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FAQs | Management

Commissions

Q1: What is the industry average commission percentage for resellers or where can I find such information?
[Pam Maloney, pmaloney@inner-vista.com]

  • In my experience (20 years of sales & marketing), direct resellers should be able to expect a discount somewhere between 25% to 40% of the "list" price of a product. Of course this is negotiable and totally dependent upon your particular model of product transfer.

    If the reseller is just being a salesman bringing in an order and the manufacturer (you) handles all shipping, invoicing and collections, then somewhere between 15% and 25% is appropriate. If most sales are at "full list" then 25% is reasonable. If the market is competitive or your product is priced beyond its perceived value and discounts to the purchaser are common, then 15% is reasonable. A sliding scale between these two numbers works well if based upon the discount involved for a given sale. i.e., if no discount, then 25% commission. If discounted, then slide down to 15% dependent upon severity of discount. The idea is to incent the salesperson to "sell the value" not "buy the business" by discounting.

    If the reseller actually purchases the product for resale, then the 25% to 40% percent discount range is appropriate depending upon the amount of post-sale involvement required and which party provides support. Then any discounts to the end-user are the reseller's responsibility.
    [Joe G. Rampy, psymbiont@flex.net]

  • One source for sales rep compensation plus a wide variety of other data on running software/IT companies is Culpepper and Associates in Atlanta, www.culpepper.com (770) 641-5400. They gather data from hundreds of companies and publish compilations. In my opinion, Culpepper is the best source of reality based data in the country. I have used them extensively in the past with excellent results.
    [Jeff Bergman, Interboard]
  • To compare your product to others on the market, try calling Ingram Micro, http://www.ingrammicro.com/visitor/ (714) 566-1000. They are one of the largest resellers in the US for IT products. They only sell to resellers and may provide some good references for a reseller price for your product. They might even be interested in reselling your product for you.
    [Tom White, tom@thesaleschannel.com]
  • Here are some guidelines to consider for sales commissions:
    1. Never "cap" what a sales person can make selling your product. I know too many examples of manufacturers never getting off the ground because they limited commissions on their product. High commissions also bring in the best sales reps.
    2. Base the commission on the profit of the sale. This simple rule motivates resellers to sell at the highest margin and can protect you in an open bid situation.
    3. Pay on payment, not just booking or shipping. If the reseller and sales rep are good, this should not be a problem.
    4. Keep it simple and make sure everything is in writing. Leave nothing to the imagination regarding method of commission calculation, customer, and payment. [Tom White, tom@thesaleschannel.com]

 

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