I once worked at a company where reps worked on par. It goes like this: When you sell a job, the company wants $X as a minimum amount; anything you charge beyond that, you either split with the company or you keep.
We didn’t call it par, we called it overage. And when overage didn’t sound too politically correct, we started calling it profit sharing.
All Par All the Time
Everything existed at a par number. So let’s say the company wanted $700 per window. You sold it for $800 and split the $100 50/50. Soon you were selling that window for $900 or $1,000 … whatever you could get. You were making $220 a window. I’ve seen commissions of $3,000 on a $10,000 window sale. It used to happen all the time.
Why do you think some of these guys were making so much money?
Recently, one of them wanted to come sell for us. He was as Old School as it gets. He told me that he was used to making $250,000 a year selling windows. I explained what our company sold, and he said, “I don’t want a high-end window.” He wanted a low-end window—say a $350 window—he could sell for $800. He said: “That’s how I make my money.”
Par was just the beginning. Then there was The Sale. When was a home improvement company ever not having a sale? We used to do Buy Three Get One Free promotions, which simply meant that the company jacked up the price by 25%. And of course we were trained in the Big Drop, where you start with some impossibly high price and drop it by some equally absurd amount so that the homeowner—who’s never bought windows and has no idea what they might cost—is left gasping at the opportunity of a bargain, and will sign that night.
How’s this for a line: “I believe in your house so much, I’m willing to pay you now …” (read: discount the price) “… for the referrals you’re going to give me.”
We did this without conscience and because we could get away with it.
Think Like a Retailer
Ten years ago, you could get rich, even flourish, using those methods. But along comes the Internet. The Internet makes it hard to get away with some of the practices and procedures that were once common, if not standard.
Let’s face it, even if the home improvement industry didn’t get the memo, we are in the retail business. We played by our own rules for a quite a while and few got caught because the industry is so fragmented.
But a lot of people know about all this. It’s not that they’re smarter than they were 10 years ago, they’re just a heck of a lot more informed.
So if you’re going to have a sale, make it a real sale. I mean, where the company actually reaches in its pocket and gives up a few margin points to bump up the volume.
And if you’re paying commission—and that’s how most home improvement companies pay their salespeople—why not hew to a strict commission number and offer reps bonus-based incentives for volume, along with incentives for self-generated leads and customer satisfaction? Those are all measurable.
In the old days companies didn’t mind in the least if 50% or more of the salesforce walked away in a year. The message was: You’re only as good as your last sale.
I no longer believe that you’re only as good as your last sale. I believe in working with people. What kind of leader are you if you can’t turn a low performer around or pull someone up out of a selling slump? That’s genuine leadership. You don’t just haul off and fire them. It costs you more money to roll over staff than it does to keep them.
What you want are people who are happy to work at your company and who believe in it. Create that kind of environment, and watch how fast it translates to customer satisfaction and real growth.