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Welcome to Economic Adulthood

One of the benefits of a career in sales is the unlimited upside earnings that come with success. You bring money into the firm and you get to keep part of the value that you helped to create. The downside for some salespeople, and it comes as a shock to many, is discovering that they have to pay for themselves.

How Your Company Looks At You

It’s likely that you are paid a base salary and that you are given benefits. These are direct costs to your business, and they view them as such. But the amount of money that is spent on your base compensation, benefits, and commissions doesn’t determine whether or not you are an expensive salesperson or an inexpensive salesperson. It is your results that determine what you really cost.

Here are two examples:

The first salesperson sells for a year, and over that time they generate $250,000 in new business. If the company has a 15% gross margin on sales, that salesperson will have generated $37,500 in gross profit. If their base salary and bonus amounts to, say, $75,000, the salesperson costs the firm $2.00 for every $1.00 in profit that they generated.

The second salesperson generates $1,250,000 in new revenue. They are paid the same $75,000, but also made $15,000 in commissions for a total of $90,000. Even though this second salesperson was paid more money, they cost only $.48 for every $1.00 of gross profit that they generated. This makes them a less expensive salesperson (This concept should be easily understood by salespeople).

This is why rewards are greater and greater for the top producers; they are less and less expensive, even when they are paid much more. And even though it isn’t pleasant, this is why salespeople who don’t, can’t, or won’t produce tend to find their way out of sales organizations.

Economic Adulthood

It is important for salespeople (and everyone else, I might add) to know what they really cost their firm. It’s important to know what kind of contribution you need to make to be of benefit to the firm, and what kind of contribution you will need to make not to be a drag on the firm.

Too many people not producing and there is no firm.

To some this plain and frank talk seems harsh. It isn’t meant to be. If you reverse the order of things, your view quickly changes.

If you decided to go out on your own and open your own business, you would be responsible for paying your own way. There more you earn working for yourself, the more you have to bring in so that you can take it out of the business—and you still have pay for everything else it requires to run the business.

Were your business to grow large enough that you needed a sales force, the calculation that you would use to decide whether or not the salespeople you hired were performing well economically would look very much like the calculations above.

This is economic adulthood. It’s understanding that you have to pay your own way and make a positive financial contribution to the organization for which you work.

Questions

Can you tell the difference between an expensive salesperson and an inexpensive salesperson by their salary?

How does your company determine the value that you create for the firm?

Is sales treated differently than the rest of the organization when it comes to paying their own way?

How do you know you are paying your own way?

If you were a business owner, how would you determine the real cost of the salespeople that you employed? Is it any different than you expect to be treated?


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Comments

comments

  • http://www.brucesallan.com Bruce Sallan

    Anthony, I don’t wanna grow up!

    I’ve been a “salesman” my whole life. I’ve often described my former career in showbiz as no different than Willy Lohman, except I sold T.V. ideas. 

    Sales is sales. 

    I still don’t want to grow up?! Do I have to?

    • http://www.thesalesblog.com S. Anthony Iannarino

      I told my eleven year old daughters that inside my mind, I am still a seventeen year-old rock star. Precocious as she is, she said: “So Dad, what you are saying is that you are 17, but with 26 years experience?” She captured me perfectly! 

      Not only do you not have to, you shouldn’t grow up! Why not keep the playful, curious, resourceful, can-do childlike spirit? 

    • http://www.thesalesblog.com S. Anthony Iannarino

      I told my eleven year old daughters that inside my mind, I am still a seventeen year-old rock star. Precocious as she is, she said: “So Dad, what you are saying is that you are 17, but with 26 years experience?” She captured me perfectly! 

      Not only do you not have to, you shouldn’t grow up! Why not keep the playful, curious, resourceful, can-do childlike spirit? 

  • http://www.brucesallan.com Bruce Sallan

    Anthony, I don’t wanna grow up!

    I’ve been a “salesman” my whole life. I’ve often described my former career in showbiz as no different than Willy Lohman, except I sold T.V. ideas. 

    Sales is sales. 

    I still don’t want to grow up?! Do I have to?

  • Robert

    The question this article begs is Do you feel a responsibility to your company to produce effectively, or don’t you care? Are you there for the company, as much as you expect them to be there for you? Do you drive your business life up a two-way avenue, or down a one-way street? I always taught my children to give more than was expected to the people they worked for; adopt that attitude and great things will happen!

    • http://www.thesalesblog.com S. Anthony Iannarino

      The money quote for me Robert is this: Are you there for the company as much as you expect them to be there for you? The contract does indeed run both ways, and we need always remember that, regardless of which side of the contract we are on. 

    • http://www.thesalesblog.com S. Anthony Iannarino

      The money quote for me Robert is this: Are you there for the company as much as you expect them to be there for you? The contract does indeed run both ways, and we need always remember that, regardless of which side of the contract we are on. 

  • Robert

    The question this article begs is Do you feel a responsibility to your company to produce effectively, or don’t you care? Are you there for the company, as much as you expect them to be there for you? Do you drive your business life up a two-way avenue, or down a one-way street? I always taught my children to give more than was expected to the people they worked for; adopt that attitude and great things will happen!



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