Sales commissions

What's the best salary/commission structure for sales for long term sales cycles

Mark Wakefield Mark Wakefield, Vice President Sales & Marketing Water Techniques

May 27th, 2017

I am in a niche market in the custom home industry - homes typically in excess of 10,000 sq/ft. We sell, install and service very elaborate and expensive water treatment systems into custom homes as they are being built. The sales cycle (or build time) is typically 1 to 5 years. Our sales people are paid a salary plus a step progression commission structure based on volume of sales that month. The commission percentage the salesperson receives on each job remains the throughout the build cycle as progress payments are invoiced and paid for by the customer. No commissions are paid until we are paid. We bill 20% down for planning and layout, 30% after rough-in, 40% upon installation of equipment and 10% retention for 30 days for final start-up. So, we get a signed contract and invoice the 20%. The job may not be ready for several months or years. Then we do the rough plumbing for our system when the house is in frame. Then we say good by for 2 to 4 years until the house is finished when we bill the 40% and finally the 10%. A sales person could have as many as 150 homes in process that need to be project managed and accounted for. We find this to be a total accounting nightmare to account for all the homes and sales commission percentages as the invoices are paid. I have found that the step percentages works to keep them motivated to bring in as many sales per month as possible

My CFO would like to strangle me every month he has to reconcile the commission report because its almost impossible to track accurately. This has also builds distrust in the salespeople's minds because of uncertainty of the accounting and knowing where they are in gross yearly and monthly sales. I know I am not the only company with a long sales cycle that has to deal with this problem. I'd be very interested appreciative in hearing about a better commission structure that's easy to account for but still motivates the sales force.

Anindita Das Coach and Co-founder Global Expat Coachworx. Your Life, Your Coach

May 28th, 2017

Hey Mark, if you were the sales person working in your department, what would you change, in terms what you have mentioned here.Give an honest answer.

Does that commission structure (that you wished as a sales person) already exist in the market?

If not, how would it feel to be the market leader in this area?

Could your proposal be a win win situation for all, looking long term?

Please give your feedback for my answer.