enx magazine

In working with dealers across the country, I find one consistent reason given for paying a sales rep a draw against commission: to keep them hungry. Just Google "average starting salary of a college graduate" and you will find that for the 2007 graduating class the starting salary of a Business Administration / Management major is $43,523. The new Economics graduate will have an average starting salary of $51, 631 and the Finance grad will have an average starting salary of $47,905. Too bad these kids did not pursue an engineering degree-they had average starting salaries $10,000 greater than the business majors.

Look at the substitute positions available to sales candidates in your geographic area. I used salary.com to check the salary of sales representatives (and account executives) in Minneapolis and Philadelphia, which was in the range of $48,000 to $65,000 plus without much variation. I then made the same query for Pocatello, ID and the range dropped to a range of $40,000 to $56,000. Granted this salary information takes into account sales representatives with various levels of tenure and technical ability, but the bottom 10% still had substantial salaries.

When you give consideration to other companies competing with you for sales talent you do not have to look farther than large national copier companies to see how your salary stacks up. I worked for one of those companies and there is a very high probability that you are competing against a mid $30,000 salary offer. I certainly understand-and even agree with-the philosophy of keeping a rep hungry. But if you are not paying a salary that is at least at the low end of the scale, statistics indicate that who you will be hiring is somebody that is simply hungry for a job, any job. On the other hand, if your new hire thinks he (or she) won the lottery because they are earning $35,000 a year, they clearly are not cut out for sales.

If a young adult who graduated college last week can average a mid to high $40,000 salary, and the population of sales representatives in your area average in the $50,000 range how much quality do you need to sacrifice to hire somebody on a draw program? Employee quality is precisely the outcome of this discussion on salary versus draw. I would never suggest that you cannot hire a sales rep on a draw against commission program. What I am suggesting is that you are forgoing substantial quality in the pool of employees to find that subset that is willing to accept a draw position.

I understand the frustration that accompanies the cash investment required to fund 100% turnover. Limiting the investment to find quality sales employees is certainly a legitimate goal. But if a sales hire stays eight or nine months and falls flat on his (or her) face-even if you limited the commissions with a draw or recoverable draw approach-you are going to invest over $20,000 in the draw payments, commissions, bonus and benefits-after you offset for any gross profit from the marginal sales generated. If you have eight sales reps turning over annually you are spending over $200,000 in direct cost to find that diamond in the rough, hopefully.

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