How Much Should You Pay a Salesperson?

by Martin Kirshner, CPA, Gray, Gray & Gray, LLP

Maintaining a steady flow of new oilheat or propane customers, along with equipment sales and service, is the lifeblood of any retail energy company. Unless you have the time to spend seeking out prospects and following up sales leads, having a sales staff – even if it just a single salesperson – is a necessity.

Whether you are seeking customers for fuel delivery or equipment installation, a good salesperson can be an invaluable resource for your business. But one question we receive quite often from our energy clients is this:  How much should I be paying my salesperson? The factors that play into a salesperson’s compensation depend on the individual company, but there are trends in the industry that can give you, at the very least, a starting point.

We polled three separate, similarly sized fuel companies about their practices in paying their sales staff. Each compensation package had similarities, but all had their own “tweaks” intended to boost the productivity of the sales staff.

• Company 1 paid their salespeople a base salary of $480 per week, or approximately $25,000 annually, plus a commission on new accounts. At a certain level of growth the commission level grew. This created an incentive-based system that drove their sales staff to push from five accounts ($200 commission per new customer) to eight accounts or higher ($400 commission per new customer)
• Company 2 pays their sales associates a base salary of $650 to $700 per week, or approximately $35,000 annually. For fuel sales, they take the net sales, subtract the cost of product, and multiply by 5% to calculate the sales person’s commission. This formula allows them to pay each salesperson on a performance basis – a fair and easy-to-calculate amount. As an added benefit, each salesperson receives a company car or car allowance.
• Company 3 pays their fuel sales staff approximately $37,000 annually, with a commission of $175 for each signed contract. They have separate salespeople for equipment, with a $50,000 base salary and a commission paid for any sales they make beyond a monthly set goal. This system encourages salespeople to beat their quota every month in order to achieve the bonus commission

Incentives for All

These three companies each provide unique systems of compensation, but there is one common trend: incentives. In order to keep a sales staff working hard day after day, there needs to be an incentive beyond just a base annual salary. Bonus commissions based on exceeded sales goals will drive a sales professional to find new clients every month. The sales staff needs to recognize that they hold the growth of the company in their hands.

That growth, however, is not up to the sales staff alone. In fact, there is not one member of your entire staff who should not be considered a “salesperson.” Each employee has a network of friends, family, and acquaintances, most of whom have fuel needs. From the office staff to those delivering fuel and installing equipment, your entire team needs to be able to recognize a lead when they have one and pass it along to a trained salesperson for a follow up.

That said, there must be incentives for non-salespeople to make referrals. If a member of the delivery staff obtains a lead, passes it on to the salesperson, and the salesperson delivers on a contract, the delivery staff member should be rewarded in some way. He or she took the initiative and delivered something valuable to the company and should be compensated. The reward does not have to be monetary, but can come in the form of gift cards and other recognition that will encourage non-salespeople to continue to find leads and make referrals.

Seek Repeat Customers

Sales leads are vital, as is success in pursuing them. But one-time sales are only good; you guessed it, one time. You must develop a companywide set of standards that describe the type of customer you want, stressing customer retention to your entire staff as an important aspect of customer acquisition.

A customer that has positive interactions with your staff, starting with a salesperson and continuing with the office staff and delivery team, will be more likely to come back the next time they need oil, propane, or service. Happy customers also refer their friends and neighbors, essentially becoming a “salesperson” for your company!

In order to ensure this positive customer experience, your entire staff must be fully versed in your company’s services and products. That way, if the client has a question, they can go to any member of your staff for an answer. Always remember, the best answer to a question that your staff member does not know the answer to is, “I’m not sure, but I know exactly whom to ask to find out.”

A knowledgeable, courteous, attentive staff member can be a salesperson for your company. Salespeople sell products and services. Non-salespeople sell your company. It is up to you to provide the proper incentives for both in order to cultivate a culture of lead generation and growth.

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