Hello, I am responding to your question regarding the compensation of
sales people at trade shows.
This article is from the Journal of Business Research
"Measuring Performance at Trade Shows" with a section on sales related activities.
http://www.nfh.uit.no/dok/hansen%20(2004).pdf
On this site: Tech Republic
Compensating a Sales Force
"So consider, your margins 1.43 or 1.5, then consider the sales reps
monthly living expenses and requiremets due to age and experience. If
you can replace any of your sales staff in less than a week and plan
on turnover, you would generally pay far less and offer little base.
If these sales reps are seasoned pros, have extensive experience and
are in demand by competitors, you will need to offer them a lucrative
base that BARELY covers monthly expenses and then negotiate a
commission that fits in with what your competitors offer.100%
commission in many places is against labour standards laws, IF, the
person is unable to earn minimum wage you will then have to pay them
the minimum wage equivalent (before you fire them of course)."
http://tinyurl.com/5wuwj
Are independent sales reps a sales solution for your small business?
"They are not paid unless they produce. Reps work only on commission.
With an in-house deadbeat salesperson, you pay salary until the
employee quits. With an independent rep, you pay based entirely on
performance. Reps do not contribute to overhead. They pay for their
own office, computer, car and health insurance."
http://www.media3pub.com/bizonline/articles/ind_sales_rep.html
On this site: Entrepreneur.com
Determining Ad Rep Commissions
Should you pay your ad reps before or after the money comes in?
"If a base pay is guaranteed, at what level does the salesperson start
earning commissions? Is it from the first dollar, or is there a
minimum sales volume that must be generated before commissions begin
to accrue? Will commissions be paid on sales or collections? Paying on
collections only requires a salesperson to have financial staying
power, since most business owners aren't going to pay instantly upon
receiving their invoice. Paying on sales only increases the risk of
your salesperson bringing in high-risk contracts. This is why most
advertising sales organizations will pay commissions on sales
immediately, then deduct from future commissions any receivables that
aren't collected within 90 days of invoice. In such a system, however,
your salesperson will need to see a weekly report on who has and
hasn't paid. That way, they'll have the opportunity to take corrective
action before they lose their commission."
http://www.entrepreneur.com/article/0,4621,310791,00.html
Sales Representatives
"Manufacturers' representatives are self-employed salespeople who act
as agents for other companies. Many companies, especially smaller or
new companies who can't yet afford their own sales force contract with
manufacturer's representatives, to sell their goods and services.
Since they work for a straight commission--a percentage of the sale
without any base salary, benefits, company-provided cars, or expense
accounts--they need to be extremely good at their jobs to succeed. For
those who are this good, however, this is the most profitable type of
sales work."
http://www3.ccps.virginia.edu/career_prospects/briefs/P-S/SalesReps.html
Starting a Craft Business
Small Business Guide for Arts & Crafts, incl Marketing, Sales, Pay Systems
http://www.cbsc.org/sask/sbis/search/display.cfm?Code=8024&coll=SK_PROVBIS_E
Arts / Crafts Business
From William T Lasley, Your Guide to Arts / Crafts Business
http://artsandcrafts.about.com/
I hope these are useful. Let me know if I can be of further assistance. jdb-ga |
Request for Answer Clarification by
kool2-ga
on
30 Dec 2004 16:25 PST
I appreciate the effort in trying to answer my question. However, I
am really looking for more authoritative answers for the question of
compensating independent sales people for selling framed art (specific
product) at "for trades only" craft shows (specific venue). It seems
that you divided my question into discrete pieces such as "how to
compensate independent sales people" and "how does craft shows work"
and tried provide answered to each piece - a divide and conquer
strategy. However, I am really looking for an authoritative answer to
an integrated question.
|
Clarification of Answer by
jdb-ga
on
31 Dec 2004 15:07 PST
kool2-ga,
Hello,
I am responding to your request for answer clarification regarding how
to compensate an independant salesperson concerning pay, commissions,
perks and benefits. You are also requesting an authoritative source
relevant to selling art at trade shows for business-only buyers such
as gifts and crafts shops. Relevant authoritative sources are in terms
of legal requirements, industry standards, and motivational, as in how
to provide incentives. Both are included in the answer clarification
along with the information that is posted in the first answer.
There are only two catagories of salepeople regardless of what they
sell and where. A salesperson is either an employee or an independent
sales contractor. I am assuming that by using the term independant
sales people that you are referring to independent contractors who
happen to be salespersons. There is not a separate legal catagory for
salespeople who work at tradeshows. A salesperson is compensated
according to whether they are an independent contractor or an
employee. The same laws apply to paying an independent contractor
whether they are in sales or some other type of service. A caveat:
Google answers does not provide legal advice, but we are able to point
you to resources.
