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Shloma Baum
Guest
|
 Posted: Tue Jun 21, 2005 2:47 pm Post subject: Software sales man options |
 |
|
Hi,
I've seen the post below about a software distribution scenario, where
people have given their insight about the issue.
I'm facing a similar but somewhat different scenario:
(this is somewhat a lengthy post, but would appreciate your comments)
I have created a software for a specific industry, this software has been in
use now by a few clients for about a year now, and I feel that its quiet
stable now to start marketing it, but in order to convince some big
corporations to look at the software I need to have at least a few dozen
smaller companies in order to show that the software is successful, I have
looked around and started to seek a salesman, but I've been having a hard
time finding a good one, mostly because my company is a startup, and people
are not willing to go with a startup.
I have finally found the right person, which has very good social and
computer skills and a very good knowledge of the industry I'm targeting. But
he's demanding that since at the beginning it is going to be difficult to
get some sales done, he wants to get a salary, and I've agreed to this. He
also asked that if he succeeds in closing a lot of deals when I would be
hiring new sales people it would be much easier for them to close deals
since the company's has already built its profile on his deals, so he's
asking some kind of reward for all future sales that is going to be closed
(by others), which again I somewhat had to agree with him on this one as
well.
Since I would like to write a complete agreement with all specs, I would
like to get your insight on the following:
First some facts:
We are in NY, USA.
The average sale (at the beginning) would be: between 7k and 15k.
We currently have 5 companies using the software.
Now what I'm wondering:
I was thinking of 2 approaches to offer for the sales guy:
1. Give him first about $800 weekly salary and then give him the sales
commission that is normal in the industry, but the commission would be
across the salary.
2. Give him the first month or so a salary of $800, then after the first
month, he would get only a $400 weekly salary, and at the beginning he would
get much higher commission for each sale then the industry's norm (say:
50%), and the percent would decrease (down to the industry's norm) when more
deals gets closed. This approach has a benefit that for the first month
which I don't expect him to close much, he would get a satisfied salary, but
afterward he would only get a lower salary, which makes him try hard to
close some deals, and get a higher commission.
What would you think is the best?
Any other ideas?
What is the industry's norm commission rate?
Does the industry pay a salary as well?, if so, how much?.
Thank you very much in advance
Shloma Baum
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Guillem
Guest
|
| Posted: Tue Jun 21, 2005 3:28 pm Post subject: Re: Software sales man options |
|
|
Hi,
"Shloma Baum" <shlomabaum-spam (AT) yahoo (DOT) com> escribió en el mensaje
news:42b827e1$1 (AT) newsgroups (DOT) borland.com...
| Quote: | I have finally found the right person, which has very good social and
computer skills and a very good knowledge of the industry I'm targeting.
But he's demanding that since at the beginning it is going to be difficult
to get some sales done, he wants to get a salary, and I've agreed to this.
|
agreed
| Quote: | He also asked that if he succeeds in closing a lot of deals when I would be
hiring new sales people it would be much easier for them to close deals
since the company's has already built its profile on his deals, so he's
asking some kind of reward for all future sales that is going to be closed
(by others), which again I somewhat had to agree with him on this one as
well.
|
as long as it is a limited reward... I think commercial people should profit
from sales since they are the first ones to search clients, but not to the
point of getting too much. After all, he wouldn't be getting any reward if
you hadn't programmed that app
| Quote: | First some facts:
We are in NY, USA.
|
does that mean a lot of companies of that industry are to find around NY?
| Quote: | The average sale (at the beginning) would be: between 7k and 15k.
|
pro sale? pro month? pro year?
| Quote: | We currently have 5 companies using the software.
|
nice for you :)
| Quote: | I was thinking of 2 approaches to offer for the sales guy:
1. Give him first about $800 weekly salary and then give him the sales
commission that is normal in the industry, but the commission would be
across the salary.
|
depending on your sales (and other incomes like maintenance and so on), it
doesn't sound bad. Btw, $800 a week? I think i missed the right country to
work in <g>
| Quote: |
2. Give him the first month or so a salary of $800, then after the first
month, he would get only a $400 weekly salary, and at the beginning he
would get much higher commission for each sale then the industry's norm
(say: 50%), and the percent would decrease (down to the industry's norm)
when more deals gets closed. This approach has a benefit that for the
first month which I don't expect him to close much, he would get a
satisfied salary, but afterward he would only get a lower salary, which
makes him try hard to close some deals, and get a higher commission.
|
this approach sounds better for you, but could be a problem for him. Without
making numbers, it could lead to the situation of him working harder for
less money at the end. Perhaps you should refine it.
