Commission Percentages

Mike Hughes

Former Board Administrator
I have an employee that has a friend in a business that can potentially direct alot of business my way. To give incentive to that end, I am considering paying my employee a small percentage of the jobs I get from his friend.

Right now I'm debating what % to give him. I would still be doing the estimates, etc.....................so I'm still doing most of the work.

I'm thinking no higher then 5%............what do you think?
 
I give my guy 10% for 1 time jobs and 5% for recurring accounts.

I know some people may think the 10% part is too much, but I was a Sales Manager and have been in new business development for a long time. There is some incentive to get new business at 5% until the first commission "bonus" is paid. Say you get a job from your employee (who is also one of your most valuable resources...hopefully). The job is $500 to wash a house, a garage, and a driveway.

1 time job:
5% = $25 (are you going to tax that?). 10% = $50. Are you not going to be profitable from a $450 job that pretty much landed in your lap?

Recurring account(s):
$1,000 per month = $50 EVERY month.

Most likely, your employee will know what the referred job(s) cost because they probably know the customer somehow since they acquired the lead. When they figure out that you only gave them $25 for a $500 job, there will not be much more incentive to seek out work. Sure, they will still refer the accidental contacts to you, but they will not actively seek out new business, which is what I want my guy to do in his spare time...network. I make sure he has extra business cards to give to his friends, family, doctor, neighbor, party store owner, fast food manager, etc.

Remember...the first question most commonly asked when two people meet is "What is your name?". The second..."What do you do?" BINGO! Networking! Incentive!

my .02
 
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