspectives. Yet, even with such a varied swatch of ideals and experience, 95% of them lead with the same question: “What is your commission split?”

So I tell them – our commission split is based on gross profit percentage. If you sell the order at 40%, your split is 40%.  If you sell the order at 70%, your split is 70%. It’s a straight-forward approach, wherein the salesperson controls their profits. There are many more perks to our compensation model, but most salespeople feel commissions are the most important factor in switching to another distributor.

The conversation invariably continues with the salesperson praising their current split, which usually ranges between 50/50 to 60/40. This love fest is cut short when I start to prod them about their company’s sales support—or lack thereof. At this point, things get a little heated, and rightfully so; you wouldn’t believe how many top distributorships make their sales force manage every facet of the business cycle. Many are tasked with doing everything from presentation builds and order entry to licking stamps and, in some cases, collecting the cash. This is valuable sales time that is wasted on rote duties, and it begs the questions: “What is your employer even doing to earn their part of the split?” If they’re just serving as your bank, you need to re-think your situation.

Personally, I’ve been through three “transitions” in my 31-year career and I’ve learned not to put too much weight on the split. The focus really SHOULD be on the evaluating the distributor model from a support and time perspective. I used to work for a large distributor, with a very attractive 75/25 split…and I was miserable. My annual sales were over $1MM, but I was carrying the load in terms of support, which weighed down my ability to grow.
 

Confucius say, “Experience over time yields perspective. Applied perspective over time yields wisdom.” After that chapter in my life, I wised up. I put priority on service and support, and it freed me up to grow my business (bank account) and focus on my client relationships. If you still think the split is the most important aspect, some of my peers would like to speak with you!

Want to see what a world-class promotional agency will do to increase YOUR selling time? Give me a call…I would love to show you!

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