Ask Fleximize: Sales Management

What percentage of gross sales should be paid to a sales manager of a small business?

Whatever the size of your business, it’s common to reward sales representatives and managers with compensation based on sales. You don’t want to compensate too little, as this can lower morale and affect performance, leading to a high turnover of staff. However, you also don’t want to compensate too much, as rewarding over a certain amount actually does little in terms of motivation, and can leave a small business out of pocket.

You’ll want to take other factors into account, such as their base salary, but essentially you want to pay a sales manager between 17-26% of gross sales, depending on performance. You don’t want to go over 30%, as this can leave the company without the resources necessary for other expenses.

What problems do sales managers face in the current economic climate?

The current economic climate creates a lot of challenges for sales managers. Among these, the most common are convincing potential customers that the outlay for big ticket items is justified, and having customers who are refused credit due to increasingly strict lending criteria. Both of these could lead to considerably lower sales than in pre-financial crisis times.

Another major issue for the modern sales manager is the advent of ‘showrooming’. This refers to shoppers who view and select a product in store and then find a cheaper stockist online. This can, however, be avoided by offering a price match service and other incentives, such as free, next-day delivery.

What channel has the best contact to sales success ratio?

Most businesses tend to find that the channel with the best conversion rate is online, with the average campaign converting at around 2-3%.

More traditional channels, such as direct mail for example, are generally expected to convert at around 1%. However, it’s usually very difficult to set a definitive value for traditional marketing, as it’s impossible to track every conversion and attribute it to a single campaign. Businesses who are running analytics tracking on their website have access to this data, which is why it’s becoming so popular as a channel.

In general terms, conversion rate very much depends on your industry and the strength of your creativity and sales proposition.