Incentives, Commissions, Bonuses for Sales Staff€¦ · Sales Plans • Should motivate sales...

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 StaffLove 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 dobetter with moreadmin 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 sell?

Or another way to look at it

$40,000 to $65,000$500,000

$32,000 to $52,000$400,000

$24,000 to $39,000$300,000

$16,000 to $26,000$200,000

Staff Pay 8-13% of Sales

Yearly Sales

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 hours @ 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 ½million)

• 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 THEY COST

$25,000 10%

$35,000 14%

$45,000 18%

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 orA 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 $550.00. • 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 sales @ 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 $25,000 + 5% 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 $2,250.00 a month ($27k)• Increments of $2,500.00 in Sales• Sales Bonus Total Bonus Total Pay % of Sales• $20,000 0 0 $2250.00 11.25%• $22,500 100 100 $2350.00 10.40%• $25,000 100 200 $2450.00 9.90%• $27,500 100 300 $2550.00 9.27%• $30,000 200 500 $2750.00 9.16%• 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 $7760.00 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 =$10.50.

• 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.

• Ex: @ 10% commission = $2600

• 20% stretch goal = $3120

• @10% commission would be $3,120

• But @ 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

$500,000100%100 hoursTOTALS

$100,00020%20Susan

$200,00040%40Mary Sue

$200,00040%40Tommy

GoalPercent Hours Name

Goals

• Post Goals and weekly results on back wall

• Have a coaching session weekly

• Coach on Average saleSales per hourNumber and dollar of add onsClosing 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:TripsDays offDinnersGive spouse a giftT.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) 255-9565

• David@JewelerProfit.com

• ATTEND a Harry Friedman workshopwww.TheFriedmanGroup.comRetail Store Management

• All slides can be downloaded atwww.jewelerprofit.com/ijo.html