For example, say at the beginning he only sells 1 app per month, and the
commission of 50 % would be $500 (just as example). That makes $3700 a
month. Then you drop his salary to $400 a week and give him only 25% (don't
know your commission standards), and he sells say 3 apps per month. That
would make $1600 salary + $750 commision, equalling $2350... He has selled
more, yet gained less. Not good at all.
| Quote: |
What would you think is the best?
|
of these 2 options, the first
I don't know if it's common in the USA, but i would suggest following:
- offer him a little less. For example $500-600 a week
- offer him a progressive commision. That means something like
* He sells 1-2 apps a month, he gets 5% of the sales (or benefits,
whatever is better for you)
* He sells 3-5 apps a month, he gets 10% of the s/b
* He sells 5-10 apps a month, he gets 15% of the s/b
* He sells 10+ apps a month, he gets 20% of the s/b
By all means, there should be a top on the percentage commision he gets, not
necessarily on the amount of money he gets. Of course this is only an
example, and you should study which commisions fit better for your case.
Doing this, you give him a sufficient background on which he can rely he'll
get every week, so he will be more relaxed, and at the same time you push
him to sell as much as possible to increase his own commision.
Btw, i wouldn't agree to give him money for what others will be selling in
the future. If he wouldn't be the first to sell the app, another would be.
If he wants to participate in others achievements, then he should create his
own company.
| Quote: | What is the industry's norm commission rate?
|
in the USA, no idea at all
--
Best regards :)
Guillem Vicens
Dep. informática Green Service SA
www.clubgreenoasis.com
--
In order to send me a mail, remove the -nospam
|
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James David
Guest
|
| Posted: Tue Jun 21, 2005 3:53 pm Post subject: Re: Software sales man options |
|
|
"Shloma Baum" <shlomabaum-spam (AT) yahoo (DOT) com> wrote
| Quote: | Hi,
I've seen the post below about a software distribution scenario, where
people have given their insight about the issue.
|
My company acts as sales agent/rep for a software application and a library,
both of which are used by hedge funds and asset management firms. In
addition to a residual commission structure, we are paid for each fully
qualified sales lead we create.
This has worked very well for me and the developers we represent.
|
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| Back to top |
|
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Shloma Baum
Guest
|
| Posted: Tue Jun 21, 2005 3:54 pm Post subject: Re: Software sales man options |
|
|
Thank you very Guillem for you detailed response,
Comments inlined.
| Quote: | as long as it is a limited reward... I think commercial people should
profit from sales since they are the first ones to search clients, but not
to the point of getting too much. After all, he wouldn't be getting any
reward if you hadn't programmed that app
First some facts:
We are in NY, USA.
does that mean a lot of companies of that industry are to find around NY?
|
Yes, we do have a somewhat good opportunity here.
| Quote: |
The average sale (at the beginning) would be: between 7k and 15k.
pro sale? pro month? pro year?
|
Per sale, then a 18% for anuall maintanance fee. (for which the salesman
would also get a chunk)
| Quote: | depending on your sales (and other incomes like maintenance and so on), it
doesn't sound bad. Btw, $800 a week? I think i missed the right country to
work in <g
|
Well it sounds like you dont have as much expenses as well
| Quote: | Any other ideas?
