David Geller: Incentivize Your Sales Staff with a New Pay Plan

Published

14 years ago

April 2, 2010

David S. Geller

Take the right steps to help you figure out the right plan for your store.

[dropcap cap=T]here are many different ways to compensate your sales staff, so they don’t have to kill each other or the customers. [/dropcap]

You may not necessarily copy my plan, but we went to a very strong commission system in 1991. It had taken us 18 years to get to $1.1 million in sales. After we went to the more generous commission plan, our sales jumped to $1.45 million in a single year — a 32 percent increase!

Of all the stores I’ve helped with compensation, well over 80 percent continue to use strong commission plans with excellent results.

If, in your store, the owner sells more than 50 percent of all sales, then your staff may not be able to make any serious money from the crumbs left to them. If you sell the bridal and high-end and leave your employees to sell earrings, charms, repairs and batteries, then they have no chance of making any serious money.

So how much should a salesperson sell?

Typically, salespeople should sell between eight and 13 times what they are paid. Another way of saying it is that sales staff should cost you between 8 and 13 percent of their sales. At 8 percent, they are very efficient, and at 13 percent, they are very inefficient.

To acquire the information you need to set up the best possible compensation plan for your store, follow these steps:

[dropcap cap=1.]Figure out everyone’s selling salaries. Get a total for the store as well as each staff member. For the total, make it “Total Sales Staff Sales.” That means the sales made by the store owner are not included in this total. [/dropcap]

[dropcap cap=2.] Use the methods as mentioned to figure out the selling cost as a percentage per sales-team member.[/dropcap]

[dropcap cap=3.] Calculate the entire team’s selling percentage as a group. Add up all of their “selling salaries” and divide that by their total sales. This will give you an average for everyone. You’ll want to know your store’s overall cost for the staff, and then calculate individual costs as well.[/dropcap]

[dropcap cap=4.] Once you have these figures, you can compare selling efficiency between staff members, but more important, you’ll have a baseline to compare to later once you’ve installed your new commission structure.[/dropcap]

[dropcap cap=5.] I agree with most compensation experts that at least 50 percent of a salesperson’s pay should come from a commission/bonus plan. You’ll find that a good incentive will give them the carrot they need to perform at a higher level.[/dropcap]

Devise a plan that’s right for your store. There are several types, which I will break down in a column coming soon.

David Geller is a consultant to jewelry-store owners on store management and profitability. E-mail him at dgeller@bellsouth.net.

[span class=note]This story is from the April 2010 edition of INSTORE[/span]

This Third-Generation Jeweler Was Ready for Retirement. He Called Wilkerson

Retirement is never easy, especially when it means the end to a business that was founded in 1884. But for Laura and Sam Sipe, it was time to put their own needs first. They decided to close J.C. Sipe Jewelers, one of Indianapolis’ most trusted names in fine jewelry, and call Wilkerson. “Laura and I decided the conditions were right,” says Sam. Wilkerson handled every detail in their going-out-of-business sale, from marketing to manning the sales floor. “The main goal was to sell our existing inventory that’s all paid for and turn that into cash for our retirement,” says Sam. “It’s been very, very productive.” Would they recommend Wilkerson to other jewelers who want to enjoy their golden years? Absolutely! “Call Wilkerson,” says Laura. “They can help you achieve your goals so you’ll be able to move into retirement comfortably.”