incentives, commissions, bonuses for sales staff€¦ · sales plans • should motivate sales...
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Incentives, Commissions,Bonuses for Sales Staff
Everyone listens to the same radio station on the way to work:
WWIFM
Races Horses & Workhorses
• Work horses may be motivated to “do a good job” but not by selling “more”. Usually: Jewelers/bookkeepers/Admin staff.
• Race Horses: Sales StaffLove to win races whether they get rewards or just get to stand out in the crowd.
• Did you hire a workhorse because they showed up for the interview when you were looking for a Race Horse?
Sales Plans
• Should motivate sales staff to sell more product, sell more items per ticket, increase the average sale and increase your closing ratio. Reward Performance.
• Easy to understand.
• In writing so the staff knows in advance.So clear never need to ask the boss “who’s sale is it?”
• Never let the staff “duke it out”.
Sales Plans
• Should be a real motivator. 1% and 2% is NOT a motivator. Equal to lunch money.
• Decide is your staff are REAL sales people or maybe they are your assistants.
• Maybe you don’t need more sales people, maybe you need a personal butler instead.
What could a plan do to store sales?
• Could sell more people who come in (closing ratio)
• Sell a higher priced product
• Sell more items per invoice
• Hey! Do all 3?
Increase closing ratio
• Cost of a brand new customer? $12 to $20
• If 10 come in and 3 buy that means you let 7 walk w/out buying. 30% closing ratio.
• If you could just increase closing ratio to 4 out of 10=33% increase in total sales.
• If you do a million $$ in product sales could go to 1.3 million $$’s.
Increase average sale
• If your average sale (without repairs) is $400 and you could get it to $500 that would increase sales by 25%.
• $1,000,000 is sales would go to $1,250,000.
Do both!
• Store does $1,000,000 in product sales.
• For every 10 people who come in, 3 buy a $400 item
• Average sale =$400
• Closing ratio=30%Increase average sale to $500
Increase closing ratio to 40%
Do both!
• Store does $1,000,000 in product sales.
• For every 10 people who come in, 4 now buy a $500 item.
• Store sales will increase a combined 40% from $1,000,000 $1,400,000 w/out any additional advertising.
NOTICE TO YOU IN THE AUDIENCE
• Your sales staff are on 100% commission right now!
• Divided their W-2 by their total sales (including repairs) to see what they cost you.
• EX: W-2 = $27,000 || sales = $175,650
• They get 15.29% of every SALE. Rings/Diamonds/Batteries/Repairs
Can you do ANY commission plan?
• Can’t do a strong plan if the OWNER is the #1 sales person and sells a majority of total sales.
• Makes them paid helpers.
• YOU might dobetter with moreadmin help.
How much should sales people sell?
• 8 to 13 times their salary
• Or, they earn 8% to 13% of what they sell
• $30,000 a year sales person should sell $240,000 to $390,000 a year. (13%-8%)
• Includes “normal” paperwork duties in 8 hour day.
• Excessive paperwork people get figured differently
How much should sales people sell?
• Sales person being paid should sell between:
Salary Sales: 8 to 13 times$25,000 $200,000 to $325,000$35,000 $280,000 to $455,000 $45,000 $360,000 to $585,000$50,000 $400,000 to $650,000
How much should sales people sell?
Or another way to look at it
$40,000 to $65,000$500,000
$32,000 to $52,000$400,000
$24,000 to $39,000$300,000
$16,000 to $26,000$200,000
Staff Pay 8-13% of Sales
Yearly Sales
How much should sales people sell?
• Divide the sales persons pay by their sales to see what percentage of each sale they get.
• If they cost you 8% they are very EFFICIENT.
• If they cost you upwards of 13% they are INEFFICIENT.
• OPTIMUM PERCENTAGE COST is 10% assuming they “can” sell a good amount of the customer base (not you!).
Excessive paperwork people get figured differently
• Figure how many hours they do “admin”.
• Bookkeeper at desk 4 hours a day. Thus selling hours available are 4 hours a day=20 hours a week.
• You’d figure 20 hours @ their rate of pay as their cost to sell.
Two kinds of commission plans
• Strong incentive plan. Staff gets paid a LOT to sell. Rewards those who can & should sell.
• Complimentary incentive plan. Staff gets a little money for their time and effort. Not a motivator.
• Your ability to choose either one has a lot to do with a few concerns:
Two kinds of commission plans
• Do they have enough selling dollars available after the boss/owner sells their share?
• Are you willing to do your share to make sure it works and is fair?
• Maybe it’s now time for you to get off of the sales floor and become a REAL manager.
Do they have enough selling dollars available after the boss/owner sells their share?
• 1 million sales
• Subtract the boss (let’s say boss sells ½million)
• That leaves $500,000 in sales that can be made by the sales staff.