I don't know if it's common in the USA, but i would suggest following:
- offer him a little less. For example $500-600 a week
- offer him a progressive commision. That means something like
* He sells 1-2 apps a month, he gets 5% of the sales (or benefits,
whatever is better for you)
* He sells 3-5 apps a month, he gets 10% of the s/b
* He sells 5-10 apps a month, he gets 15% of the s/b
* He sells 10+ apps a month, he gets 20% of the s/b
By all means, there should be a top on the percentage commision he gets,
not necessarily on the amount of money he gets. Of course this is only an
example, and you should study which commisions fit better for your case.
|
Good idea, but can't start with a too small percentage.
In any case thanks for you insight.
Best Regards,
Shloma
|
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Mark D. Lincoln
Guest
|
| Posted: Tue Jun 21, 2005 3:56 pm Post subject: Re: Software sales man options |
|
|
Shloma,
First, I have to commend you on investing in sales and marketing. Many
startup ventures are unable or unwilling to make this investment which means
that they languish for years with paltry revenue growth and relegate
themsleves to obscurity. What is most appalling about this is that many
startup ventures ignore the importance of time as it relates to the success
of a business. Time is the only resource that cannot be reclaimed. Many
startup ventures instead focus on money (cash reserves) and conserving money
in order to avoid debt. In the end, this strategy causes a failure to
invest in the business resources required for the success of the venture.
How many business have invented a new way to do something or a new product
that everyone must have only to let the product or service languish in
obscurity until a competitor with a similar product or service takes the
market. Hiring a professional sales person to get your product out into the
marketplace is a great first step.
As for paying your sales people, commission is definitely the way to go.
Since you just hired the first member of your sales staff, you might want to
consider some type of deferred compensation or equity sharing plan. Based
on your post, your new sales person has asked for the former. You might
want to consider the latter as well or some combination of both. I like the
equity sharing plan (stock or stock options depending on your corporate and
tax situation) which makes the sales person a part owner of the company at
some point in the future and invested in the success of the company. Many
startup ventures fail to set up a plan that will incentivise their key
people to stay with the startup for the long haul. What happens if your key
sales, marketing, or technical person gets a "great" offer from another
company. Will they stay or will they have to follow the money and leave
your venture. Remember, this is business and you need to make sure that
your venture has all of the resources it needs for success. Make sure that
your key people will want to stay regardless of the economic temptations
offered by other compnies. Take a look at the companies that have been
hugely successful at keeping their key people. Microsoft, for instance, has
always given stock options to all of their employees. Defer stock options
and/or bonuses for a reasonable vesting period so that the key person is
financial invested in your company. If the company does well, give your
people raises. If it does greater than expected, give them a quarterly or
annual bonus. Contribute to their retirement plan. If the economics of
hiring a new person dictate paying a higher salary because that is what the
market is currently paying, pay all of your exisitng staff with the same
talents and skills more money as well. In the end, if being part of your
startup venture is financially and personally rewarding, your employees will
go the extra mile and your business will be a great success.
Mark
"Shloma Baum" <shlomabaum-spam (AT) yahoo (DOT) com> wrote
| Quote: | Hi,
I've seen the post below about a software distribution scenario, where
people have given their insight about the issue.
I'm facing a similar but somewhat different scenario:
(this is somewhat a lengthy post, but would appreciate your comments)
I have created a software for a specific industry, this software has been
in use now by a few clients for about a year now, and I feel that its
quiet stable now to start marketing it, but in order to convince some big
corporations to look at the software I need to have at least a few dozen
smaller companies in order to show that the software is successful, I have
looked around and started to seek a salesman, but I've been having a hard
time finding a good one, mostly because my company is a startup, and
people are not willing to go with a startup.
I have finally found the right person, which has very good social and
computer skills and a very good knowledge of the industry I'm targeting.
But he's demanding that since at the beginning it is going to be difficult
to get some sales done, he wants to get a salary, and I've agreed to this.
He also asked that if he succeeds in closing a lot of deals when I would
be hiring new sales people it would be much easier for them to close deals
since the company's has already built its profile on his deals, so he's
asking some kind of reward for all future sales that is going to be closed
(by others), which again I somewhat had to agree with him on this one as
well.
Since I would like to write a complete agreement with all specs, I would
like to get your insight on the following:
First some facts:
We are in NY, USA.