You may or may not already be familiar with what legally constitutes
an independent contractor salesperson as opposed to an employee. In
case you are looking for the legal definition for these, I have
included authoritative resources that provide this.
An independent contractor is not covered by minimum wage laws in many
states, and you can contact the relevant labor department and related
agencies in your state to verify this. I have included below the
California labor departments, agencies and laws as an example, and I
can search your specific state if you tell me which state in which you
are planning to do business.
----------------
This site discusses how to pay art representatives that sell your art at shows:
http://artsandcrafts.about.com/library/weekly/aa051100.htm
"Arts / Crafts Business
Sales Representative Tips for Crafters
-Percentage
Percentages can vary greatly depending on who you hire. Usually 5 -
15% of wholesale price is the standard range, but it's not unheard of
to offer a higher percentage to better sellers. Remember to check your
pricing after this percentage is added to make sure you will still be
making money on sales! Pricing adjustments may be necessary, but be
sure you do not overcharge for your products or sales may decline.
-Exclusives
Some representatives, particularly larger agencies, will require you
to sign an "exclusive" agreement with them. This means that you will
not allow another rep or agency to sell your products in a particular
region. This can be by city, state or, in some cases, countries. This
can mean that when you hire the representative, the agency will
"service" (contact for reorders) your existing customers in their
region. This can be good and bad. It can be good if the representative
works hard to get new business for you. It can be bad if a
representative does nothing but contact your existing clients for
reorders. You are then paying your representative a percentage of
sales that very likely would have come in anyway."
----------------
Trade Show Marketing
(Series of articles)
http://tenonline.org/art/mm.html
Including:
"Compensation... More Than Just Dollars"
http://tenonline.org/art/mm/9511.html
----------------
http://techrepublic.com.com/5208-6239-0.html?forumID=60&threadID=156347
"As a former sales manager at several companies, I can tell you first
had there is no commission formula...100% commission in many places is
against labour standards laws, IF, the person is unable to earn
minimum wage you will then have to pay them the minimum wage
equivalent (before you fire them of course)."
http://www.media3pub.com/bizonline/articles/ind_sales_rep.html
"What about commissions?
Commissions for independent sales reps vary widely. John Woolsey,
executive assistant to the president at the Manufacturers? Agents
National Association (MANA), a trade group in Laguna Hills,
California, says commissions usually range from 5 percent to 20
percent.
Typically, commissions are paid within a range already established
in a specific industry. According to MANA, the average commission paid
in the appliance industry is 5 percent, while in scientific research
equipment and supplies it is 14 percent.
While a commission range usually exists for any given industry,
commissions are negotiable. Smaller companies that want to break into
a market and don?t have much marketing leverage might pay commissions
that are somewhat higher than usual in order to get the reps they
want."
http://www.alliancedatacom.com/isp/guide_ch6_sales.asp
"If you decide to employ straight-commission sales reps, the law
requires that you guarantee them minimum wage...(For more on your
local employment laws, check with your State Dept of Human and Labor
Relations.)"
----------------
Legal Resources for Determining Employees vs Independent Contractors,
article, downloadable contract templates:
U.S. Department of Labor
Employment Relationship Under the Fair Labor Standards Act (FLSA)
"This fact sheet provides general information concerning the meaning
of "employment relationship" and the significance of that
determination in applying provisions of the FLSA."
http://www.dol.gov/esa/regs/compliance/whd/printpage.asp?REF=whdfs13.htm
IRS
Independent Contractors vs. Employees
http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
http://tinyurl.com/5u0d
IRS
Frequently Asked Tax Questions And Answers
Employee - Independent Contractor
http://www.irs.gov/faqs/faq-kw68.html
Page includes links to:
-Determination of Employee Work Status for Purposes of Federal
Employment Taxes and Income Tax Withholding. Publication 1779 (PDF)
-Employee Independent Contractor Brochure, andPublication 15-A (PDF)
-Employer's Supplemental Tax Guide (provide additional information on
independent contractor or employee status)
IRS
Topic 762 - Independent Contractor vs. Employee
http://www.irs.gov/taxtopics/tc762.html
State of California
Division of Labor Standards Enforcement
Independent contractor versus employee
http://www.dir.ca.gov/dlse/faq%5Findependentcontractor.htm
"The state agencies most involved with the determination of
independent contractor status are the Employment Development
Department (EDD), which is concerned with employment-related taxes,
and the Division of Labor Standards Enforcement (DLSE), which is
concerned with whether the wage, hour and workers? compensation
insurance laws apply. There are other agencies, such as the Franchise
Tax Board (FTB), Division of Workers? Compensation (DWC), and the
Contractors State Licensing Board (CSLB), that also have regulations
or requirements concerning independent contractors. Since different
laws may be involved in a particular situation such as a termination
of employment, it is possible that the same individual may be
considered an employee for purposes of one law and an independent
contractor under another law. Because the potential liabilities and
penalties are significant if an individual is treated as an
independent contractor and later found to be an employee, each
working relationship should be thoroughly researched and analyzed
before it is established...
