Sales

[joshranwest]

Hello fellow photogs!

Quick question. I have been in business since 1996 doing weddings and portraits. Its been wonderful. But, since I am now growing quite nicely, the time has come to hire an outside sales person to sell weddings and portraits.

My question...

What rate do you hire someone for? I seen a lot for straight comission (about 20 bucks a sale). Just wondering.

Thanks,

[brian.austin]

Originally Posted by joshranwest

I seen a lot for straight comission (about 20 bucks a sale). Just wondering.

$20 per sale? SALE? That seems absurdly low. Or do you mean 20% (although that seems a bit high)?

Commissions are usually based on a percentage of the total sale or percentage of the margin, depending on the industry.

[joshranwest]

Thats what I have seen, 20 bucks a sale (company had $100 products). I personally was thinking a percentage of what they sell/week. I just want to bring someone in here fairly, and not sure what to pay them and how to really go about it. Im stuck, LOL.

[cpurves]

Originally Posted by joshranwest

Hello fellow photogs!

Quick question. I have been in business since 1996 doing weddings and portraits. Its been wonderful. But, since I am now growing quite nicely, the time has come to hire an outside sales person to sell weddings and portraits.

My question...

What rate do you hire someone for? I seen a lot for straight comission (about 20 bucks a sale). Just wondering.

Thanks,

Is this sales person going to be selling fulltime. If so you have to determine what a reasonable wage is for someone of that skill level. Then how many jobs do you want them to generate a month.
For ease of figuring if the wage is $24K/year (2k month) and you want them to bring in 10 weddings a month then you have to pay $ 200.00 per wedding.
The idea of paying commission on a sale is to provide the incentive to the salesperson to work harder. The harder they work the more they get paid. You also have the benefit of having a fixed cost per sale. So if they don't generate a lot of sales you have to pay less.
I am in Canada so I can't speak to the tax implications or other costs to you of having that employee. You will have to find that out from your accountant.
Also what expenses will you reimburse to the salesperson? If they have to cover their own expenses then you have to build something into the commission rate to cover that so they still make that basic wage.
Another thing to think about is how much extra work can you handle? If you can handle 10 more weddings what happens if the salesperson brings in 12 or worse yet 20?
Your accountant can probably help you more on this because they will know your local area better and what you should be paying.

Cheers
Chris

[brian.austin]

Originally Posted by joshranwest

Thats what I have seen, 20 bucks a sale (company had $100 products). I personally was thinking a percentage of what they sell/week. I just want to bring someone in here fairly, and not sure what to pay them and how to really go about it. Im stuck, LOL.

Well, $20 on a $100 sale is a nice commission. $20 on a $2,000 wedding is crap. Stick with the percentage model for better sales. Not only does the salesperson get more if they sell more, they get a bigger commission if they upsell the wedding packages. More incentive.

As Chris said, talk to your accountant. Accountants have a nice network of peers, customers, and vendors who they can call upon if required. They also have a much better sense of local markets for this type of stuff. If nothing else, he/she can help you figure out how to determine a fair commission and pay structure (ie base + commission or draw or straight commission or whatever).

[joshranwest]

Thanks guys, that really helps me out! I am thinking I will stick to a percentage and go from there. I would like to pay a base plus commission, but we will see! The idea of extra work is nice, as I have a huge database of second shooters and assistants whom I also pay a daily wage. Lots to consider with hiring a sales person.

Thanks again guys!! Off to see the accountant to see what we can do!!

[Mark McCall]

Josh,
I got this idea from Dixie Dobbins, M. Photog. Cr. in Wichita Falls Texas.

Determine your average sale amount first.

Then, pay your sales person a percentage of any amount above average. On top of their hourly salary of course.

This way, your associate will be rewarded for an above average sale, without taking a penalty if they do not meet the average sale amount.

[brian.austin]

Originally Posted by Mark McCall

Then, pay your sales person a percentage of any amount above average. On top of their hourly salary of course.

This way, your associate will be rewarded for an above average sale, without taking a penalty if they do not meet the average sale amount.

The biggest issue with this is that there isn't an incentive for average sales at that point. It's not a selling proposition at that level so much as a casual transaction.

Commissions on ALL sales encourages the salesperson to CLOSE the deal rather than let average sales fall through the cracks.

A tiered approach is another option, with incentive based on how far from a breakeven point the sale gets. At low margin sales, the commission is low, with commission percentage increasing as margin increases. This is particularly useful on industries or companies that control margin at the sales level rather than pricing lists from Accounting. A former employer of mine actually paid commissions on PROFITS rather than gross due to the Sales department underbidding projects and then not making any money on it. Once Sales started having incentives tied to margin rather than gross revenue, they started caring more about the money the company NEEDED to make to stay in business.

[Mark McCall]

Originally Posted by brian.austin

The biggest issue with this is that there isn't an incentive for average sales at that point. It's not a selling proposition at that level so much as a casual transaction.

The sales averages are created by the sales associate in the first place.
Your simply getting them to stretch what they're already doing.
The commission kicks in after they've reached the average sale.

In other words...
Why reward the associate a commission for an average job? (average being the sales average they've created themselves).

