Ross Ridout says it used to be that you set your pay structure based on what your competitors were doing, but with so many former rivals out of business, that rule of thumb has changed.
“We had one particular competitor that paid all their outside salesmen a salary,” he says. “That’s just about over with these days.”
Ridout welcomes the end of that era, because he believes it wasn’t as motivational as a commission-based system. That motivation takes many forms. For instance, Ridout Lumber will cut a sales rep’s pay if his or her customer doesn’t pay the bill on time. This encourages the sales rep to avoid making sales to companies that may have shaky finances as well as make the rep more likely to apply personal pressure on that customer to pay up.
Ridout Lumber’s commission-based system also factors in whether a sales person is provided with a vehicle and/or a phone as well as how often the commission is paid. In addition, it pays its sales reps on every product in the store that their customers buy. For example, if a rep brings in a customer to look at floor coverings, that salesperson may end up handing the customer over to the floor covering staff, but he or she will still get commission on the sale.
