$ Commissions: Everything Sales Reps & Owners Should Know About What's Fair [My Opinion]

Money, money, money, money, money. This is the topic of discussion today. Everything you need to know about commissions. Listen, sales reps, owners, managers, leaders, brand new, seasoned. This video is for you. I'm going to break down all of your questions. What's normal? What should I pay? Why should I pay it? Am I getting paid enough? Am I getting paid appropriately? What's the best pay plan to have? And for any owners, managers, leaders, anyone growing a sales team, should you jive in this topic? Maybe you want a little bit more help. There's a program I have available for you. I'm giving you a little bit of what's in there right now. But my program is called how to build your dream team. And the only way to get a hold of it is to get the package called the roofing sales success formula which will get you all my recruiting info along with my entire training and strategy suite for your team. So you can put your team through there in just a lightning fast nine and a half hours. Get everybody a custom daily sales plan built around their income goal. Get them armed with making their first sales, dominating the neighborhood, the whole battle pack, canvassing strategy, objection strategy, closing strategy, and more. And if you're interested, there's a link in the video description or you can email me adamroofstrategist.com my salespeople listen, you might be wondering, am I getting paid enough? What's the best pay plan? How does this all work? Well, we're going to come cover literally pretty much everything you need to know about pay and making money in this industry. So welcome or welcome back. My name is Adam Bensman, the roof strategist. And everything that I do here on my YouTube channel, on my podcast, when I work with folks, whether it's through my programs or inside the Pitch pro movement is designed to help you smash your income goals and give every customer an amazing experience. So let's hop right into today's topic. I want to talk money. First, let's cover the essentials. There's two main ways to pay off of the gross and off of the profit. All right, now in today's video, the only thing that I'm not going to be addressing are draws, which are advances on pay or a base pay. All right, the reason I'm not is those numbers wickedly complicate pay plans because those are variables far beyond my control. I want to give you the bones of this. Now, what I will share is this. These pay plans are the most common that I see. And first I'm going to cover the, the Two critical elements that will dictate which one to pay and how much. Let's get to it. So first, the two factors. Factor number one is the responsibility of the rep. All right, what do I mean by responsibility? Gosh, whenever I. I wish that my tablet had like spell check response. Yeah, I think we're on point. So responsibility, rep. Oftentimes salespeople are responsible. We'll call cradle to grave, from selling the job all the way to collecting the job. Okay, so that means everything, including the build day, including supplementing the whole kit and caboodle. Meanwhile, the next company hires on and says, listen, all you got to do is ink the job and then get the build order. And then we're going to take care of supplementing and production and collection and everything else. So depending on the responsibility of the rep will dictate the kind of pay and how much as well, because obviously having a supplement department, having a production department, having collections handled for you frees up the salesperson. Time to do what? To sell more. So when you have more time, you can sell more. Now, this back end of the process, and when I say back end, this is what happens after you turn in the check. Here's the check, here's my colors. Go build it. Now we have to order material, schedule the job, sit on production, do the final walkthrough, submit to our invoice to the insurance company, or collect for final payment if it's retail. But all of this processing takes a substantial amount of time. So some folks love doing the whole thing because they develop a deep relationship with the customer. Many companies run this model. In fact, some of the largest roofing companies in America still use this model. It's not wrong. It's about what fits the culture in the company. So likewise, if you have this whole model, usually that person is going to get paid a little more, but they also have the ability to sell less. So the benefit to the sales rep is they can make, you know, maybe some more money per job. The benefit to the company is that they have one person handling it all and it can be a win win. Now, at the same token, you might find someone who says, listen, like, I'm this person, by the way. I am like, do not let me do this. I don't want to have to stay organized. I don't want to babysit jobs. I do not want to be in charge of supplementing. I do not want to be in charge of ordering material. I do not want to be on charge of chasing all this stuff from the insurance company. What I love to do is connect with customers, bring the deals in, turn them into someone else who's really good at that. Because generally salespeople, let's face it, my salespeople are not very organized and we like poke my eyes out to have to do this other stuff right? So if I'm someone who's just focusing on this front end, I'm likely going to get paid less per job. But guess what? All of this time is now freed up, which means I can sell more. So usually this person will have a higher volume of sales and lower responsibilities following along so far. Alright now by the way, this is a controversial topic. If there's things you don't agree with or if there's questions you have do, drop a comment if you haven't noticed. I look at them, I reply to them, I comment on them, they inspire videos just like this one. So drop a comment. And by the way, tell me like, I'm trying some new video styles for you, listening to your request. So if you liked it, thumbs up, hit that button and let me know because it'll help me say yes, my people love this or they hate it. All right, so number one factor is responsibility. And thank you, by the way. Thank you. Number two is the big old can of worms. Are you ready? I'm going to open it right now. And once it's open, I can't close it, so you better be ready. W2 versus 1099. Now what does this mean? W2 is an employee. Okay? 1099 is an independent contractor. I'm just going to write IC because I don't want to be writing all day. So an independent contractor versus an employee. Pros, cons. Now this is a gray line, okay? Gray line. However, most folks go this route. 