IoT- Internet of Things · Sales commissions

What are reasonable sales commission models for hardware/solution sales?

Jamshed Dubash CEO - Vaspar Strategies

May 9th, 2016

I am looking to understand what a reasonable sales commission model is for hardware/solution sales using independent sales consultants?

Based on HW devices and a backend SW solution - deal size can range from $10K up to $500K for hardware with recurring monthly sales revenues for $10-$50/month i.e. combination of CAPEX and OPEX. The HW pricing can also be bundled into an OPEX model. OPEX models are typically based on 3-5 year commitments.

Steven T.A. Carter

May 10th, 2016

I am a big fan of tying commission to gross margin. It ties sales behavior to a critical business factor. Typically the rates are much higher than straight revenue based commission models. But it give a solid incentive for the desired behavior. In media sales you see revenue based commission models in the 2 to 3% range at the top. We ran up to 10% of gross margin models for gross margins over 60%. 3% for under 40%. 4% for 40 to 50. 5% for 50 to 59%. We had a lot of sales folks figure how how to sell at high margins because they made a LOT more money that way. 

Tom Ramar VP of Growth at DrinKitz, LLC

May 9th, 2016

Depends on what you're trying to achieve. What are your margin requirements? Do you have a loss leader to get in w/ the account? How frequently do you want a rep to call/visit a current account? What do you want a certain level of rep (leader vs. individual contributor) to be paid AT plan/quota? What kind of sale rep do you want becoming the face of your brand?

Richard Joye Disrupting industries @KCHK

May 9th, 2016

On top of the above-mentioned important points and questions mentioned by Tom Ramar, it is also important to consider the workload and investment required by the sales people. Are you selling a solution or a product ? Sales guys would need to spend a lot of time mastering it or is it an easy sell ? Will they have to buy or carry hardware with them, organize demo, workshops, showrooms ? Is there any form of exclusivity, like territorial ? Who are the typical customers ? individuals, large corporations etc...?
So it depends on many many factors... commission could range from a very low 3% (i.e. selling to multinationals multi-million $ contracts if the sales guys have good relationships) to 30% (retail sales, requiring traveling, demo, etc...). 

Suresh Neti Software Outsourcing Advisor | Custom Software & Product Development

May 10th, 2016

As rightly mentioned above, it depends on what one is selling. We normally pay a fixed % of the revenue to our sales consultants (for the software services projects). I am guessing that it will be between 10% - 20%.

Yazdi Mehta President at Sales Genii Inc.

May 10th, 2016

We are a software company in Florida. Where is a good place to find good individuals to add to your remote sales team?