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Building Compensation Packages For Sales Pros
September 2008 Franchising World
Franchisors need to understand their salespeople and what is required to keep them producing at their maximum potential. By Tom Spadea, CFE Franchising is first and foremost a business about people. Whatever the concept, the entire franchising business model revolves around successful relationships. Most franchising professionals will agree that the health and success of any system is directly related to the quality of the franchisees. If a franchise company is seeking the best franchisees to profitably grow its system, then it needs the best people on the front line awarding agreements. The franchise sales team is the gatekeeper to the next generation of franchisees that will either take the franchise organization to the next level or inadvertently devise its exit strategy. Franchisors who can identify top performers, keep them motivated, support them properly and, of course, compensate them appropriately will always outperform the pack, especially in today’s highly-competitive marketplace.
Who are the Top Performers?
The best salespeople help prospects get themselves over the finish line by removing obstacles and dealing with the prospects fear. It is very difficult to talk someone into buying a franchise, and even if it can be done, he or she typically will not make a very good franchisee. The best salespeople have tremendous empathy and recognize when people are a good fit and are ready to make perhaps one of the biggest decisions in their lives. Similar to marriage, going into a franchise system is a life-changing event that is not so easily undone. Prospects realize this, and the salespeople that can effectively deal with that anxiety will be successful.
Motivating and Supporting Top Performers
Tom Spadea is vice president, franchise development of Saladworks. He can be reached at 610-662-0192 or tomspadea@gmail.com.
Past performance is a great indicator of future success. Franchise sales are like no other type of relationship sales. Typically in franchising, companies start over every month at zero with brand new prospects, but they can’t just sell, sell, sell to be successful. Companies need the basics and to never be overtaken on follow-up or follow-through, but that is not enough to be the best. It is a necessary condition of success, but far from sufficient. Someone who understands the nuanced difference between franchise sales and other sales and has proven it by selling large numbers in other systems will most likely be successful in any system. If not, perhaps there is a system-wide problem or as will be discussed later, the company isn’t giving him the tools and support he requires to hit those goals.
Listening is the most important skill a franchise sales professional can have. What did the prospects say and what didn’t they say? What will it take to get them over the finish line? The top performers are thinking about these questions in every conversation. It’s about building great relationships quickly, typically over a series of phone calls and not in person. Since most franchise sales are conducted over the phone, consider the interview process. Are franchise companies basing their decisions over the relationship they built with candidates over the phone or the impression they made in person? Many people come across differently over the phone versus in person and one should weigh that into any decision and compare that to an organization’s sales process.
A great deal is always made about lead generation, and, of course, without leads companies can’t have an effective sales program. However, the process is not as simple as bringing in lots of leads in the front end and having good salespeople on the back end and expecting all will be well. That is probably half the battle, but don’t ignore the other half. What happens in the middle can make an enormous difference in the success or failure of any development department. It is a relevant discussion as part of compensating top performers because without an effective process and support structure it is hard for salespeople to maximize their earnings and stay motivated.
Just as top performers need to be great listeners, the department head needs to be the best listener on the team. What obstacles are in the way of them conducting more deals? What software is in place that makes it easy for them to track their leads, follow up and record notes? Has the franchise company automated some of the more routine parts of the process like e-mail blasts to old leads and Webinars for basic information on the concept? Does the franchisor have a qualifier calling initial leads to keep top performers focused on financially- and geographically-qualified leads? All these questions and many more are essential to the motivation and retention of top performers and are too often overlooked by the attitude that top performers don’t need considerable support to be successful.
Can a sales team control its own mail-merged follow ups so it is consistent in the process and doesn’t have to reinvent the wheel for each deal? The more variables that are removed from the process and the simpler it is for the sales team, the more it can focus on getting people to Discovery Day and closing deals. Many top performers are poor record keepers and are considerable more people-oriented than reporting-oriented. It isn’t that they are trying to hide information from the franchisor; it’s that it is not what is important to them. Some of the administrators are the best salespeople and some of the best administrators are the worst salespeople. Always remember what is most important to reaching the numbers. Free them and the franchisor from that stress and create a system that is easy to follow and can get the information needed to manage them without making a great salesperson an administrator.
Compensating Top Performers
Compensation depends a great deal on the system, the size of the system and the expected amount of franchise fees a top performer is expected to generate. As a general rule, a 50/50 split between base salary and commission is a good starting point. Experienced salespeople will require and expect a base salary; sorry to disappoint those looking for a way to not invest in the ramp-up time it takes to have people begin producing results. Many mid-level concepts (between 100 and 2,000 operating units) usually pay between a $40,000 and $80,000 base salary with benefits, expenses and so on for an experienced salesperson. Some top performers with decades of experience can command a higher base salary, but my experience and discussions with other sales executives indicate that is an exception to the general rule. Anything less and perhaps that person is not yet ready for prime time and the franchise organization will get what it pays for.
Commissions are very concept specific and companies need to look at the overall plan and how it fits their concept. When is it paid, how is it calculated and how fair is it to the entire team are all relevant things to consider when devising a plan? The greater the frequency of the payout, the better the plan is. Many concepts pay quarterly or even monthly, but the best way to pay is in the next paycheck after the deal is booked. That drives a sense of urgency and makes every pay period a new deadline. Top performers are money motivated; don’t be fooled into thinking otherwise. It is how they compare themselves against their peers, judge their own professional success and explain to their spouses why they spend so much time working nights and weekends. Nothing motivates better than getting paid a commission.
When calculating commissions, simple is better. If the franchisor can’t explain the commission program in one or two sentences, it’s too complicated. A flat fee per deal or a straight percent with a high-achiever override and perhaps a team bonus is best. An example would be: $2,000 per deal and after 25 deals in a year it goes to $3,000. And if the team does more than 100 deals, it will get an additional $5,000 year-end bonus. Plug in any numbers that make sense for the concept, but remember the golden rule is simplicity. The example above is probably not far off the median for mid-level concepts. Commission plans ranging from $1,000 per deal up to $4,000 per deal for concepts that expect 20 to 40 deals per year are not unheard of. It all depends on the concept, but a good rule of thumb is if the sales team hits its goals, it should make as much in commission as in take-home salary.
The final consideration on paying commission is fairness. Not only should all salespeople be on the same commission plan regardless of tenure or past success, but franchise companies need to ensure that salespeople have an equal opportunity to earn. That may mean looking at how the leads are distributed. Is the system really fair? As a good leader, one needs to know this, because the team will know the truth no matter how someone tries to spin it. Another unfair practice that happens all too often is constant changing of the commission plan. Nobody likes to have the goal post moved, so any changes should be well thought out, properly communicated and not performed too frequently.
Remember, franchising is first and foremost a business about people. Franchisors need to understand their salespeople and what is required to keep them producing at their maximum potential. The sales team is making that critical first impression on new prospects who are considering investing their life’s savings and personal egos in a concept. Franchisors always tell their franchisees to invest in sales and marketing to drive business. Don’t forget to take that advice. How companies motivate, support and compensate those critical ambassadors of their brand will be an enormous factor in reaching future achievements.