1099. Now most doesn't mean it's the best. By the way, this doesn't mean it's the best either. Every company is different advantage to a rep. 1099, you have more write offs. You're essentially running your own business, okay? Your money that you're getting paid, you have to pay your own taxes. W2, the company's paying your own taxes. W2, the Company also will be providing workers comp. Which means generally that a W2 employee is going to cost the company 17.5% more. So if you're looking at the numbers that I'm going to be sharing with you in a second and you're like, oh, I'm getting paid less than that, well, guess what, 17.5%. Is that what the Company is paying. So the company is not keeping this money by the way, they are paying this money out. The 1099 person will be receiving more money up front, but they have all the tax liability up to handle everything on their own. As a new Salesperson, most are 1099. And one of the downsides, we start making good money in this business. I remember I wanted to buy my first house and I had made my first six figures. I go to the bank, I'm like, woo hoo, I can buy a house. And they're like, no you can't. We want two years of tax history to show that you're stable because they look at you as like a small business. So I had to wait to get my first house. And because they wanted two years of tax filing, meanwhile you're a W2. You're like, here's a wage. They just assume that you know that's stability. So as long as you can prove the income, you're in a good spot. So again, there's advantages and disadvantages to both. But it's important that we realize owners, managers, 17.5% is what's going to cost you in that W2. By the way, I go into this part in great detail in my recruiting program. How to build your dream team. Covering my recommendations on the sales process, who should do what, where those handoffs are. I help you develop that SOP or standard operating procedure. I also give you hiring ads to run, teach you how to how to pay, how much. I go through my incentive structure, the monthly plan. This keeps high volume sales coming in. I'm not covering that here. I give you hiring ads to run. I teach you my entire recruiting process and how to spot talent and all that. So that's all inside. I just am covering the high level stuff here to get you on your way. Alright, so factor number two, W2 versus 1099. Following along. Good. Alright, let's rock and roll. Now let's get into those two pay plans and break this puppet down. First we have our gross and next we have our profit. The two most common pay plans, not factoring in base pay, very rare in this business. Let me rewind. I wish I had a rewind button. Remember when I had W2 right here. Sometimes companies provide trucks. Very rarely by the way, very, very rarely. If you have a company truck, provided, you're likely going to earn less commission. Why? Because the company bought you a freaking truck and you're able to use your truck and go run sales and they're handling all that wear and Tear. Okay, so there's again those factors of like what bonuses and what perks are included. So now we're back to where we were. Gross versus profit. I'm going to use a $10,000 sale as a sample for both. And I am about to write down a number that I hope to not regret writing down. And that is what I see most common ranges of commissions ranging from 5% to 12% off the gross. Okay, this varies based on employee, the two factors. Are you an employee? What are you responsible for? If you're just signing deals and turning them in, you're probably not earning 12%. You shouldn't be because the money that's made has to go to you. And then the production team, supplement team collections, all that. So this is the general range profit. Not that I agree with this range. Okay, I'm not. Disclaimer. I am not recommending any of this. If you're deciding your pay plan, I walk you through that in that program. There's a lot of factors. Everyone's different. Please. I'm not an accountant. I suck at math. Don't take this as financial advice. I'm sharing what I see. After working with thousands of people in the industry, 30 to 50% of the profit is common. Tell you my personal opinion, 50% is too much. Salespeople. When you think that like the company's earning a bunch of money. When you start to understand the numbers of what it costs to run a roofing company, they are nowhere near as profitable and cash cows as you imagine. There's a huge expense, huge liability, a lot of cash flow. And sales reps often see this profit. They say, well, I'm going to go start my own company. And they quickly learn, oh wait. A roofing company is what we call a pass through company. All the money comes in and then goes out and our expenses are quite High. So 30 to 50% of the profit. Again, people are shying more and more away from the 50% because it's not really a financially feasible option. But we're going to break this down still right now. All right, let's go back to the gross. So we see our average ranges on the gross. The way that works. Very simple math, I hope for me, because I suck at math. If I am doing wrong math, what I want you to do is drop a comment so you can correct it for everyone else that's watching and then hears me say a number that's wrong and is confused. Alright, so let's get to it. Gross $10,000. Let's use 10% because it's easy. That means your commission is $1,000, which makes it very easy. You want to make 100 grand, sell a million bucks. You have your book of business. These are all the sales I'm bringing in. I can add them up. I take 10%. There's my earnings. It's easy for you, it's easy for the company. It is completely transparent. That's what I love about this model. All right, now let's turn our attention to the profit. Generally speaking, when we go a profit model, we're going to subtract first in overhead. That overhead is generally 10 to 15, sometimes a little higher. 