• If you have ONE other sales person then he/she can sell $500,000 or more in sales
Do they have enough selling dollars available after the boss/owner sells their share?
• If they sell $500,000…………..
• At 10% full commission they’d be paid $50,000.
• If you pay hourly or straight salary, for them to be worth their salt their pay check would have to be:8%=$40k || 10%=$50k || 13%=$65k(Notice the lopsided cost to the store?)
Do they have enough selling dollars available after the boss/owner sells their share?
• But what if you have 2 sales people and they share the $500k in sales, each “could” sell $250,000.
If each is paid below and sell $250,000
PAID THEY COST
$25,000 10%
$35,000 14%
$45,000 18%
Now we know we can have a STRONG commission plan.
• 100% commission (no salary or hourly)
• Typical to give a guarantee draw against commission.
• 100%=A percent of selling price orA percent of the gross profit
• They would get paid on all sales, yes REPAIRS too. It’s a profitable sale!
Strong Commission Plan(David’s Plan from Harry Friedman)
• $300 a week draw against 10% straight commission.
• Sales of $4000 = $400 commission check.
• Would you rather have $300 or $400?
• Give $400, forget about draw.
Strong Commission Plan(David’s Plan from Harry Friedman)
• $300 a week draw against 10% straight commission.
• Sales of $2500= $250 commission check.
• Would you rather have $300 or $250?
• Give $300, just overpaid you by $50.
• Next pay period (hopefully) we get our $50 back. Remember this number.
Strong Commission Plan(David’s Plan from Harry Friedman)• $300 a week draw against 10% straight
commission.• Sales of $6000= $600 commission check. • You owe us $50 from last weeks check• Pay=$600 minus the $50.• Write a check for $550.00. • We’re even• Draw helps with slow periods.• Draw of $300 week = sales of $300,000.• Expect them to sell lots more than that.
Strong Commission Plan• Percent of Gross Profit
• If all sales are at keystone and you were considering paying 10% of sales; 20% of the gross profit is the same thing.
• $1000 sales @ keystone = $500 profit
• 10% of $1000=$100 commission
• 20% of profit ($500) also = $100
• % of gross profit tends to decrease discounting.
• Figure shop sales are keystone.
Strong Commission Plan
• Typically graduate the strong commission on margin of item. Example:
• 10% commission/20% of GP with keystone sales.
• Diamonds/Rolex/other low profit items, pay 5% commission or 12% of profit
Strong commission, not 100% of anything.
• Hourly + a percent of selling price or profit
• Total pay should still be within 8-13% of cost of sales.
• EX: $500,000 in sales at a cost of 10% of sales we’d pay $50,000.
• Cut commission in half to 5% & lower hourly.
• 5% commission=$25,000
• Pay a salary of $25,000 a year.
• Total pay would cost 10% of they’d get $50,000
Hourly + a percent of selling price or profit
• Base salary of $25,000 + 5% of sales
• Sales $500,000 || pay = $50,000 (10%)
• Sales $400,000 || pay = $45,000 (11%)
• Sales $350,000 || pay = $42,500 (12%)
• ======================
• Sales $600,000 || pay = $55,000 (9%)
• Sales $700,000 || pay = $60,000 (8.5%)
“Long” Salary + Graduated Bonus Plan
• Salary Plus Graduated Bonus Plan• Figured on a starting salary of $2,250.00 a month ($27k)• Increments of $2,500.00 in Sales• Sales Bonus Total Bonus Total Pay % of Sales• $20,000 0 0 $2250.00 11.25%• $22,500 100 100 $2350.00 10.40%• $25,000 100 200 $2450.00 9.90%• $27,500 100 300 $2550.00 9.27%• $30,000 200 500 $2750.00 9.16%• Starts over in $100 Bonus increments.• BIG bonus of $200 comes every $10,000 in sales• At $40,000 BIG bonus is $300 rather than $200.• If they sold $100,000 total pay could equal $7760.00 month• Suggest $500 bonus at $100,000; $1000 at $200,000
Complimentary Commission Plan
• Not much of an incentive. Not much in their pocket.
• Hourly + 2%
• Do it because: 1) Wimp 2) Dollars unavailable 3) Reward your butler.
• 100% hourly w/no commission or bonus means no sales incentive, you have hired CLERKS!
• Drives a lot of “She’ll be back, I know it.”
Complimentary Commission
• Not very appealing. If they sell $200,000 a year at 2% commission = $4,000 in commission.
• 52 weeks = $76.00 a week
• $15 a day, after taxes =$10.50.
• How much is it to buy lunch near your store?
You want to pay SINFUL wages
• Not everyone can make $50,000 selling jewelry.
• They should have a chance to have a KILLER paycheck.
Stretch Goals
• Give everyone goals so they know what is expected of them. Not “get out there and sell!”