The associate would be far more inclined to get that sale up if they know there's something in it for them.
But it doesn't penalize the business owner financially if the average sale isn't met.

BTW....I agree with paying commission only as well, if that's what your suggesting.
The only downside is that you might be paying more out in compensation, depending on the commission rate.

In a nutshell, I'm all for rewarding a good sale, but as business people, we have to be smart about it.

[brian.austin]

Originally Posted by Mark McCall

The sales averages are created by the sales associate in the first place.
Your simply getting them to stretch what they're already doing.
The commission kicks in after they've reached the average sale.

In other words...
Why reward the associate a commission for an average job? (average being the sales average they've created themselves).

Bad. Why? First, you never let a sales person set the bar. Bad practice, even in a negotiating environment. Sales is a motivational occupation. No motivation = no sales.

Second, let's say that the average sales for an associate is $1,000. Customer walks in with a budget of $800. No budging on it, simply because they cannot afford more. What's the incentive to close an $800 deal? Nothing. There is no performance measurement for anything under the $1,000 average.

The associate would be far more inclined to get that sale up if they know there's something in it for them.
But it doesn't penalize the business owner financially if the average sale isn't met.

The associate would be more inclined to get that sale up if there was a tiered commission structure in place. Why? Let's say the same $1,000 average is in place. We structure a commission based on the following:

$500 to $1,000 = 5% of sale
$1,001 to $2,000 = 7%
$2,001 to $3,000 = 10%
$4,000 to $6,000 = 12%
$6,000 and higher = 15%

The customer walks in with a budget of $1900 for a wedding package. Well, for another $101, the sales associate makes an extra 3%. That's a difference of $133 to $201 for commission. Do you think he/she isn't going to work on getting that extra $100 out of the client? If it's a straight commission rate, regardless of rate, that's only a $7 difference! Yet the margin on your $2,000 packages may shift from 10 to 15% due to volume from your suppliers.

Tiered commission structures work EXTREMELY well for motivating to upsell. They have to be structured to match package margins, however. At the high end of the lower tier rates, the company will actually be making more off of the sales person while at the lower end of the scales, they'll make less...but increase their gross and improve cash flow.

BTW....I agree with paying commission only as well, if that's what your suggesting.
The only downside is that you might be paying more out in compensation, depending on the commission rate.

In a nutshell, I'm all for rewarding a good sale, but as business people, we have to be smart about it.

I'm not a big fan of commission only but it's very dependent on sales volume. High volume markets: okay. Low volume, however, leaves sales people high and dry for a while. Base + commission helps cover that. I prefer to keep bases low enough to make it seriously hurt, though. If you're driving a new BMW on a $30,000/yr base and sales dry up, you're either getting motivated QUICK or looking for a new job.

Why is it a downside if you're making more ANYWAY? It's a percentage of margin. More revenue = more commission but same margin percentage. If your pricing is set up correctly, it should actually be MORE margin at higher revenues anyway.

Sounds smart to me. I make more as a business owner and my salespeople are motivated to make more by selling more. Reward those that generate income.

[Mark McCall]

Originally Posted by brian.austin

Bad. Why? First, you never let a sales person set the bar. Bad practice, even in a negotiating environment.

I'm not implying that.
I'm suggesting using the averages preset before this thread was posted.....laying down policies using known information.

Having a Certificate of Photographic Business Management from PPA, I've studied the topic thoroughly, but ulimately it's up to each person to find what works for them.
Unfortunately, many photographers have nothing to compare their method to.
If you ever have a chance to study with Larry Peters from Ohio, his sales methods are genius, concentrating on rewarding sales girls for getting averages up, but doesn't reward them for average sales (which your going to get anyway....that's why it's called an average).

Originally Posted by brian.austin

The customer walks in with a budget of $1900 for a wedding package. Well, for another $101, the sales associate makes an extra 3%.

Why give a commission on wedding package?...unless your competing for wedding work based on price.
Blue chip clientele are not choosing you because of your price. They're looking for style, quality, storytelling images.
You shouldn't give a commission for that.

Originally Posted by brian.austin

Base + commission helps cover that.

That's what I've been saying.
I'm agreeing with you in principle. It's the method and amount we're paying sales associates that's different.

[brian.austin]

Originally Posted by Mark McCall

Having a Certificate of Photographic Business Management from PPA, I've studied the topic thoroughly, but ulimately it's up to each person to find what works for them.

I've been in Sales and Sales management for a number of different industries for almost 20 years. Just using experience here but no specific photography business on the resume.

Why give a commission on wedding package?...unless your competing for wedding work based on price.
Blue chip clientele are not choosing you because of your price. They're looking for style, quality, storytelling images.
You shouldn't give a commission for that.

Okay. I agree with that but it was just an example.

That's what I've been saying.
I'm agreeing with you in principle. It's the method and amount we're paying sales associates that's different.

I've found that happy employees who have more control over their potential income are more likely to stick around and generate repeat business. Again, based on experience more than anything else.

[joshranwest]

Excellent suggestions and wonderful advice! I am glad I posted this question here. I am going to design a pay structure based around what you both have suggested. I agree, a happy employee is more likely to stick around! Excellent tips and ideas!!! Thank you all so much for responding!!