Sales is the battlefield where the art of negotiation becomes the primary weapon of choice. Everday business deals are made with the intention of coming out of them as the winner. Similarly, managing a sales staff involves carefully discussing with them to negotiate commission rates.
Finding the right balance between stimulating the team to perform and ensuring profitability is the key to a successful negotiation.
Follow the below mentioned approach to effectively execute a negotiation.
Assess the Company’s Performance
Before setting out to negotiate, understand the performance of the company. Pay keen attention to the financial health of the company. This is an obvious step however; it requires careful scrutiny as new employees are to be added to the team.
Conduct Extensive Industry Research
With the firm’s financial situation fully understood, conducting extensive market research on the industry will help determine the benchmark. It will give an insight into the offerings of the competitors and allow the firm to set a competitive offer. Along with this, take a look at the current economic situation to evaluate the changing trends of the market.
Develop a Preliminary Commission Structure
Post the analysis received from the research, develop a comprehensive commission structure. The most important factor in creating a skeleton is understanding how the product will sell. There is a greater demand for bars of soap or clothing items compared to a car which might be a once in a lifetime purchase.
Therefore, a salary structure that matches the product type must be set. The common offer is to have some base pay along with the commission rate. Here, both components can be altered for different types of salespersons.
It is observed that senior salespeople prefer stable pay with lower commission rates while younger salespeople take the risk and prefer a higher commission rate. Depending on the product, the volume of sales, and price of the product, the commission can start from 2% and go up to 25%.
Additionally, determine whether the rates should be fixed or variable. In order to incentivize staff, many firms choose to keep a fixed rate for multiple tiers. So, as the salesperson sells more, they have the opportunity to jump to a higher bracket to earn more money.
Time to Negotiate!
With a commission structure set and industry standards understood, it is time to negotiate. Firstly, you must gather information from the salesperson beyond their resume. Discuss with them about their performance at their current organization. Talk about their aspirations and key achievements to gauge their skillset and long-term goals.
Remember to keep it an open and relaxed conversation. If the person seems fit to be a part of the crew, share the commission structure with them. It is crucial to actively listen to their thoughts post presenting the proposal. Make sure it is thoroughly understood by both parties to make justification easier. Along with this, providing reassurance of support from the side of the company for career growth goes a long way.
Closing Thoughts
Through a proper balance, firms can negotiate commission rates with salespeople in an efficient manner. In order to prepare for the negotiation, a firm must conduct extensive research on the product, the firm, the competitors, and the industry in general. The important aspect to remember while negotiating is to stay calm, actively listen, and display flexibility.
