Thread: Commission Based on Industries

For those who deal with commission sales, do you receive a commission based on the industry?

For instance we pay flat 1% commission, we want to break into other markets. By offering maybe 2% would that motivate sellers to venture into these new markets?

A higher commission rate for particular industries or market segments would motivate me to pursue sales in that area unless the opportunity cost for the extra 1% was too high. When I was working commission it was 10% flat.

I'm in the process of buying out a chair manufacturer. They have two lines (restaurant and medical) and they pay their sales people higher commissions on medical because it's an area they want to grow. Even within that line they pay different rates on each product. For instance, they pay 3% on their standard medical chairs, but they pay 5% on their bariatric line because they realize it is a smaller market and the profit margin is greater.

I can tell you that in mens retail shows, they pay 5,6,7,8, percent on each pair sold. This may seem like alot, but when the average sale is 79.99 its nothing really.

Originally Posted by Trevorrow

A higher commission rate for particular industries or market segments would motivate me to pursue sales in that area unless the opportunity cost for the extra 1% was too high. When I was working commission it was 10% flat.

They would love 10%, but our average sale is roughly 500k. We would go broke if we paid that

Originally Posted by JimF355

I'm in the process of buying out a chair manufacturer. They have two lines (restaurant and medical) and they pay their sales people higher commissions on medical because it's an area they want to grow. Even within that line they pay different rates on each product. For instance, they pay 3% on their standard medical chairs, but they pay 5% on their bariatric line because they realize it is a smaller market and the profit margin is greater.

I know you are in process of buying but did they notice an increase in sales of the "better" chair?

It's not a better chair, it's just a different chair, but yes their YE2011 sales of the higher commission product were up more than the others....however, not enough so to indicate that the sales of the other products had suffered due to the sales team over-focusing on the higher paying line.

To get back to your original post, I might suggest a sales pay structure that maybe implemented bonuses instead of tweaking your current uniform commission schedule. I can think of another company I bought then sold a few years ago that wholesaled cell phones. When they had old inventory or were trying to break into a new market, they would just keep the commission the same but offer a little bonus. I like this approach because it keeps things fresh for your sales team and everyone likes a bonus check, especially when it's paid promptly.

How does the commission structure work when you selling things $1m and up? I would think typically it's on the low side. Does anyone know if there is a standard rate brokers charge once you go above that amount (for industrial equipment, etc)

Originally Posted by BicepKaz

How does the commission structure work when you selling things $1m and up? I would think typically it's on the low side. Does anyone know if there is a standard rate brokers charge once you go above that amount (for industrial equipment, etc)

I'm not sure on standard rates, there are no complaints on pay though. The salesmen are paid a salary based on non commissioned sales but receive commission on all new units and servicing of older units. The current system in place works well for existing markets but these fields will eventually dry up. It makes more sense to target new Markets now, rather than scramble to find them years down the road.

Originally Posted by BicepKaz

How does the commission structure work when you selling things $1m and up? I would think typically it's on the low side. Does anyone know if there is a standard rate brokers charge once you go above that amount (for industrial equipment, etc)

Depends if you are a rep for the manufacturer or for an authorized reseller. Manufacturer will pay a lower percentage based on total revenue than a reseller, although more and more manufacturers are tiering the percentage payout based on how much profit margin there is in each transaction. Reseller will pay based on GP (Gross Profit), and the percentage is almost always higher than a manufacturer would pay.

When selling shoes, I made 7% commission on top of a base salary. As a driver, it is 50% commission. If it costs the company $60 to make the one delivery, I get $30.