The average sale (at the beginning) would be: between 7k and 15k.
We currently have 5 companies using the software.
Now what I'm wondering:
I was thinking of 2 approaches to offer for the sales guy:
1. Give him first about $800 weekly salary and then give him the sales
commission that is normal in the industry, but the commission would be
across the salary.
2. Give him the first month or so a salary of $800, then after the first
month, he would get only a $400 weekly salary, and at the beginning he
would get much higher commission for each sale then the industry's norm
(say: 50%), and the percent would decrease (down to the industry's norm)
when more deals gets closed. This approach has a benefit that for the
first month which I don't expect him to close much, he would get a
satisfied salary, but afterward he would only get a lower salary, which
makes him try hard to close some deals, and get a higher commission.
What would you think is the best?
Any other ideas?
What is the industry's norm commission rate?
Does the industry pay a salary as well?, if so, how much?.
Thank you very much in advance
Shloma Baum
|
|
|
| Back to top |
|
|
Shloma Baum
Guest
|
| Posted: Tue Jun 21, 2005 4:33 pm Post subject: Re: Software sales man options |
|
|
Mark,
Thank you very very much for your inspiring post, flaged to show for my
investor  , and very good advise as well.
Agree to all that you have said.
Best Regards,
Shloma
"Mark D. Lincoln" <mdlincoln (AT) speakeasy (DOT) net> wrote
| Quote: | Shloma,
First, I have to commend you on investing in sales and marketing. Many
startup ventures are unable or unwilling to make this investment which
means that they languish for years with paltry revenue growth and relegate
themsleves to obscurity. What is most appalling about this is that many
startup ventures ignore the importance of time as it relates to the
success of a business. Time is the only resource that cannot be
reclaimed. Many startup ventures instead focus on money (cash reserves)
and conserving money in order to avoid debt. In the end, this strategy
causes a failure to invest in the business resources required for the
success of the venture. How many business have invented a new way to do
something or a new product that everyone must have only to let the product
or service languish in obscurity until a competitor with a similar product
or service takes the market. Hiring a professional sales person to get
your product out into the marketplace is a great first step.
As for paying your sales people, commission is definitely the way to go.
Since you just hired the first member of your sales staff, you might want
to consider some type of deferred compensation or equity sharing plan.
Based on your post, your new sales person has asked for the former. You
might want to consider the latter as well or some combination of both. I
like the equity sharing plan (stock or stock options depending on your
corporate and tax situation) which makes the sales person a part owner of
the company at some point in the future and invested in the success of the
company. Many startup ventures fail to set up a plan that will
incentivise their key people to stay with the startup for the long haul.
What happens if your key sales, marketing, or technical person gets a
"great" offer from another company. Will they stay or will they have to
follow the money and leave your venture. Remember, this is business and
you need to make sure that your venture has all of the resources it needs
for success. Make sure that your key people will want to stay regardless
of the economic temptations offered by other compnies. Take a look at the
companies that have been hugely successful at keeping their key people.
Microsoft, for instance, has always given stock options to all of their
employees. Defer stock options and/or bonuses for a reasonable vesting
period so that the key person is financial invested in your company. If
the company does well, give your people raises. If it does greater than
expected, give them a quarterly or annual bonus. Contribute to their
retirement plan. If the economics of hiring a new person dictate paying a
higher salary because that is what the market is currently paying, pay all
of your exisitng staff with the same talents and skills more money as
well. In the end, if being part of your startup venture is financially
and personally rewarding, your employees will go the extra mile and your
business will be a great success.
Mark
"Shloma Baum" <shlomabaum-spam (AT) yahoo (DOT) com> wrote in message
news:42b827e1$1 (AT) newsgroups (DOT) borland.com...
Hi,
I've seen the post below about a software distribution scenario, where
people have given their insight about the issue.
