With sales such a critical part of any business’s success, one obvious way to be competitive is in the reward paid to your sales team.
So how do most small businesses pay when it comes to commissions for the people who bring the money in? You might be surprised by the answer.
According to an August 2015 sales commission survey by SurePayroll, the majority of small businesses when asked said they paid commission rates of 20 percent or less to salespeople. In fact, nearly 45 percent say they pay 10 percent or less as a commission.
SurePayroll, a Paychex company based in Illinois, provides a system allowing small businesses to do payroll and make other payments including tax filings. The sales commission survey covered small business customers of SurePayroll, mainly with 1-10 employees.
And what the survey found about how these businesses dealt with paying sales commissions was particularly eye-opening.
Surprisingly, about one fifth either don’t pay commissions at all, or base them on something other than the face amount of the sale. Some other options include gross profit or net profit.
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Two smaller groups of respondents, 7.7 percent each, said they paid sales commission rates of 30 percent or more.
Here are some of the write-in responses from small business owners who marked the “Other” square on the survey. Some paid:
- 50 percent of gross profit
- No commission
- Bonus only
- Whatever is left after salaries and expenses
- Tiered scale
- Dependent on overall income of business
- 50 percent of profit on each job (after all costs including 15 percent overhead)
From the numbers, it appears there’s room for competition among the small businesses surveyed. That’s especially true when it comes to sales commissions.
Are you competitive when it comes to the sales commissions you pay to your team? Ultimately, the question is whether the amount you pay in sales commissions is sufficient to keep one of your most important resources working for you or leaving for greener pastures.