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Sales Commissions for a freelance salesperson?

Hi:
We were thinking of hiring a freelance sales person who would sell ad space on our websites, print advertising space in our catalog, as well as possibly some other advertising channels we have yet to explore.

We don't really want to have an in-house sales person for this due to expense and the fact that most of our advertising opportunities are finite. Our expectation would be that this person would work on a commission-only basis and we'd expect that they'd probably be working for other (non-competing) sales clients as well.

My question is: what is an appropriate ballpark sales commission % amount to pay in these situations? Any help would be appreciated!

Thanks!
Richard

4 Responses

  • Sep 30, 2010

    Principal Owner

    For the last five years I've paid a retired school superintendent to make cold calls for me to my target group, school district superintendents. He also works for about five or six other companies who sell products or services to school districts. He makes the calls, follows up on online sales presentations that I conduct, and goes to industry group meetings for me. I pay him a 10 percent commission for every business deal that I close as a result of him setting up a sales presentation; 20 percent if he closes the deal himself. It has worked out extremely well for me and him. I do provide him a Skype headset and subscription for his calls, and do pay commissions sometimes when he has only made a call to a client, that eventually turns into a sale.

  • Oct 05, 2010

    President

    There are two big issues here: what is the typical sale amount for the items you're thinking of using this person for, and what does an outside freelance salesperson usually make in your area?

    The first item only you can answer, and it's going to fairly directly influence the commission rate. I would suggest the 10%/20% for contact/close transactions referenced in first comment is probably low unless you're dealing with $10,000 plus average tickets. I've seen and would expect 20-50% commission rates on smaller average sale amounts.

    As to typical compensation rates for your area, you should just ask around. The key is that if you expect them to spend xx% of their time on your sales, then give them a good chance to hit that % of their typical comp with your commission rate and expected sales. If your commission rate doesn't achieve that, then they're either not going to spend much time on your behalf, or you'll only get relatively inexperienced options.

  • Oct 05, 2010

    CEO

    Thanks for your answers! The average sale amount is probably anywhere from $500 to $5,000 depending on the length of the advertising campaign sold. I would guess an average of probably $1,500 per sale would be ballpark. I suppose you could structure something to incentivize larger sales, i.e. a higher commission on sales over a certain amount.

  • Bill Winkelman

    http://www.linkedin.com/in/bilwink
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    Marketing Executive (Product Management, Product Development and Direct/Online Marketing)

    (Mar 31, 2011)
    A few other ideas to try...protect yourself by paying only after you have received payment (this can be problem with 100% commissioned sales/affiliates). Also, pay a higher commission if the rep is sourcing the leads (i.e. if you give them qualified or warm leads there is less work to close the sale). Also, send out regular commissions statements showing earnings so they know where they stand. I worked with a company that released an interesting app that helps this process and works with microsoft excel, www.oneclickcommissions.com/rmao.html. Good luck!

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