Incentives, Commissions, Bonuses for Sales Staff. Everyone listens to the same radio station on the way to work: WWIFM

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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
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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 Staff Love 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 do better with more admin 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 Yearly Sales $200,000 sell? Or another way to look at it Staff Pay 8-13% of Sales $16,000 to $26,000 $300,000 $400,000 $500,000 $24,000 to $39,000 $32,000 to $52,000 $40,000 to $65,000 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 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 ½ million) 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 $25,000 10% $35,000 14% $45,000 18% THEY COST 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 or A 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 $ 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 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, % 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, a month ($27k) Increments of $2, in Sales Sales Bonus Total Bonus Total Pay % of Sales $20, $ % $22, $ % $25, $ % $27, $ % $30, $ % 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 $ 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 $15 a day, after taxes =$ 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. 10% commission = $ % stretch goal = commission would be $3,120 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 Name Hours Percent Goal Tommy 40 40% $200,000 Mary Sue 40 40% $200,000 Susan 20 20% $100,000 TOTALS 100 hours 100% $500,000 Goals Post Goals and weekly results on back wall Have a coaching session weekly Coach on Average sale Sales per hour Number and dollar of add ons Closing 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: Trips Days off Dinners Give spouse a gift T.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) ATTEND a Harry Friedman workshop Retail Store Management All slides can be downloaded at
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