Salary Averse In home improvement selling, commission continues to rule the day. Most contractors are convinced that their salespeople would be less productive and would earn less if they were paid a salary instead of commissions. “In our business, owners usually feel that if you’re on salary, you’re soft,” says Ed Christian, VP of sales for ABC Seamless in Fargo, N.D.
Salaries aren’t unheard of, though. Hometown Restyling pays two salespeople who sell larger remodeling projects salaries that Illustrations: Philip Anderson range from $35,000 to $45,000, as well as a percentage of the profits from projects they can spend weeks on and where they serve as general contractors.
During winter months, Portland, Ore.-based A Cut Above Siding & Windows pays its salespeople three-tenths of 1% of the business they closed from January through October, on top of the commissions they earn from sales during the slower period. But Randy Dorsing, A Cut Above’s sales manager, is not a proponent of salary-based compensation. “Our guys would rather work on commission, and I’m not sure I’d want someone working for us who would settle for salary.”
This aversion to salaries spills over to the ambivalence some contractors express about letting salespeople draw cash against commissions. Dalco’s Hayes says that his salespeople don’t need draws, and 5 of the 11 companies interviewed for this article don’t offer that option to salespeople. Other contractors, though, say draws are useful — even necessary — during training periods, or when a newly hired salesperson is getting his feet wet in a territory. A Cut Above starts each new salesperson with a guaranteed monthly salary of $2,500 with a $450 car allowance for three months; the salesperson switches to commissions if he gets up to speed faster. ABC’s Fargo branch starts its salespeople with a $500-per-week draw for six weeks. Cincinnati-based Gilkey Windows allows its salespeople — who earned between $75,000 and $130,000 last year — to draw up to 25% of their commissions and reviews those balances monthly, says VP of sales Kevin Hillebrand. Salespeople starting at Windowizards draw $400 a week, “although we’ve never had anyone who didn’t raise that to at least $700 within the first month,” says Felkoff. Windowizards’ two lowest salespeople currently draw $1,000 per week, he says.
Benefits, Bonuses, Perks Some contractors have sweetened their benefits, which “help you get better people to work for you,” says ABC’s Christian. Some companies now extend health and dental coverage to family members of salespeople. Schmidt Siding & Window even pays salespeople for vacation time: one week for one year of service, two weeks for two years, three weeks for 20, says Dale Brenke, president of this Mankato, Minn., company. Garden State is one of the few contractors that are employee-owned, so its salespeople have a bigger stake in this company’s success. Garden State also offers a 401(k) retirement plan in which employees are fully vested after five years. Eight of the contractors interviewed have 401(k) plans in place, and Budget Exteriors in Bloomington, Minn. — whose salespeople had the fewest years of tenure among these companies —was preparing to introduce a retirement plan this spring, according to sales manager Jeff Beck.
Benefits and perks, like car and cell phone allowances, are the icing on a cake in which the main ingredients are spiffs, bonuses, and sales contests that, when mixed together, give salespeople more ways to fatten their wallets.
Windowizards, for example, pays its salespeople an extra $6 for every window sold with low-E glass. A Cut Above recently began carrying products from Renewal by Andersen, and, through March, paid its salespeople an extra $25 per Andersen window unit and $5 per Andersen door unit. Hayes at Dalco says that suppliers often chip in with promotions that might include a $200 gift certificate for the salesperson who sells the most product in a given period.
The real cash, however, flows from bonuses that contractors agree are the adrenaline that keeps sellers sharp and motivated. Their bonus programs are as varied as the companies themselves. At Budget Exteriors, salespeople who exceed $60,000 in monthly sales get a 1% override on that volume, 1.5% for sales over $75,000, and 2.5% for monthly sales exceeding $100,000, says Beck. Dalco’s salespeople are entitled to quarterly bonuses, based on dollar volumes, which Hayes says average between $1,200 and $1,500.
Performance quotas often define the parameters of contractors’ bonus plans. Any time one of Garden State’s salespeople sells five units in a week, he or she automatically receives a $25 cash bonus, regardless of the size of the invoice. During slow selling periods, Garden State pays sellers an extra $100 when they close their fifth sale of the month, $200 for the sixth closing, and $300 for the seventh. St. Clair Corp. in St. Louis pays out monthly $300 to $500 bonuses, based on the number of orders and total volume, says sales manager Joe Valenti. (Six of St. Clair’s salespeople closed over $800,000 in business last year, and two exceeded $1 million in sales.)
If a salesperson at A Cut Above hits $100,000 in monthly sales on a quota of $90,000, he or she gets another 1% of that total. A Cut Above also rewards its salespeople for getting high scores on their customer service surveys. If a seller’s score averages 70% or above, he or she receives an extra 0.25% commission; at 80% or higher, the commission is bumped to 0.5%; at 90% or higher, it goes to 0.75%. (As of mid-February, the company average was 86%, says Dorsing.)
Sales contests for trips to sunny climes are another popular incentive. Last year, 78 of Champion Window’s salespeople who each generated over $1.1 million in business were entitled to a one-week paid vacation in Mexico. Budget’s sellers with more than $650,000 in closings took a seven-day cruise to Jamaica, Grand Cayman, and Cozumel last year. Sellers at ABC’s Fargo office who close more than $600,000 are entitled to trips, too, although Christian notes that there have been fewer takers lately when those junkets don’t include the salesperson’s family.
What Bonuses Do Contractors view bonuses as recognition for effort beyond the call of duty and are careful about not structuring their compensation plans so that they become too easy to achieve. Invincible Associates used to pay bonuses on installed sales to between three and five sellers per month; now, with so much remodeling work going on in Florida, “two-thirds of our salespeople are receiving bonuses,” Avery says. Consequently, Invincible has chosen to raise its bonus thresholds, which, at the low end, increased to $70,000 in monthly sales from $60,000. Salespeople at Champion Window must generate at least one sale on their own to be eligible for their monthly bonuses, says corporate sales manager Camille Saleh.
A growing number of contractors also use their compensation programs to engender greater esprit de corps among their reps. St. Clair runs sales contests three or four times a year, and occasionally these contests will be “a team thing,” says Valenti, where quotas are set for the entire squad. Last year, ABC Seamless teamed sellers for a given period and rewarded the most productive team with cash and prizes. And every June, Budget Exteriors sends its salesforce to Duluth, Minn., to pair off for two days of appointment selling. The trip concludes with a few days of fishing on Lake Superior.
To keep its salespeople busy during slower periods, Budget provides them with lists of past customers in their territories who they are asked to call on to see if they have any service needs “and to get another shot at selling them something,” says Beck. Linking compensation to revisits has been particularly effective for Schmidt, which did $6 million in sales last year from an eight-county area that has just 200,000 people. Most of Schmidt’s salespeople exceed or are close to $1 million in annual closings, and 78% of the company’s business comes from what Brenke calls the Three Rs: referral, repeat, and reputation.
Champion Window requires all of its salespeople to visit the jobsite during the installation phase to try to get homeowners to purchase add-ons. A high percentage of Invincible Associates’ sales of late have come from change orders and from selling multiple products to the same customer. “That’s where our salespeople are really making money,” Avery says. —New Jersey freelance writer John Caulfield has been writing about the home improvement industry for more than 25 years.