HVACR Business

JUL 2017

Help hvacr contractors master the critical components of business management.

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11 HVACR BUSINESS JULY 2017 www. hvacrbusiness .com • Salespeople may not offer the right mix of products • Salespeople may oversell a job to make more money or • Salespeople may undersell a job just to earn some money • Customer care aspect may suffer and communication and follow-up may be limited • Salespeople may feel slighted based on lead allocation • Pay can vary greatly based on season, economy, etc. • Salespeople may look for short-term self-gain versus company long-term relationships • Turnover may be an issue in lean times Most of the disadvantages can be cured by you, and the upside in revenue and profit generated will be more than enough to justify the plan. One area salespeople tend to debate is whether a commission covers non-selling activities. A commission should be large enough to cover and reward such time in- vestments by componentizing it based on job functions: • 50% Selling and customer care func- tions, including paperwork • 20% Service team sales coach • 20% Home shows, join and attend net- working and trade association group meetings • 10% Sales, marketing & company meetings Avoid paying based on par pricing or padding your book price for purposes of allowing salespeople to drop price. A par price is what you set as its lowest accept- able price. A higher list price is set for salespeople to go to market. Salespeople are provided flexibility in negotiating sales prices with customers and are able to reduce list price to make a sale then are paid a flat percentage for par price and split any overage with the com- pany 50/50. is practice lacks integrity as some customers will pay more than others for the solution. Set a list price for products/services and only allow for documented promo- tional discounts or buying incentives. Teach salespeople how to differentiate their value proposition and build value in all that you do. If a customer needs an incentive to do business with you beyond the value the salesperson conveys, then allow your sales- people to throw in an accessory, extend the warranty or add a maintenance plan. e perceived value is greater and the customer will not think you were trying to squeeze them for more money to start. is way your company maintains pricing integrity. e commission plan works well to drive performance when a company has the proper people that rise to a challenge and are motivated by money and what it can do for their lives. Competitive people are also stoked by commission play plans. is plan also ensures compensation is in direct proportion to sales volume. Combination Plan is plan includes a salary plus an in- centive in the form of a bonus on sales volume over a goal or a commission on all sales. e bonus is based on a salesperson hitting a goal. Variations can be a salary plus bonus, salary plus commission, salary plus com- mission plus bonus, etc. Advantages: • Provides greater security than commis- sion plan and greater incentive than a salary plan • Permits better control of the variable income than is possible with the com- mission plan • Provides management a lot of flexibility to be creative in developing pay plans based on objectives, perfor- mance, experience and longevity, etc. • Allows for customized plans by salesperson • Offers salespeople the advantages of both the salary and commission plans • Broadens the possibility for greater range of earnings • May give salespeople a greater security because of reliable base income • Compensates salespeople for all activities • Allows management to provide motiva- tion toward specific goals and objectives Disadvantages: • Salary-plus-incentive plans tend to be more complex than the other two methods. us they involve more pa- perwork, control, and administrative work. ey need more frequent revi- sion because of the interaction of the elements that comprise the total plan. In making individual adjustments over the years, one should be careful to avoid a gradual loss of uniformity in the plan. • Sometimes complex, may be difficult to understand and may be costly to manage • If salary is low and bonus or commis- sion are high, retention may be an issue in lean times • Can lead to excessive compensation Salary and commission are set as previ- ously mentioned. Structuring the mix between salary (fixed) and incentive (variable) is vital. e percentage split should be based on historical sales performance and compen- sation records along with predictable fore- casted expectations. Combination plans tend to have caps on bonuses, commissions and overall income. Incentives Incentives are optional elements paid at your discretion on top of one of the afore- mentioned plans, based on preset expecta- tions or level of achievement. Teach salespeople how to differentiate their value proposition and build value in all that you do. continued from page 9 continued on page 12

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