I'm facing a similar but somewhat different scenario:
(this is somewhat a lengthy post, but would appreciate your comments)
I have created a software for a specific industry, this software has been
in use now by a few clients for about a year now, and I feel that its
quiet stable now to start marketing it, but in order to convince some big
corporations to look at the software I need to have at least a few dozen
smaller companies in order to show that the software is successful, I
have looked around and started to seek a salesman, but I've been having a
hard time finding a good one, mostly because my company is a startup, and
people are not willing to go with a startup.
I have finally found the right person, which has very good social and
computer skills and a very good knowledge of the industry I'm targeting.
But he's demanding that since at the beginning it is going to be
difficult to get some sales done, he wants to get a salary, and I've
agreed to this. He also asked that if he succeeds in closing a lot of
deals when I would be hiring new sales people it would be much easier for
them to close deals since the company's has already built its profile on
his deals, so he's asking some kind of reward for all future sales that
is going to be closed (by others), which again I somewhat had to agree
with him on this one as well.
Since I would like to write a complete agreement with all specs, I would
like to get your insight on the following:
First some facts:
We are in NY, USA.
The average sale (at the beginning) would be: between 7k and 15k.
We currently have 5 companies using the software.
Now what I'm wondering:
I was thinking of 2 approaches to offer for the sales guy:
1. Give him first about $800 weekly salary and then give him the sales
commission that is normal in the industry, but the commission would be
across the salary.
2. Give him the first month or so a salary of $800, then after the first
month, he would get only a $400 weekly salary, and at the beginning he
would get much higher commission for each sale then the industry's norm
(say: 50%), and the percent would decrease (down to the industry's norm)
when more deals gets closed. This approach has a benefit that for the
first month which I don't expect him to close much, he would get a
satisfied salary, but afterward he would only get a lower salary, which
makes him try hard to close some deals, and get a higher commission.
What would you think is the best?
Any other ideas?
What is the industry's norm commission rate?
Does the industry pay a salary as well?, if so, how much?.
Thank you very much in advance
Shloma Baum
|
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|
| Back to top |
|
|
Shloma Baum
Guest
|
| Posted: Tue Jun 21, 2005 4:36 pm Post subject: Re: Software sales man options |
|
|
James,
Thanks for responding.
Is your company based in the US?, are you willing to share about how much
the commision rate is?, would you rather prefer to take this offline?. (you
could email me at full email to what I'm subscribed to, its a real email)
Thanks in advance
Shloma
"James David" <solar (AT) infidel (DOT) ixx> wrote
| Quote: | "Shloma Baum" <shlomabaum-spam (AT) yahoo (DOT) com> wrote in message
news:42b827e1$1 (AT) newsgroups (DOT) borland.com...
Hi,
I've seen the post below about a software distribution scenario, where
people have given their insight about the issue.
My company acts as sales agent/rep for a software application and a
library,
both of which are used by hedge funds and asset management firms. In
addition to a residual commission structure, we are paid for each fully
qualified sales lead we create.
This has worked very well for me and the developers we represent.
|
|
|
| Back to top |
|
|
James David
Guest
|
| Posted: Tue Jun 21, 2005 4:43 pm Post subject: Re: Software sales man options |
|
|
"Shloma Baum" <shlomabaum-spam (AT) yahoo (DOT) com> wrote
| Quote: | James,
Thanks for responding.
Is your company based in the US?, are you willing to share about how much
the commision rate is?, would you rather prefer to take this offline?.
(you
could email me at full email to what I'm subscribed to, its a real email)
|
I'll email you some details to the address above (without "-spam").
|
|
| Back to top |
|
|
Steve Tyrakowski
Guest
|
| Posted: Tue Jun 21, 2005 4:45 pm Post subject: Re: Software sales man options |
|
|
In article <42b83216$1 (AT) newsgroups (DOT) borland.com>, Guillem wrote:
| Quote: | * He sells 1-2 apps a month, he gets 5% of the sales (or benefits,
whatever is better for you)
* He sells 3-5 apps a month, he gets 10% of the s/b
* He sells 5-10 apps a month, he gets 15% of the s/b
* He sells 10+ apps a month, he gets 20% of the s/b
personally I would be careful with this approach. It is subject to |
some manipulation if you delay sales at the end of one month if you are
in a low bracket and try to push them to the following month when you
know you have a couple people already interested. You might find
alternating good months and bad months when you set arbitrary cutoff
dates.
