Tim Mclellan, a partner for B2B CFO talks about sales compensation plans for your business.

1. Win / Win Compensation Strategies
Presented by:
Tim McLellan, CPA
B2B CFO®

2. Salespersons’ Duties
• Identify Potenial Customers
• Identify Potential Projects
• Calculate Estimates from Plans
• Field Measure
• Obtain Pricing From Manufacturer
• Negotiate Installation Labor

3. Salepersons’ Duties, Cont.
• Create Written Proposal
• Order Materials
• Manage Project
• Schedule Work
• Prepare Invoices
• Collect Receivables

4. Types of Sales Comp Plans
• 100% Commission
• Draw Against Commission
• Salary Plus Commission
• Salary Plus Bonus
• Straight Salary

5. Pay Based On
• Sales Dollars
• Gross Margin Dollars (profitability)
• Other
volume incentive – annual or monthly
timely collection

6. Range of Pay
Company:
Low Range – 8% of Sales
High Range – 12 % of Sales
Individual Cash Compensation:
Low - $50,000
High - $200,000

7. What’s Included In Comp?
• Auto allowance
• Company Car
• T & E Allowance
• iPhone
• Health insurance – employee or family
• 401(k) or other retirement
• Vacation / Personal Days
• Payroll Taxes / Workers’ Comp

8. Comp Based on Sales
• Company budgets total sales expenses at 10%
of sales.
• Benefits shown on prior page equal 2% of
sales.
• Sales Commission rate is 8% of sales.

9. Comp Plan based on Margin
• Usually includes a floor, example - no
commission paid on sales less than 10%.
• Sometimes includes a ceiling but not always.
• Three varieties to a margin based plan:
– Fixed Rate
– Graduated Scale
– Point for Point

10. Overhead Factor
• There is usually an overhead factor of 2 - 4%
built into the calculation on a gross margin
plan.
• Job Runner / Floor Manager allows user to set
overhead rate based on Material, Labor or
Both.

11. Fixed Rate Plan
Salesperson receives 25% of gross margin on all jobs with a
margin > 10%
Example calculation: $100,000 Sell price. $20,000 Gross
Margin.
Commission would be $20,000 x .25 = $5,000

12. Graduated Scale
0% - 10% = no commission
10% - 20% = 15% commission
20% - 30% = 20% commission
Above 30% = 30% commission

13. Point for Point Plan
• 10% job earns 10% commission
• 11% job earns 11% commission
• 12% job earns 12% commission
• 30% job earns 30% commission

14. Monthly Payment Calculation, ex 1
• Salesperson is on a $5,000 per month salary or
draw.
• Salesperson earns $7,000 in commission in
March.
• Salesperson will receive commission of $2,000
in April commission payroll cycle.

15. Monthly Payment Calculation, ex 2
• Salesperson is on a $5,000 per month salary or
draw.
• Salesperson earns $4,000 in commission in
March.
• Salesperson is under draw by $(1,000) so no
additional commission is earned, continued on
next slide…

16. Monthly Payment Calculation, ex 2 cont.
• Salesperson is $(1,000) in the hole from prior month.
• Same draw of $5,000 per month.
• Salesperson earns $7,000 in commission in April.
• Salesperson will receive commission check of $1,000
in May ($7,000 - $5,000 draw - $1,000 make up
from prior month).

17. Budgeting for GM Plan
$2,000,000 average annual sales
$400,000 expected gross margin
25% average commission rate
$100,000 expected compensation
Decide on monthly draw amount 60/40, 75/25

18. Questions?
Tim McLellan
tmclellan@b2bcfo.com
404-915-5539
www.b2bcfo.com