Roofing Sales is a gold rush, right?
Well – for the best sales people, it certainly can be.
But it’s important that owners and salespeople alike come up with a roofing sales compensation plan that ensures these three things:
- That the work be done in a quality manner that earns 5-star reviews and word-of-mouth referrals.
- That it helps motivate the salesperson to sell the appropriate stuff, and not cut corners.
- It adequately pays the company for the risk and the overhead required to run the company well, and continues to drive the business forward.
In this video, I talk to Dallas Werner of First American Roofing who breaks down the pros and cons of different common roofing sales comp plans.
Common Roofing Sales Comp Plans:
- 10/50/50 split OR…
- 10% of the total collected
Dalla Werner also offers a third comp plan as a better alternative. He explains his preference in detail in our video conversation:
- % of the Profits Based on the Margin Amount (40% margin, not mark-up, after we take out an overhead percentage.) Once it’s taken out… the sales rep gets 40% of that profit.
So let’s break them down one by one:
1. The 10/50/50 Split and Its Issues
According to TalkRoofing.com, the 10/50/50 split doesn’t take into consideration how much the salesperson does in the process after the sale. This is how the plan works:
“For instance, the sales rep sells a $10,000 job and is on a 10/50/50 plan. $1,000 (10% of the job) is taken by the company for the office cost and overhead. That leaves $9,000. Say the job ends costing $7,000. You then have a $2,000 profit ($9,000 minus $7,000). With the 50/50 split, the Sales Rep’s commission is $1,000.”
Below – Adam Bensman strongly suggests owners not give 50% of profit, as it can really mess up a company.
“This would obviously vary depending on the types of work your company does but I’ve found that for jobs that are insurance rate funded, a Sales Rep getting the 10/50/50 split will average from 10% to 20% of the total job in commissions. If you have a job where the insurance pays O&P, it is at the higher end. If it is a big roof job with steep, double steep and high charges, the Rep will average 15 to 18% of the total job. Small, simple cookie cutter roofs will pay 10 to 12% in commissions.”
“The differences in the split is generally linked to the capabilities of the Sales Rep and the overall portion of the job they are capable (or willing) to perform. A highly capable rep that can make the sale, accurately measure/diagram the roof, write their own Xactimate, handle the Adjuster Meetings, conduct material selection meetings with the HO and pick up the deposit, put together material orders and roofer instructions, discuss supplements with the insurance company, visit the job site during construction, etc. would probably get a split of 10/50/50 or 5/50/50. At the other end of the spectrum, you may have a Sales Rep who only makes the sale and does little after that, so their compensation/commission goes down accordingly.”
“When taking this approach, I believe it is important to have a reasonably well written Sales Representative Handbook that describes the job function, expectations, etc… For example, our Rep Handbook includes a code of conduct, descriptions for filling out contracts, diagramming/measuring a roof, what to look for with storm damage, do’s/dont’s in facilitating Adjuster Meetings, how to chalk a roof & take pictures and several other topics important to us.”
– Adam Bensman
2. 10% of Total Collected (or 7-12% as Adam Bensman Explains)
Watch this video! Particularly if you are a salesperson.
Adam Bensman suggests advocating for a better sales compensation/commission structure for high-performing roofing salesman. He lays out the 7-12% of Total Collected idea:
- You may start a salesperson at a lower amount (7%) if they don’t have high responsibilities – materials, project management etc. Go up (to 12%) if they do it all.
- You may make a tiered structure – a certain amount (7% for instance) at the beginning of the month, and the percentage could go up (to 12%) if they sell a higher volume.
- This method often gets short-hand, called the ‘10% of Total Collected’ method.
If you go the “10% of total collected” route – get the fulfillment off their backs (according to Bensman)
Adam Bensman believes salespeople should be totally focused on closed deals, and he suggests companies get other people to support the best salespeople in fulfillment.
3. A Better Alternative: Just Sharing the Profits
Should you consider JUST sharing a % of the profits?
This protects the company against completely hurting itself, and yes, it does incentivize the salesperson to sell more profitable jobs.
Based on the margin amount (40% margin, not mark-up, after we take out an overhead percentage.)
Once its taken out… sales rep get 40% of that profit.
How do you protect the customer from getting sold something too expensive? Well – if you do run with this particular roofing sales compensation plan, Dallas Werner of First American Roofing suggests capping the profitability of projects at around 50-60%.
He says this puts the safeguard in place that no one ever gets a crazy overpriced experience from your company, ensuring better word-of-mouth and reviews.
What’s the Best Sales Compensation Plan for You?
If you are a CLOSER: You have a lot more leverage in a discussion with the business owner you’re working for.
Just know – if you do decide to go out on your own, there’s a ton of things that are much more difficult about being a company owner. And no matter who else you work for, you’re going to have to justify better percentages with math and closing more deals. (Owners would rather have less, high-close salespeople, than more low-close salespeople.)
If you are an OWNER: Ensure you communicate to your people about what’s all involved in the overhead of the company. Make sure your salespeople know that you’ve carefully considered the above-mentioned options and that you’re always open to ideas that will create more revenue and profit for the company.
Incentive plans are one huge lever you can adjust to increase the output of your team. So, I hope this article is useful to you, and perhaps gave you some things to think about and will help you make more money this next year!