• If they exceed their goal throw money at them.
• Harry’s=“If you exceed your goal by 20% we’ll increase your commission for the month by 20%.”
Stretch Goals
• Goal = $26,000 for month.
• Ex: @ 10% commission = $2600
• 20% stretch goal = $3120
• @10% commission would be $3,120
• But @ 12% commission would be $3,744
Stretch Goals
• When you reach $200,000 in sale we’ll give you a check for $500
• When you reach $250,000 in sale we’ll give you a check for $1000
• When you reach $300,000 in sale we’ll give you a check for $1500 and all sales thru end of year will be paid at 12%.
GOALS
• Decide how much more you NEED in sales (don’t just pull a number like “10%”out of the air).
• Subtract the boss’s sales & other admin.
• Divide up the sales staff based upon their time on the floor, not their experience.
• Everyone must pull their weight.
GOALS
• $1,000,000. Boss does 50%
• Staff’s goals = $500,000 for the year
$500,000100%100 hoursTOTALS
$100,00020%20Susan
$200,00040%40Mary Sue
$200,00040%40Tommy
GoalPercent Hours Name
Goals
• Post Goals and weekly results on back wall
• Have a coaching session weekly
• Coach on Average saleSales per hourNumber and dollar of add onsClosing ratio
• Even if you have a complimentary system that’s not very strong.
Rules helps keep the natives from being restless
• Selling Rules
• Who’s sale is it?
• What do we do with a split?
• What do we do with Be backs?
• Put it in writing.
• Easy to understand and specific.
Not everyone wants money
• Higher pay soon becomes expected pay.
• Consider instead:TripsDays offDinnersGive spouse a giftT.V.’s/iphone/iPad
Not everyone wants money
• If sales exceed $500,000 for the year we will give you a 20 hour a week personal assistant to help you make sales.
• Will send you to a trip of your choice
• Take you to a buying show.
• Ask what they would like.
Bonuses
• If the store reaches its sales goals for the month everyone gets $50.
• If the store exceeds its goal by “x” or reaches a WHAG the company puts 5% of the exceeded number into a pool and divides it up to all employees by hours worked.
Bonuses
• An IJO member shared this one:
• For every month we beat last years same month everyone in company gets $25.
• If we do it again next month everyone gets $50.
• Do it again next month everyone gets $100 and so on.
• Don’t make it? We start over.
We all have had “one too many”
• Many of us don’t know when to stop, right?
• But when it comes to selling, we know when to stop selling: WHEN THEY BOUGHT THE DARN ITEM!!!
• Selling higher priced items can be difficult.
• Add on’s can be an even bigger problem.
• Add on’s are free of overhead.
Ever heard this?
• “A retail sales person in a jewelry store can’t sell the items they are supposed to sell because they can’t envision themselves ever being able to actually own.”
• Train them and reward performance up and beyond “normal”.
How to get past “Selling Shock”
• Women love to play with clothes/shoes and of course jewelry.
• New Federal Law: You can’t touch our product with out our permission.
• Just passed by Congress. Approved by the President.
• Customers act like they are in a museum.
How to get past “Selling Shock”
• “Here let me show you a matching necklace to the bracelet. Allow me put this on”
• Every time a sales person puts an item on her body give the sales person a dollar that night! Doesn’t have to buy only try.
• Sales will increase. (30%?)
Scared to start?
• Never ask a sales person or jeweler to help you run the business.
• What’s better?Content sales person making $25,000 a year selling $175,000, or
• Sales person who balked at first but is now being paid $38,000 a year and selling $345,000.
Scared to start?
• Pass the buck
• $1 for every time you get someone all “dolled up”. Don’t have to buy just TRY.
• Give big spiffs for selling your dogs. Commission just on “Extreme Value Case.”
Extreme Value Case
• Dogs over 1.5 years old.
• Cost $300, sells for $650
• If 25% discount sells for $487, savings of $162.
• It’ll move faster if you give the sales person the $162. Remember new Federal law “Can’t touch!”
Extreme Value Case
• No matter how its discounted, give the staff 5-10% to sell it.
• You can’t make a profit on it after 1 year. Stop your losses and move it out.
• Like clothing stores do at end of season.
• Jewelry may not go out of style, but it does go “out of money.”
• Pay the staff to move old merchandise.
Extreme Ending
• Train, train, train.
• Store meetings
• Weekly coaching sessions
• Put goals and achievements on a wall.
• Make a big to-do on reaching numbers.
• Pay monthly, not at year end.
• Have fun! Make money for you, the store and the staff.
Thanks
• David Geller || (404) 255-9565
• ATTEND a Harry Friedman workshopwww.TheFriedmanGroup.comRetail Store Management
• All slides can be downloaded atwww.jewelerprofit.com/ijo.html