By David M. Fellman
This is the second part in a two-part series. Part one, in the May/June 2022 issue of PostPress, focused on hiring salespeople. Part two focuses on retention.
Having (hopefully) found yourself a good salesperson, how do you keep that person with you? It’s pretty simple, really. First and foremost, you make sure your expectations and your salesperson’s expectations are in sync, and then you keep your side of the bargain. (And if your salesperson doesn’t keep his/her side of the bargain, we’re not talking about a good salesperson, right?)
Your expectations start with the job description – developing new customers vs. servicing established customers, quote machine vs. missionary, etc. – and continue with more tangible action standards and objectives. Your overall objective (and the salesperson’s quota) might be $500,000 in sales, and one of the action standards to support that might be 20 “prospecting starts” each week. (That’s my term, by the way, for a process which begins with the identification of “suspect” companies and ends with the qualification of real prospects.)
Your salesperson’s expectations probably start with an income goal but may also include support and “working conditions” expectations. Let’s deal with those first. Part of your side of the bargain is to ensure that the promises your salesperson has to make are being kept; promises of quality, service, reliability, etc. Now, the salesperson shouldn’t be making unreasonable promises – again, one who does that would not be a good salesperson, right? – but you have to understand that those promises are a critical part of the selling process. If the promises aren’t kept, the customer may not buy from you again, and that affects the salesperson’s income. Put yourself in a salesperson’s shoes. If you do your job – developing customers, winning orders, etc. – but your “promise keepers” don’t do their job, you’re probably going to look for a better group of promise keepers before too long.
Now let’s talk about income goals and expectations. I’ve seen many situations that were doomed from the start because the printer either created or allowed an unreasonable earnings expectation. Here’s an example: A candidate earned $65,000 the previous year selling office products. The printer told him he could earn a lot more than that selling printing. “I’ll pay you 10% of everything you sell,” the printer said, “and for the first 3 months, I’ll let you draw $5,000 per month so you won’t be taking a huge pay cut while you’re getting things rolling.”
In the first month, the salesperson worked hard, but sold basically nothing. In the second month, he continued to work hard and landed a few small jobs and one good-sized (by this company’s standards) job. The small jobs were in the $300-$500 range. The good-sized job billed at $3,500, and his total sales for the month were a little less than $5,000. In the third month, he landed several new customers, six small jobs and three good-sized jobs, for total sales of approximately $11,000.
I asked the owner how the new guy was doing. “Great,” he said. “I couldn’t be happier!” I asked the salesperson how he was doing. “I’m dying here,” he said. “Everyone tells me I’m doing great, but I’m not even close to covering my draw. I must do $650,000 in sales to equal what I earned last year, and I can’t see any way that’s going to happen.”
Here’s the problem. The printer hired a $65,000 guy for a $30,000-$45,000 job. The first question you should always ask yourself before hiring a salesperson is how much sales volume you can reasonably expect. I ask my clients to produce three figures: a solid performance, an exceptional performance and a minimum level of performance. The second question you should ask yourself is how much you’re willing to pay for each level of performance.
When I did this “after the fact” with this particular printer, we came up with $300,000 as a solid performance and $450,000 as a really outstanding performance, all of that based on his equipment and capacity and market dynamics. His answer to the second question was the same 10% of sales he’d offered to the salesperson, with the expectation that benefits and expenses and taxes would increase that to a total “compensation load” of about 15%. “With anything more than a 15% load,” he said, “the work he brings in won’t be profitable.”
Here’s a hard fact. The arithmetic of the situation tells you exactly how much salesperson you can afford, and it may very well disqualify the kind of candidate you would really like to hire. The trap that many printers have fallen into is to think that a more talented and experienced – and therefore more expensive – salesperson will automatically bring in enough business to make everybody happy. It doesn’t work that way. If the printer paid $65,000 for $450,000 in sales – which we agreed, remember, would represent an outstanding performance – the salesperson might be happy in the short term, but please also remember that the printer promised him he could earn “lots more” selling printing. And the printer wouldn’t be happy at all with a wages-plus-benefits-plus-expenses-plus-taxes compensation load up around 20%. The most likely scenario is the loss of a talented salesperson because the job was not all it was cranked up to be.
The moral of this part of the story is don’t oversell the job. Remember, this all starts with reasonable performance expectations. If it would take a beyond-reasonable sales performance to get to the salesperson’s desired or required income level, the relationship is almost certain to fail.
All of this begs a question: What do you do if you can’t afford to hire – or if the job won’t support – a proven professional? My best advice is to hire someone who’s going to be a proven professional someday. Let’s take another look at that quote from Caliper’s promotional material: “The Caliper Profile is a personality assessment instrument that objectively quantifies an individual’s competencies and identifies candidates with the strongest potential.” In other words, you have tools available to help you identify young/inexperienced people who are likely to grow into the job. You’ll have to train them, and manage them effectively, but the “opportunity equation” is pretty clear-cut: good candidate + solid training + solid management = great salesperson.
