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Hiring the first sales person11/20/15
First off, 25%? Give me a brake, and you agreed to it? If I read it right the "salesman" isn't doing design, site drawings or measurements, He only makes a phone call and sets up a meeting? I want to work for you.
A 2% referral fee might in order but not 25%. A good salesman who finds the client, measures and designs the project and collects the checks might be worth 10% of the project.
Profit figurers are arbitrary, it all depends on who loaded them and what was included. The only person who knows the "true cost" of a project is the one who paid for it.
If I were going to pay a salesman I'd use a percentage of the project totals. The amount paid would depend on what the salesman provided.
I don't know of anyone who pays on percentage of profit - the sales person has little control over how well you bid or run your jobs and the resultant net profit - if any. He or she has a lot of control over the sales price and most commissions are based on that. 10% is not unheard of for someone who does all the client contact including designs, legwork, handholding, etc. It would be pretty generous for just an introduction but on the other hand you wouldn't have the work if not for that and now it could be turning into a long term customer. Raise your price 11% (or better yet 15%) and keep him happy with 10% of the sale price, especially if he knows more contractors. If he's willing to accept a lower percentage of the sale price even better - it's guaranteed no matter how well you do on the job, and he can stay out of your books
I have enlisted the help of a salesman on and off for the last 15 years. At the beginning of our arrangement we agreed to a compensation structure of 5% for sales, 5% for design and 5% for project management. This proved helpful for those occasions when a builder or homeowner might find me directly, but I still wanted my salesman to perform the design. Over time I became dissatisfied with his performance as a project manager, but I was carefully able to retain his services as a salesman and designer. Currently, I only use him as a designer, and we have further negotiated that he will be compensated directly from the homeowners. Despite the ups and downs of our long term relationship, I always felt that the core percentages of our agreement were fair. Competency towards those tasks became the bigger issue as time went on. I hope that information is helpful.
Well put, Chase.
David, chase and Larry, thanks all for contributing and shading light on what went wrong from the beginning. I apologize for the delayed response.