3. Q. Does it make any difference if I am an employee rather than an
independent contractor?
A. Yes, it does make a difference if you are an employee rather than
an independent contractor. California?s wage and hour laws (e.g.,
minimum wage, overtime, meal periods and rest breaks, etc.), and
anti-discrimination and retaliation laws protect employees, but not
independent contractors. Additionally, employees can go to state
agencies such as DLSE to seek enforcement of the law, whereas
independent contractors must go to court to settle their disputes or
enforce other rights under their contracts."
Independent contractor versus employee: the risks of reclassification
Business Horizons, Nov-Dec, 1997 by Renee D. Robbins, J. A. DeFatta
http://www.findarticles.com/p/articles/mi_m1038/is_n6_v40/ai_20149733
Legal - Independent Contractor Classification Rules
"Preview
-At A Glance
This Word document is a template which details the rules and
regulations which determine whether an individual working for your
company is classified as an employee or an independent contractor.
-Background
Developing a checklist of the governing rules and regulations that
determine whether an individual working for your firm can be
classified as an independent contractor as opposed to an employee. An
independent contractor working for your company who falls under the
classification of an employee may expose your firm to unknown
liability.
-Benefits
Using this tool, your company will be able to assess whether it faces
any potential liability due to the incorrect classification of an
employee as an independent contractor.
-Time ROI
It takes on average 12 hours to research and develop a governing
document that details whether someone who works for your company is an
employee or an independent contractor agreement. By using
MyWorkTools.com, you will save approximately 11 hours since all you
have to do is review for your state and company relevance."
Legal - Independent Sales Contractor Agreements
http://www.myworktools.com/tp_cache/t9/tool_937.html
"Preview
This Word document is a template for an independent sales contractor agreement.
-Background
A legal binding agreement is essential when entering into a contract.
It is advisable to ensure any mutual agreement of authorized
representatives of the parties is in writing. The key is detailing the
agreement to cover all aspects of the venture, maintain
confidentiality, nondisclosure, ownership, and all other areas
relating to the business to meet legal requirements.
-Benefits
Using this tool will define the terms and conditions of agreement
between your company and an independent sales consultant, minimizing
any misunderstandings and/or misrepresentations by either party.
-Time ROI
It takes on average 10 hours to develop an independent sales
consulting agreement. By using MyWorkTools.com, you will save
approximately 9 hours since all you have to do is review the agreement
and input company-specific information."
Legal - Independent Contractor Commission Agreement
http://www.myworktools.com/tp_cache/t4/tool_426.html
"Preview
-At A Glance
This Word document is a template for an independent contractor
commission agreement.
-Background
Developing an independent contractor commission agreement is critical
prior to employing external contractors or consultants for short-term
or one-time projects, projects where you do not have in-house
expertise, a ramp up in production, or a periodic hiring ramp.
Assignments need to be of a finite duration with definite beginning
and ending dates.
-Benefits
Using this tool, your company will have a formal agreement that is
clear and consistent for all independent contractors on commission.
-Time ROI
It takes on average 10 hours to prepare an Independent Contractor
Commission Agreement. By using MyWorkTools.com, you will save
approximately 8 hours since all you have to do is review the agreement
and input company-related data as required."
Independent Contractor Agreement
https://www.legaldocs.com/docs/ind_con1.mv
(This site is a fillable form that creates a contract specific to your
type of business and state)
----------------
I hope these resources are useful. Please let me know if I can be of
further assistance. jdb-ga
|
Request for Answer Clarification by
kool2-ga
on
29 Jan 2005 11:44 PST
These are all very good information. But it still fails to answer the
central part of my question.
Here is a paragraph from your own research, "Typically, commissions
are paid within a range already established in a specific industry.
According to MANA, the average commission paid in the appliance
industry is 5 percent, while in scientific research equipment and
supplies it is 14 percent."
So what is the commission paid in the wholesale framing and/or
wholesale framed art industry when the final products are marketed
through the trade-only shows?
When I said "authoritative", I meant something like the following:
"According to the extensive survey done by the National Association of
Wholesale Framed Art (fictional name) over 5 years ...."
I was not talking about legal issues surrounding independent
contractor vs. employees, which I am well aware of.
Your research results address the craft show industry in general.
However the word "framed art" is not mentioned anywhere in any of the
articles. I have been to a wholesale craft show and there are wide
range of products from some trinkets from China that sells for a few
dollars to framed art which generally sells around $60 on average.
Now I can not believe that sale person who sells $2 items and have to
sell very large quantity would be compensates the same as a sales
person who sells $60 item.