You could just keep a flat commission rate and have a bonus at certain
milestones. Perhaps a $5K bonus after every $100K in sales. You could
also make the reward higher if that $100K was achieved in 3 months vs 6
months.
If you are more interested in how to wean off of salary and onto
commission, you could phase into it over a year. Track what commission
would be monthly so he can see it, and in month one, he gets 100% of
salary and 0% of commission, month 2 he gets 11/12 of salary and 1/12
of commission, month 3 would be 10/12 of salary and 2/12 of commission,
etc.
At any point give him the option to switch to 100% commission, but
after one year, he'll be there no matter what. Of course you want to
keep him paid a reasonable amount of money, but you also need him to
perform, and if after a year the sales are not there, you both need to
decide if he's the right person for you. You can always revise your
agreement later if you both agree to change it.
Steve Tyrakowski
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Shloma Baum
Guest
|
| Posted: Tue Jun 21, 2005 5:39 pm Post subject: Re: Software sales man options |
|
|
James,
| Quote: | I'll email you some details to the address above (without "-spam").
|
No, use the '-spam' as well, its a disposable email that I use on the
newsgroup, use the 'full' email.
Thanks again
Shloma
|
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Joe Hendricks
Guest
|
| Posted: Tue Jun 21, 2005 6:17 pm Post subject: Re: Software sales man options |
|
|
You might grab a copy of :
"Compensating New Sales Roles : How to Design
Rewards That Work in Today's Selling Environment"
by Jerome A. Colletti, Mary S. Fiss
ISBN: 0814471064 (c 1999)
from Amazon or your library...
Excellent ideas for commission structures and
more importantly how to think about your
long term strategy for rewarding both inside and
outside sales. Also covers the new titles and
buzz words for sales roles in most industries.
JoeH
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Guillem
Guest
|
| Posted: Wed Jun 22, 2005 8:29 am Post subject: Re: Software sales man options |
|
|
"Steve Tyrakowski" <steve (AT) sct-associates (DOT) com> escribió en el mensaje
news:VA.0000002e.190d4c3a (AT) sct-associates (DOT) com...
| Quote: | In article <42b83216$1 (AT) newsgroups (DOT) borland.com>, Guillem wrote:
* He sells 1-2 apps a month, he gets 5% of the sales (or benefits,
whatever is better for you)
* He sells 3-5 apps a month, he gets 10% of the s/b
* He sells 5-10 apps a month, he gets 15% of the s/b
* He sells 10+ apps a month, he gets 20% of the s/b
personally I would be careful with this approach. It is subject to
some manipulation if you delay sales at the end of one month if you are
in a low bracket and try to push them to the following month when you
know you have a couple people already interested. You might find
alternating good months and bad months when you set arbitrary cutoff
dates.
|
you're right. That's a point i missed
--
Best regards :)
Guillem Vicens
Dep. informática Green Service SA
www.clubgreenoasis.com
--
In order to send me a mail, remove the -nospam
|
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| Back to top |
|
|
Jay Boisseau
Guest
|
| Posted: Thu Jun 23, 2005 2:29 am Post subject: Re: Software sales man options |
|
|
In article <42b840db (AT) newsgroups (DOT) borland.com>, [email]shlomabaum-spam (AT) yahoo (DOT) com[/email]
says...
| Quote: | Mark,
Thank you very very much for your inspiring post, flaged to show for my
investor , and very good advise as well.
Agree to all that you have said.
Best Regards,
Shloma
|
I agree with the previous post, but be careful. A salesman can make or
break you. Also, they are trained into talking a good game and selling
*themselves*, but that doesn't mean they can sell (experience speaking
here).
If you like, I have access to a compensation consultant. His rates are
reasonable and he can devise a plan for your situation. Use the e-mail
below to contact me privately if you wish.
jayster75075 at yahoo dot com.
Jay
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