I am very close to securing a 'newly created' sales position within a start-up company and I require some guidance regarding remuneration, namely commission.
- the company specializes in Brand Merchandizing and Promotional Products mainly to large corporates within the FMCG and Business Services sectors.
- products are designed in-house and are either sourced from china or manufactured in china
- Gross profit margin is quite high - anywhere from 50% to 200%. This is due to the director being able to negotiate very low input costs in china.
- the company is 2 months old and consists of one person (director /founder) who is also the company's product designer / electrical engineer / importer.
- the director has a wealth of industry knowledge and product design knowledge. However, when it comes to sales, he has no experience nor is he inclined to learn such skills (understandably).
- the 3-4 sales orders that have been generated so far are from his own 'warm' contacts as well as leads from his ex-colleagues / business associates.
- naturally he wants to be able to venture in 'new business development' - which is where I come into the equation.
- in terms of remuneration, we've both agreed on a commission-only model, which we are both comfortable with.
- I have a business development background, namely within the recruitment industry. I also happen to have a rather extensive (up-to-date) database which I have amassed over the past few years. Approximately 900 decision-making contacts that are relevant to this start-up company. This was the initial appeal of getting me involved into the business.
- the director would like me to eventually hire, train and develop sales staff as the business grows, which means I'll eventually be overseeing all of sales.
- My own database can be split into approximately 9 'patches' (one sales rep per patch, 100 contacts in a patch)
- revenue will invariably be generated on the back of these, contacts that i have brought into the business, (which will become IP of the business)
- the director has asked me to have a think about remuneration and to come back to him with something equitable for both parties (this is where I am stuck)
1. Given i'll have no base salary, what commission (%) is industry average? Assuming i generated an annual revenue of $1,000,000 (approx 20 sales)
2. In the event a sales is generated from one of my 900 marketing contacts (by a future sales rep other than myself), what is a reasonable cut (%) for me given it was my introduction of the client into the business?
3. I have no control over products costs as everything associated with the products (sourcing, manufacturing, design) is handled by the director. So given i cam only control the sale price, should commission be based on 'REVENUE' generated or 'GROSS PROFIT'?
4. In the event i leave the business - & sales occur from my contacts immediately after - how long after i leave will i still have a right to a % of those sales?