Pay for Performance (one in a series)
You are paying your sales staff commission, right? I don’t mean some modest salary plus a commission. I mean 100% commission: As in eat what you kill, earn what you sell, low sales equal low pay!
If your salespersons aren’t selling at least $50,000 per month, and your parts sales storewide aren’t at least $20,000 per employee for ALL employees, you need to be reading about and implementing pay for performance.
In coming months, I will talk about how to dramatically increase the performance of each of your departments by switching to pay for performance. It’s about paying fewer employees more money and increasing sales and profits.
Bear in mind that the amounts mentioned above are really minimums; many yards are getting more than $100,000 per salesperson per month and more than $30,000 per employee when all employees are counted.
I remember when I converted my sales staff to 100% commission in 1984. I was probably one of the first in the US to do so. Howard Nussbaum (now with LKQ) was working with me as a consultant. Phones were crazy. We had 20 salespeople each selling $100,000 per month. Wow, how things have changed!
Howard spent a few hours at the counter, and promptly announced that we had twice as many salespeople as we needed. I looked at him like he was crazy because I thought he was. I wondered who would answer all these phones with half the salespeople gone. He said “Half your staff will and they will do it so well that sales will double.”
He explained all the issues and how some of the current staff would be skeptical but some would rise to the occasion and others would depart. We created the plan to switch to full commission and how to present it to our salespeople.
I pulled the trigger.
We sold $150,000 per salesperson the next month. Yep, a 50% increase! In the third month following the switch, we hit $200,000 per salesperson. We doubled our sales per salesperson in 3 months.
Eventually, four of our original 8 salespersons left, and we hired one new one, so that was with 5 staff. No computers, a card system. We increased sales significantly with less staff.
Yes, it is possible, and I have seen it over and over. And by the way, your competition, including LKQ, is doing it, and maybe kicking your butt in the process.
Even if you are on some incentive pay for salespeople, you can reap huge gains by going to straight commission. A salary plus commission won’t get it.
Stay tuned, in coming articles we will discuss pay for performance for dismantlers, drivers, inventory clerks, parts pullers, outside account executives. We will also touch on how to increase sales even further using extended warranty sales.
I was honored to speak at the ARA convention about how to use the Internet to grow your parts sales. Each of you at the session left with a plan to sell more parts online. Feel free to contact me for a free website review to show you which changes to make.
We don’t do websites for clients but can give you objective actionable advice and refer you to designers who understand the auto salvage business and have experience designing successful sites, if needed.
Remember only you can make business great!
Ron Sturgeon, founder of Mr. Mission Possible small business consulting, combines over 35 years of entrepreneurship with an extensive resume in consulting, speaking, and business writing, with 6 books published.
While still in high school, Ron started an auto repair business that evolved into a single employee salvage yard. When he sold it to Ford in 1999, it had become one of the largest auto salvage operations in the United States. Later, he and two partners purchased Greenleaf Auto Recyclers from Ford and sold it to Schnitzer Industries 18 months later.
As a consultant, Ron shares his 35 years of expertise in strategic planning, capitalization, compensation, growing market share in his signature plain-spoken style, providing field-proven, high-profit best practices well ahead of the curve.
Ron has helped owners in industries from restaurants to law firms with a wide variety of business issues, including sales, promotion, production, financial measures, business strategy, business valuation, and succession planning.
To get a free website review or inquire about engaging Ron as a consultant, contact him at 817-834-3625 or at rons@MrMissionPossible.com.