New Company - Need Sales Person - what % commission

[SetSitesHigh]

What is a fair % for commission on contracts signed that were generated through a sales rep?

Sorry for such a basic question, but have no clue.

[angelos]

First, I think that it's what both parties involved should decide on.
Second, it certainly depends on the industry they work in. The more valuable the goods are the less the commission rates are supposed to be.

[percentages]

Sales commision is just a way of attempting to guarantee success.

If you have a product that everyone wants to naturally buy the sales commission should be very low (10% or less)......or zero sales people can also work.

If you have a difficult to sell product the sales commision needs to be high to attract the true salespeople! (50% to 90+% might be in order).

Some people can sell oil to Saudia Arabia, if your product is a hard sell you need those folks, and you are going to have to pay them well!

No one can give you a precise answer from the info you have shared.........But, my guess is you have a hard to sell product and therefore a high commission should be in your thoughts!

[gstick]

If you are selling without a formal pricing structure or price sheet the best way to determine commission is based on a formula. The formula is easily derived from your costs and target margin on your contracts.

Once you have this you must decide how much the selling effort is needed and how much it is worth. Obviously you do not want to give away all your margin. But on the other hand you have nothing without the sale. If you decide that 1/2 of the margin goes for the cost of selling (commission), when the sale is made at your target margin, then you can build a sliding scale where the sales person shares or suffers depending on the contract price level at which the contract is sold.

This assumes that you want the sales person to have some pricing discretion. If you do that discretion should be limited, of course.

If you can give us more details I might be of more help.

[gstick]

It occurred to me, after sending my earlier message, that you may not have determined your costs & margins. If you are going to employ a sales representative you have to set a "value" on his or here work. That value can only be relative to the work's value to you.

Setting cost estimates may seem arbitrary in the beginning but it needs to be done. Otherwise you have no objective basis for your business. Are you making money? or should you be working for someone else.

In short, you need a business plan, however simple it may be.

gstick