Our next MSPmentor Live: webcast is Aug. 19 at 2:00 p.m. eastern. During the discussion, we’ll cover six ways managed service providers (MSPs) and solutions providers can find and win new business. The format will be interactive. We’ll spend roughly 10 minutes on each business and sales tip.
That’s right: Six tips in 60 minutes. Two top MSPs and ConnectWise, the Webcast’s sponsor, will answer your questions about each tip. I’ll be the timekeeper and moderator — ensuring our experts address as many of your questions as we can cover. Register here to join the discussion.
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Hello Everyone,
I was wondering what was is the average commission a sale person makes per sale(on manage services) ? I understand every sale is different but is there a formula that most companies use ? Example – if the monthly sale is $10,OOO, How do you measure the cost ? and how much of the margin do you pay the sales person ?
Best Regards,
A lost puppy!
Hi Tim,
A few readers may weigh in but I think your question might be a bit too broad/generic. Commission models and bonus structures vary greatly from MSP to MSP.
But if you’re just getting started here’s a popular model from an MSP called Jenaly Technology Group. It involves a quarterly bonus structure for all employees based on company performance and other variables. You’ll find it here.
But that’s only one sample approach…
Thanks Joe, I will check out the link….. is there industry average on commission pay ? Say I am billing a small customer $1000 a month. Where do you think the average commission payout would fall ? 25% ? The sale person would take home $250 a month ?
Tim
Hi Tim: I don’t have an “industry average” commission for you. But I would ask peers and industry consultants about so-called sunset clauses.
Tim,
There are lot of variables with regards to pay that you have to take into consideration. Here are some thougths that I would like to share with you and the group.
Coffee is for Closers!!!!
Compensation is always a subject of great debate and strategy. The current economy, abundance of great sales talent in the marketplace and the tremendous growth within the Managed Services business has put the IT comp plan on its head.
The most successful Managed Service companies serving the SMB market have made a conscience decision to not “default back” to the old paradigm of break-fix. This also means changing the ways that you compensate your Sales and Technical support team.
Hunters and Farmers
Regardless of the size of your organization you need to establish a process around the Hunting and Farming efforts of making a Managed Services sale. Smaller organizations may only have one sales person and thus the person is required to play both roles within the organization. As companies are building their Managed Services program you might need more focus on Hunting versus Farming so, compensation plans should be designed to grow with your company.
Base Salary:
A quality sales representative should be able to earn a base salary as part of their compensation package. Depending on the skill set, industry knowledge, market segment experience, and territory served a base salary may range from $500 to $5,000 per month and beyond.
Recurring Revenue:
As a business owner of a Managed Services company your primary concern should be that of recurring revenue. Managed Services contracts will add tremendous value to your business and a predictable income stream will help you better manage the growth.
This is the primary area that you should compensate your sales reps to develop. However, a Sales rep should not be able to rest on just a base salary and recurring revenue. Incentives should be added to continue to generate net-new business for the company.
One to Qualify:
A qualified “Hunter” should most certainly be able to bring on 2-7 new company customers per quarter. You will have to establish proper goals for your organization.
It should be a requirement that a minimum number of new customers be acquired per month, quarter or per year in order for your designated “Hunter” on your team should be able to participate in 100% of the recurring revenue.
Here is an example of a model that I have seen be successful in the marketplace.
If the Sales “Hunter” brings on……
1 New customers
They would earn a 5% commission on 33% of the recurring revenue
2 New customers
They would earn a 5% commission on 50% of the recurring revenue
3 New customers
They would earn a 5% commission on 66% of the recurring revenue
4 New customers
They would earn a 5% commission on 100% of the recurring revenue
5 New customers or more
They would earn a 5% commission on 110% of recurring revenue
Your “Farmers” should be measured on customer retention/satisfaction and overall revenue growth of the company. Be sure to set measurable goals. Gross revenue of the company or individual business units appears to be the easiest to measure. You should always take into consideration the Cost of the sale and Gross margins when designing your compensation plans.
You might also consider a third party organization such as Help Desk Institute to help you measure customer satisfaction with a random sampling of closed incident tickets.
Happy Selling!
Todd McKendrick
Recommended Reading:
The Referral of a Lifetime by Tim Templeton
http://www.amazon.com/Referral-Lifetime-EasyRead-Large-Bold/dp/1442966149/ref=sr_1_1?ie=UTF8&s=books&qid=1238687628&sr=1-1
Value Forward Selling by Paul R. DiModica
http://www.amazon.com/Value-Forward-Selling-Sell-Management/dp/193359831X
Good to Great by Jim Collins
http://www.amazon.com/Good-Great-Companies-Leap-Others/dp/0066620996/ref=sr_1_1?ie=UTF8&s=books&qid=1238687692&sr=1-1