Your Business Plan
If you are reading this article, you are most likely starting up a new business, or helping someone else start a new business. The key element for every business is to have a realistic and workable business plan. Your business plan is most likely either under construction, or almost complete. Business plans will have several sections to include all aspects of your goals and your strategy to achieve those goals.
We will discuss how to build out a sales structure with product or service tracking and sales commission tracking. After you build out your sales structure, you can add it to your business plan. This structure hopefully will grow as time goes on and your product or service accounts grow.
There are three items to consider for this structure:
- Identify the products or services being offered to customers.
- Set realistic and achievable sales goals.
- Identify the number of sales force you may need to reach your goals.
Identify Your Products and Services
When I say ‘Identify Your Products and Services”, I mean for you to identify those products and services that you will be selling to the public that will generate a sales commission for your sales team structure.
For you to track sales and commissions, you will need to keep a separate accounting for the commissions. The commission structure may vary. For example:
- You sell used cars. The commission for the sale of each car may be either a flat rate (such as $100 per car) or a percentage rate (such as 10% of the sale price).
- You also provide body shop services. Your team may get commissions from the automotive paint sold for the paint job, but not for the actual painting labor.
- You also sell spare parts at your counter. Your team may get commissions from selling the spare parts.
- You also provide a tune-up shop. Your team may receive commissions from the parts sold that are required for the tune up or brake job.
So, with the above example, take a moment to clearly define what products and services are included in the earned commissions accounting.
Setting Sales Goals: Be Realistic
Every business plan needs goals to focus on to achieve success. Since you are new at this business, you may not have a clue what your goals should be. Here are a few ideas:
- If your business is not unique, you should be able to glean actual sales information from other companies statistics from the Small Business Administration (www.sba.gov). You can then use those figures as a guide.
- If you purchase an existing business from someone else, the previous owner should have provided you with at least the previous year sales.
- If you have absolutely no idea, then you will have to track and determine your sales for the next 3 months and use those figures as a gauge for the remaining quarters of the calendar year.
- When you have established sales goals, keep careful track of them to be able to identify patterns. An example would be – if you live in an area that has snow and ice several months each year, you will notice your automotive body shop services will have a volume increase during those bad weather months.
Your Sales Team
Let us discuss your sales team. There are some employees who are very good at selling products, and some that are not.
You need to have a top notch sales manager who can weed out the bad ones. There are a few skills the sales manager will need:
- Able to identify the strengths and weaknesses of your sales force, and be able to use those strengths and weaknesses to your advantage.
- Able to effectively TRAIN your sales team and have continuing training sessions for encouragement, education, and to promote friendly competition.
- Able to create and hold sales events to promote your products and services.
- Able to recognize and discipline team members when one violates the business code of ethics, or a local, state, or federal law.
The example Sales Organization Chart and Commission Tables below represent the commission flow for a company that sells at least 4 products in each store. This example shows the need to two salesmen for each product. Those two salesman report to a supervisor. The supervisor reports to the store manager, who reports to a district manager.
Try this different example: Product 1 is a set of skin care products. Each Product 1 salesman and the supervisor needs to be the subject matter expert on all of the skin care products. If Product 2 is a series of vitamin supplements, then the two salesmen under that branch need to be subject matter experts for the vitamins.
Now, later on, you will see that it will benefit the entire store team for the four product supervisors to cross train the entire store sales team so that eventually you will have all eight salesmen able to sell all four products. This strategy will help you advance with sales growth for that store and be able to handle customer volume when your sales team members are on vacation or out sick.
What if your business is based completely on the internet? It is interesting to note the growing number of internet based business start ups over the past 5 years alone.
With Internet based e-commerce (electronic commerce) websites, you can still track your sales and commissions. You can still have a sales team that works to promote your website and your business products and service sales. One type is called an affiliate. You sign up affiliates and provide them with a unique code. Whenever a sale is generated from a link provided to the customer by the affiliate, that unique code is recorded with the sale information.
This example shows that you can still pay commissions to internet sales teams and track them using unique codes.
Your Take Away
The whole sales team commission structure is dependent on you determining a commission structure.
That structure needs to include how much commission (flat rate or percentage) is earned for the sale of each product and service your business provides.
Then, the structure needs to identify the commission flow (from Salesman to District Manager) to provide a financial incentive for all positions in the organization to help provide sales oversight, scheduling, promotions, training, support channels, and to promote healthy competition between your employees at each job function.