EDITOR'S NOTE: This article first appeared in sister publication Lawn & Landscape Magazine.
These are some best practices in getting the greatest return on investment from your sales team.
In or out?
First and foremost, most salespeople in landscaping companies are designated as “outside” (i.e., not “inside”) salespeople, if they satisfy two legal criteria found within the Fair Labor Standards Act (FLSA):
- The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
- The employee must be customarily and regularly engaged away from the employer’s place or places of business (which includes the employee’s home office).
By meeting those two criteria, the outside salesperson is classified as “exempt” which means the salesperson is not required to be paid the minimum wage rate, nor be paid overtime.
Get it in writing
Next, to establish a clear understanding of the position, the landscaping company should draft a sales commission agreement to be signed by each salesperson at the time of hire, and each January thereafter. This agreement clarifies the administrative, legal and professional obligations that inevitably are contested as either a grievance or lawsuit about unpaid wages (e.g., commission)
Sales employees typically have a three-stage compensation package. First, their base salary is typically between $45,000 - $60,000 per year. Second, standard commission plans offer a flat rate (e.g., 2 percent, 3 percent) for all new sales contracts. By way of contrast, competitive companies have a multi-tiered commission structure to entice greater sales performance. Sales personnel should receive bonus payments for exceeding sales objectives (e.g., $2,000 for $700,000 in annual sales, $3,000 more if they reach $800,000, and $5,000 more if they reach $1,000,000 in annual sales).
Depending upon local considerations, the average full-time salesperson should sell at least $600,000 - $700,000 annually. Keep in mind that annual sales goals must contain blended criteria: revenue and gross margin. While failing to reach revenue goals is inadequate, meeting revenue goals at insufficient gross margin standards is far worse in that a poorly-bid job (i.e., improper gross margin) can haunt a company for an extended time.
With reference to sales revenue, most sales employees are responsible for only new annual revenue. That is to say, in most cases, sales employees are not required, expected, or accountable for selling enhancements work on existing maintenance contracts. That revenue-generating task is normally assigned to field operations staff like field supervisors, account managers, or branch managers.
Typically, a salesperson does not produce much revenue during their first 90 days on the job, with standard performance usually being met around six months. To infuse value into that dormant time, a strong on-boarding program consisting of the following elements can be invaluable: meeting clients, making site visits, partnering with field operations employees, learning the estimating system, reviewing materials (e.g., marketing plans/brochures, past social media postings, proposal template), engaging in networking groups, becoming familiar with the desired client sales mix percentages (e.g., residential, commercial, HOA, retail), evaluating the client relations management tools, reviewing the sales matrix, and learning business acumen concepts (e.g., gross margin).
While most companies simply evaluate sales employees’ performance by revenue, astute companies also focus extensively on the sales pipeline (e.g., leads, contacts, submittals, awards) when conducting their weekly one-on-one meetings with sales personnel.
Assuming an average capture rate is 20 percent, the salesperson’s pipeline should have a 5x multiplier: That is to say, if the annual sales goal is $500,000, the salesperson should submit at least $2,500,000 of proposals during that year.
With a pipeline of that size, containing multiple jobs at various steps along the decision process, management should leverage available energy on each level of activity for each job in the pipeline to increase the likelihood of sales success.
Steve Cesare is the Harvest Group’s expert for human resources and safety. He has more than 25 years of HR experience. Contact him at firstname.lastname@example.org