17%. Please don't freak out. Whatever your overhead actually is from the company, rest assured, 95% of the time that I've seen it, it's actually too low when compared to the actual overhead. When owners go through and calculate their actual overhead, which is the total cost of what it kept the salaries, the lights on, the insurance, the phone bill, the Internet bill, your business cards, your T shirts, your door hangers, your yard signs, your workers comp, your liability insurance, all of those things that don't make you money but are a cost. Is your overhead again, any salaries, Office workers, employees, things like this, that number is usually a lot higher. So, salespeople, I just want to put you at ease because I know a lot of new folks see it. They're like, gosh, that's so much money. It really isn't like it costs a lot. So for this sample, we're going to use 10% overhead, which means the company gets $1,000 from that job. Alright? Remember, they're married to this project. When something goes wrong, they pay for it, not you. Alright, now for math's sake, I'm going to use a 40% commission off of this. Let's just say there was $3,000 in profit on this sample roof. And $3,000 in profit is calculated after we subtract material and labor. So we take off our overhead, we take off material, we take off labor. I kind of did that backwards. My apologies. We have 3,000 in profit. Your profit sharing model means that you would get 40% of the remaining 3,000 bucks. So we took our job what it costs to run the company, which by the way, is usually low, not enough then material labor. Here's our profit. You get 40% for this example, which would leave you with $1,200. So which one's better? Whoa. First glance, you want to say this one, but remember last two things. Are you an employee are you 1099? What is your responsibility if you are spending 40% more time processing the customer from when you sign it up to building to collecting, is it worth $200 versus just working with, let's say for example, a different structure. And again, there's not one that's right or wrong. It's important for you to make that choice for your company as an owner, manager, leader or as a sales rep to pair it so you can leverage your talent. Or do you want to be with that company that's like, hey, go sign deals, meet with the adjuster, turn in the job, go do it again. Maybe that extra $200 per deal, even if you do 100, that adds up a lot. But you're like, hey, I could just sell in that time. I could just go make another sale. So it's important that you do not factor in what company to sell for based on a dollar amount per job alone. What kind of support W2 or not? What are you doing? Alright, next, the other thing I want to hit on, this profit thing. Everyone loves this model until it it doesn't work because you participate in the upside. The more profitable a job is, the more you make. But it's not if, it's when. When a job goes awry, when something breaks, when you made a mistake because you're in charge of the profitability and you forget to supplement when you miscalculated. When you miss estimated on a retail project, which I had done, you also participate in the downside. And then all of a sudden on that job you worked so hard for, you can scratch off this one and now you're left with a $200 commission. These things do happen. There's no just gravy situation. So when you participate in the upside, you participate in the downside. So I want to leave you with what is the best plan? I have two simple answers. The best plan incentivizes the behavior you need to perform at what I mean owners, managers. If your rep is in charge of profit, he or she should be paid off the profit. There are companies, by the way, that pay off the profit where, you know, they have their own supplement divisions, production divisions. Again, I'm not saying it's wrong. Please don't take anything I say as the gospel. There's a lot of ways to run this business. I'm giving you my philosophy. If a person's in charge of profit, pay them off the profit. If they're not, pay the rep off the gross because they're in charge of volume and it's easy to calculate, but at the end of the day, no matter what you do, transparent transparency is important so you know how you're getting paid and why you're getting paid. And it is quite that simple. And then the next thing is pairing the right process, the right pay plan with the right sales process which will dictate your culture and your structure and your talent. I cannot stand details in the little nitty gritties. I handled it. I'd rather not. So it is entirely up to you in the company now. I hope this video demystifies a lot of this. If you want to get into the nitty gritty if you're hiring, if you're figuring out pay plans, click the link in this video description to learn more about the Roofing Sales Success formula. This is the training being used today by some brand new companies to some of the top 100 roofing companies in America. To answer all these questions for you, lay it out, help you spot that right talent and get your team trained up in hey sales reps, if you're listening and you want access to the same training, I have a package available for you. It's the same material for your purposes. The owner manager recruiting stuff isn't included, but it is a great resource for you and it is wicked affordable. With either plan. You're going to make your money back in just one sale and I do offer a 30 day money back guarantee. So listen, thank you for joining me in today's video. If you liked it, give it a thumbs up. If you have any questions for me that I didn't answer about pay or getting paid, drop a comment below. I will take a look. So what did I miss? What questions do you have for me about the money? Just because our time here is about to wrap up doesn't mean our time has to. So if you're interested and you want to learn more about my products or programs or services, click the description right now. Or you can text me 303-222-7133. We can set up a time to chat that is for product and program questions only. Thank you so much for joining me and if you want to continue with me, I think you're really going to like this video. We'll see you in the next one.