Daniel owns a landscape company, and he hired some superstar employees. He wants to turn one of them into a salesman. He isn't sure how to start with that though. Dave explains how he would approach it.
QUESTION: Daniel in North Carolina owns a landscape company, and he hired some superstar employees. He wants to turn one of them into a salesman. He isn’t sure how to start with that though. Dave explains how he would approach it.
ANSWER: The first thing I would do is try to find some other landscape companies that are your size in some other cities that are big enough that they have a salesman and ask them how they’ve structured. Copy what they’re doing if they’ve got something that’s working. You could just literally pick up the phone and call a couple of them and go, “Hey, my name’s Daniel. I live down in Charlotte. I’ve got a company about your size. I’m thinking about adding my first sales guy. I’m just curious. Would you tell me how you’re paying your guy and how that’s working for you?”
What you’re looking for there is what in business we call best practices. You find something that someone else in the same industry is doing that’s working and you steal the idea. That’s what best practices is. You emulate successful people. It’s a nice way of saying you steal the idea.
All we’re doing is trying to find out hey, if you want to be skinny, figure out what skinny people are doing. So I would do that, number one.
Number two thing I would tell you—and you got this in the book EntreLeadership in the compensation chapter—is when you’re designing compensation in new positions, always tell everyone involved that it’s a trial. “We’re going to try it this way and make sure it makes sense. I want to make sure you make enough to eat in this position if you’re making sales, and I want to make sure I’m not paying you so much that you make more than the company makes as my salesman. We’ve got to structure this thing. Here’s what I think will work. We’re going to set it up this way. We’re going to try it, and after 90 days, 120 days, or six months, we’re going to relook and reset and make sure that this is still good for you and still good for us assuming you’re making sales. If you’re not making sales, dude, then we haven’t got anything to talk about because your job is sales. If you’re closing nothing, and you’re not making any money, then that’s kind of how it was supposed to do. If you’re bringing the company money and you’re not making enough to eat, then I’ve got to change that for your benefit. On the other hand, I don’t really want you to end up being the owner because we could design this comp wrong.”
We want the opportunity to adjust it, number two. Number one is best practices. Find what someone else has been doing. But here’s the thing: Run it on the extremes, whatever you come up with. I’ll just make up a number. Let’s say we’re going to pay you 10% commission on the size of every job you sell. If they sell a $20,000 job, they get a $2,000 check. You say, “Okay, I can do that, and I’m comfortable with that.”
But what if it scales down and he’s doing good work and he’s making good sales and the company’s making money off of him, is he still making enough to eat on? Barely at the bottom. You want him to starve out if he’s not making sales. That needs to be the natural result of the comp plan—in a sales comp plan for sure. But let’s just say he’s doing good and you don’t want him to starve out. What’s that line? So you kind of look at the bottom side. Then you look at the upside and you say, “What if this guy went berserk and sold $500,000 worth of jobs or something? Would I feel okay about paying him that kind of money at that point? Am I going to get really excited if in two months he sold $500,000 worth of landscaping and he’s on 10%?” That’s $50,000 you’re paying him out in two months. You’ve got to be okay with the upside scale and the downside scale. The stuff in the middle will work, but as it scales down or scales up, does it still make sense? Does it pass the common-sense smell test? That’ll help you design your comp plan that way as well.