I have been toggling between paying sales executives 3 -5% of gross sales or 12-15% of profit margins. What is the industries standard commission pay structure for independent car dealers?

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When you include a PACK, i understand you take your overhead cost divided by the number of units you sell a month. Now, is it the average per month or is it adjusted every month?

Do we know what the mean income is in Guam? What would a decent salesman expect to make? I've got very little knowledge of their economy, but i'm guessing that might be an important piece of date before figuring out a commission/pay plan.



I had one other thought on your commission question. If an independent is doing
in-house financing should you pay commissions up front or as earned. I would
opt for both in that I would pay on gross in house at delivery and also on
deferred gross as earned. This limits your exposure on unearned gross, obviates
the needs for chargeback’s which are de-motivating and incentivizes the
salesperson to maintain a relationship with sold customers because he has money
riding on their satisfaction. Just a thought...



 

Dan, not really disputing your thought process of keeping the salesperson engaged with the customer, but from a former controller's perspective this would be a nightmare for accounting to keep track of. I'm unaware of any dms that would track payroll calculations on ongoing collections for sales commissions.

Overall, the simpler the pay plan is the better it works because the salesperson can easily calculate what they will earn, payroll department has few errors in calculating it and management has something easy to calculate for forecasting. 

 

Point taken. It was just a thought. For one thing it would encourage salespeople to work cash down with more interest and urgency. I can see the complications for accounting though.

just curious, is everyones pay plans strictly a percentage of gross / net / etc. or a combination of salary plus, perhaps a sliding scale, unit production etc..... 

Also to all a great holiday season!

Sheldon Wolff

You can structure a pay plan anyway you want as long as it fits within certain parameters as a percentage of gross profit, net profit or total sales or a combination of the three. You need to be able to incentivise the behaviour you want and expect while at the same time benchmarking the compensation to ensure its fairness to both the employer and employee.

Flat commission in a used car operation is the best way to pay the salespeople.

 

Like a pack, you have a fixed amount per car regardless of what your acv is.

 

That way your salespeople are selling cars not price.

What is a standard flat commission to pay salesmen per car?

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