When do you need a sales manager, and how much should you pay that person? Those are questions owners of small but fast-growing home improvement companies eventually have to ask themselves.
My belief is that once you have four, and certainly no more than five, sales-people, you need a full-time sales manager. Bear in mind that some of those salespeople will require a great deal of attention, others less.
How much is that sales manager worth? Most owners without a sales manager assume they don't need one to do the volume of business they're currently doing. That makes sense. Just don't forget that someone's had that job. In many cases it's you, the owner. How badly do you want to rid yourself of that position? How much more money can you add to your bottom line by freeing yourself of the sales manager job?
Let's say you hire a sales manager. I think a base salary of approximately $50,000 is fair, plus a percentage of whatever revenue is generated by having that sales manager. I believe a sales manager who's allowed the freedom to actually work with and coach his staff all day, every day, will increase sales by 10% annually.
Let's say you have five salespeople doing $3 million. If the manager ups that total by 10%, then you have five salespeople doing $3.3 million. It cost you $50,000 to hire the manager. You paid him perhaps 2% of the additional $300,000, another $6,000. In addition, you paid the salespeople about $30,000 in commission on that $300,000.
So with that staff of five that's now selling $3.3 million, you didn't make a lot more in the first year. If, however, you look two years down the road and your manager has expanded the staff to eight salespeople who are averaging $800,000 each, that's $6.4 million. Your sales manager made $150,000 and you're selling $3 million more than you were before you hired him.
Sales managers who are free to go on appointments every day and who help salespeople to improve their presentation and closing skills are valuable. They enable your company to land deals that it otherwise wouldn't be getting. I don't think that I've ever met a good sales manager who was overpaid. —Phil Rea has conducted more than 13,200 in-home sales calls and trained more than 1,750 salespeople. He shares his sales strategies each month with salespeople across the country through his MasterMind Program. For more information, call (866) 441-7445.