Here’s something else to consider: Attaining an income level is no guarantee of performance. There are plenty of “hacks” earning $65,000 or more in sales, some of whom inherited great territories or compensation plans that benefit the salesperson far more than the company. I believe, though, that the top 25% of people who will start with you at $35,000-$40,000 will outperform the bottom 50% of people currently earning $65,000 or more, and the top 10% of those $35,000-$40,000 people will outperform the bottom 80% of those earning $65,000 or more. Like any other investment, the best strategy with salespeople is to buy early in the value cycle; in other words, to invest in relatively inexpensive things which will appreciate in value.
Appreciation, by the way, is another part of the formula for keeping good salespeople, and you show your appreciation in both tangible and intangible ways. The intangibles may be the most important consideration here, and the moral of this part of the story is to treat your valued salespeople with at least the same respect you show a valued customer. (That’s good strategy, of course, with any valued employee.)
The tangibles provide you with opportunity too. Here’s an example. One of my clients had determined that she was willing to pay a new salesperson $45,000 to bring in $350,000 in sales in her first year, and we both agreed that $350,000 was a reasonable expectation. We told the candidate that this position had “low 40’s” potential in the first year, and that met her income requirements and expectations. The salesperson’s compensation plan started with a salary of $2000 per month, and my client’s original plan was to pay 6% commissions on top of that, which would add up to exactly $45,000 on $350,000 in sales. My recommendation was to reduce the commission rate to 5% and add two incentives to the plan. The first was a $2,500 bonus to be paid if the salesperson reached her quota of $350,000. The remaining $1,000 was budgeted for “random acts of appreciation.”
About five months into the first year, the owner and salesperson went on a sales call together, and on their way back to the office, the salesperson remarked on a watch that the client was wearing. “I really want one of those,” she said. “I can’t really afford one yet, but it’s definitely on my list.” That led the owner to call the client to inquire about the watch, and that afternoon, she ordered one (about $400) from Amazon. As she gave it to the salesperson, she said, “This is just because I appreciate the way you do your job and represent the whole company. Keep up the good work!”
I’m sure you see the motivational and loyalty-building value of that act of appreciation. Please also note that there was still $600 in the budget for additional “random” acts.
Let’s go back to the subject of income expectations for a moment. For most salespeople, part of the expectation is the opportunity to increase sales and earnings from year to year. That holds true right up to the point where many salespeople settle into a comfort zone.
What do you do in that situation? Here’s what you don’t do. You don’t arbitrarily decide that since the salesperson isn’t working as hard, you won’t pay him/her as much.
This goes all the way back to the question of reasonable sales expectations and what you’re willing to pay for that level of performance. After asking my clients to define first year objectives and compensation tolerances, I always ask them to think ahead. This process, combined with the interview process, ultimately yields seven data points: (1 & 2) first year sales expectations and what the printer is willing to pay for a reasonable performance, (3 & 4) future sales expectations and what the printer is willing to pay for a reasonable performance, (5) what the salesperson needs to earn in the first year, (6) what the salesperson wants to earn in the first year and (7) what the salesperson wants to earn by some future year. With those seven data points, it is usually possible to craft a compensation plan that will work for both parties in both the short term and the long term, and that’s important because changing a compensation plan is by far the most dangerous element of sales management.
Please note that there’s usually a difference between what a salesperson wants to make and needs to make, especially in the first year. The need figure may have to cover hard, fixed expenses or it may reflect the value the salesperson places on his/her own talent and experience. Either way, you have to guarantee that need figure, or else the salesperson won’t come with you or stay with you.
You don’t have to guarantee the want figure, but you do have to provide a reasonable opportunity to reach it. If not, the salesperson is probably not going to stay with you. Again, don’t oversell the job!
Here’s a closing thought for today. It is certainly worth the time and effort it takes to find good salespeople, but ultimately, you don’t need to keep salespeople – you need to keep customers!
In addition to the expectations and appreciation issues, it’s important that you never let a customer be your salesperson’s customer, as opposed to being your company’s customer. You prevent that by broadening the interface between your company and your customers, involving designers and customer service personnel and maybe even production people in the relationship. You also make sure that you have a personal relationship with the most important customers.
Most printing companies seem to abdicate “ownership” of the customer, which makes it easy for a salesperson to take a customer along if he/she leaves to go to work for a competitor. I want you to be able to go out and say: “I’m sure ‘Fred’ has talked to you about continuing to buy from him at his new company. We just want you to know that ‘Fred’ was only one of the people at our company who’s been responsible for your level of satisfaction, and the rest of us want to keep your business!”
Dave Fellman is the president of David Fellman & Associates, based in Raleigh, NC, a sales and marketing consulting firm serving numerous segments of the graphic arts industry. Contact him by phone at 919.606.9714, or by e-mail at [email protected].