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Jewelers Seek 5X+ Return on Sales Comp: Spotcheck Survey April 30, 2022 (2 comments)

SALES COMP SPOTCHECK SURVEY

Merrick, NY--When it comes to sales compensation plans, fine jewelry retailers use everything from no commissions to discretionary bonuses to commissions based on revenue to commissions based on gross margin to commissions based on team goals to base plus various commission plans and many more.

They are all based on the store owner's belief that what they use is working and is best for their store.

Retailers Want 5X+ Back in Revenue

But what if there were some consensus on a lowest common denominator investment return criteria that cuts across all styles of sales compensation plans?

That was the precise mission of this The Centurion "Sales Compensation Spotcheck Survey". We asked retailers one simple question: "What is the MULTIPLE you feel your store should get back in REVENUE from your investment in SALESPERSON COMPENSATION. (For example, if you are seeking a 10 X Multiple and you spend $250,000 in sales compensation overall, you are looking for $2,500,000 in REVENUE from that investment.)

Retailer respondents revealed that a Five Times Return in sales revenue is the minimum return they see as reasonable. And they pointed out that this is for sales team members other than the store owner. So if you are getting less of a return, a lot of store owners would disagree with your approach. A number of respondents wanted higher returns of from 7 Times all the way up to Fifteen Times.

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Comments (2):

Great time to post this well needed opinion survey.  There are a lot of stores that work with a commission plus base as a means for pay to sales staff.  We follow a slightly different approach.
Salary request at (example) $50,000 annually.  We almost always agree to their request with or without experience.  We give them a base agreement at 13x salary for minimum gross sales.  We then add a 13% plus for their individual goal and when that number is reached we pay the difference in the form of a bonus (reward).  In the past we moved their salary up but, because this is an unusual growth couple of years, we feel that in the better interest of staff they have a better chance of success and growth.  Most prefer the cash injection at the end of the fiscal year.  We also offer a 401K as another form of incentive.
This system has worked for nearly 35 years for us and our staff makes their own choices.

By James Orloff on May 3rd, 2022 at 5:18pm

As consultants who work with retailers around the world on building compensation strategies, we strongly advise that measuring expense against sales is ineffective. In determining return on investment,  “Revenue” should be defined as gross profit, not gross sales.  Business model - including distribution of responsibilities (i.e.  how big is the sales support team, and what does a sales professional have to do in addition to actually working with customers and closing sales?) also factors heavily into what that return ratio needs to be.  Very generally, we look for a sales professional to earn 15-18% of the gross profit they produce.
Oh - and inviolate rule #1 is that compensation/commission calculations must be simple and straightforward.  Employees shouldn’t have to waste time (and your payroll dollars!) figuring out how much they are going to earn.

By Kate Peterson on May 7th, 2022 at 1:35pm

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