It may be difficult to find such specific information about a niche
area and I am not sure even if such information is available. But
that's why I posted the question on the Google Answer.
|
Clarification of Answer by
jdb-ga
on
29 Jan 2005 15:17 PST
Hello,
The types of associations I find are listed below, and are various
types of art and craft and supplies trade and trade show associations.
Material on their sites discusses motivating sales staff.
Here is an art sales affiliate program that offers 15-16% commission,
which is at the top end of the 5-15% range found on other sites:
LowCostPrints.com
Affiliate Program
http://www.lowcostprints.com/affiliate-program.html
"Affiliate Program Notes
Get a commission (currently 15-16%) on each sale made by a visitor
coming from your site."
The above dovetails with this from my last answer clarification, from
the About.com expert on the art & craft business:
William T Lasley,
Your Guide to Arts / Crafts Business
http://artsandcrafts.about.com/mbiopage.htm
FREE Newsletter. Sign Up Now!
Contact the Guide [Link]
William Lasley owns a retail/wholesale craft manufacturing business.
Meet your guide: Topic Introduction [Audio]
Experience:
William has been attending both retail and wholesale markets for over 10 years.
From William T Lasley:
"One of my favorite things about exhibiting at new shows is meeting
new craftspeople and exchanging ideas on how to enhance the arts and
crafts industry."
See:
Lasley: "Sales Representative Tips for Crafters"
http://artsandcrafts.about.com/library/weekly/aa051100.htm
"Percentages can vary greatly depending on who you hire. Usually 5 -
15% of wholesale price is the standard range, but it's not unheard of
to offer a higher percentage to better sellers. Remember to check your
pricing after this percentage is added to make sure you will still be
making money on sales! Pricing adjustments may be necessary, but be
sure you do not overcharge for your products or sales may decline."
So there is this range of 5-15% commission and where one pays sales
staff in this range is a matter of these three pay and incentive
approaches, listed on an ISP (internet service provider) sales site,
but summarizing nicely these approaches to commission pay in all lines
of sales, and concluding that a degree of security provided by base
pay, combined with a decent commission, results in a loyal and
motivated sales staff:
Sales Commissions
"Want to tune your sales organization for maximum efficiency? Matching
the right payment system?and the right commission structure?to the job
can make all the difference."
http://isp-planet.com/business/isp_sales_commissions.html
"There are three possible ways to pay salespeople:
Base-pay-only.
Base-pay-plus-commission/bonus.
Straight commission with a recoverable draw.
Each of these approaches has its own set of implications
...
Salespeople who get base-pay-plus-commission:
...
Tend to be motivated on a daily basis
Are able to sell without worrying that they need to close the next
sale or go hungry tonight. This allows them to focus more on the
customer's than their own.
This is by far the most popular basis for compensating ISP
salespeople: The base pay satisfies their basic security needs. The
system rewards them with increased pay as their sales efforts (and
results) increase, and it keeps their attention focused on corporate
goals instead of the own selfish desire to maximize commissions above
all."
So it seems the conclusion may be that paying a base wage and 15%
commission is both standard and best for retaining loyal and motivated
sales staff.
Here are some associations, this first one with a brief summary of an
industry economic survey of business owners:
NCA, The National Craft Association
"for art & craft home business how to, craft wholesale supplies, craft
shows, trade shows credit cards, art & craft trends, credit cards,
craft malls, shopping malls, retail & wholesale."
http://www.craftassoc.com/
CODA Craft Industry Economic Impact Survey Results
http://www.craftassoc.com/CODAsurveyresults.html
-Income from craft activities comprises 47% of household income on
average. 22% of craft households derive all of their income from
craft.
-Direct retail accounts for 52.9% of annual sales, with just over
one-half sold at craft fairs.
-The average craftsperson derives 27% of annual sales from wholesale
and 11.2% from consignment to galleries.
-Craftspeople that have paid employees have three times the household
income and ten times the sales/revenue of those that work alone.
National Art Materials Trade Association
http://www.namta.org/
Job Listings
Sales Representative
http://www.namta.org/jobdisplayspecific.cfm?jobnbr=93610
"Candidate should be seeking a stable, long-term position. We offer a
competitive salary, sales incentives and benefit package."
The Bevelled Edge Magazine
Magazine of Fine Art & Framing
http://www.bevellededge.com/newpages/issues.html
-Associations
http://www.bevellededge.com/newpages/associations.html
CHA Convention and Trade Show
http://www.chasummershow.com/industry_whalin.htm
"ASSEMBLING A SALES STAFF
Manufacturers Reps are men and women who represent a variety of
vendors in a particular territory. Lists of them are available in the
CHA 2005 Summer Convention and Trade Show Directory and the HIA
Membership Directory."
I hope these are useful. jdb-ga
|
