Identifying the costs associated with hiring a new sales professional
As the economy continues its recovery, we are seeing more dealers who want to take advantage of the opportunity to grow their sales departments. One of the most difficult parts of determining whether or not to add sales professionals is figuring out exactly how much the investment will cost.
Finding a Potential Hire
Hiring two sales professionals at once can help avoid a wasted investment if one should leave. It also gives each employee someone they can relate to and compete with. In the long term, training costs are reduced by hiring two professionals at once, but the initial costs will be higher.
There are many options for posting open job positions. Some options, such as Craigslist, are free, and inexpensive ads can be placed in local newspapers, but in my experience, the best candidates have come from websites such as CareerBuilder, Monster, ZipRecruiter or Indeed. These sites tend to attract higher-caliber candidates. Remember, these sales professionals will be walking into homes unsupervised, representing a dealership and product. There is too much at stake to hire an entry-level individual who may not have the integrity, work ethic or maturity to make this representation in a manner that promotes positive growth and reputation.
A minimum four-step interview process over eight to 10 hours per candidate should be completed. It is less risky and costly to identify concerns during the interview than during the first three months of employment. In my experience, too many companies will hire based on a “gut feeling” after only a brief interview period, only to regret the decision months down the road after damage has been done and money has been spent.
There always will be unanticipated costs associated with hiring a new team member, but below are most of the costs a dealer is likely to incur with a new sales professional.
Ad Costs: $800 to $1,000. The cost of this ad will remain the same whether you are hiring one or two professionals.
Test Kit: $450 to $600 per professional. A thorough test kit will allow sales professionals to test accurately and perform the appropriate sales demonstrations. Knowing how to do the demonstrations and when to conduct them is important.
Computer/Tablet: $750 to $1,500 per professional. The sales professional will need a tool to use both as a digital presentation book, as well as a customer relationship managemenr (CRM) workspace. The cost suggested includes the costs of the software that will need to be loaded onto the device, including virus protection, CRM, mapping and office suite. There also may be a recurring monthly cost of a data plan, but this may be part of the cell phone provided.
CRM Program: $35 per month per user. There are some free or inexpensive options for CRM programs, but a solid cloud-based program that allows for reporting, accountability and integration with existing databases is important. I recommend Salesforce or Zoho.
Cell Phone with Data Plan: $75 per month. I recommend against allowing a new sales professional to use their personal cell phone for business purposes. A dealer should encourage the sales professional to distribute a cell phone number so their customers can call about water treatment issues, but that phone number should belong to the dealer and should be able to be transferred from employee to employee. If a salesperson leaves for any reason, the dealer should be able to take that phone and respond appropriately to any inquiries. An alternative option is to use a virtual PBX system that forwards a call to any cell number. For many small businesses, this is a more affordable way of keeping phone number ownership.
Business Cards: $50. This is such a small occasional expense that I am surprised at how many companies avoid spending the money. They often are afraid the salesperson will not stick around and they will have wasted money on business cards. If you do not think they will be long-term employees, do not hire them.
Uniforms: $100. Many companies provide shirts for a sales professional. At the very least, a badge should be provided.
Bottled Water $1,500. If a sales professional is going to sell reverse osmosis (RO) systems, they will need to be able to demonstrate the difference between high total dissolved solids water and RO water in the home. Having private-labeled RO bottles is an excellent marketing tool for canvassing or generating business, but it also will provide a means to demonstrate quality water during a sales presentation.
Training Salary: $500 to $700 per week. This can vary with each individual company or employee, but I generally recommend a three- to six-month period of training base pay. This usually starts with $600 to $700 per week for the first six to eight weeks (with no commission opportunity) and drops to $400 to $500 per week (with a reduced commission opportunity) for an additional four to six weeks.
Car Allowance: Up to $500 per month. This cost is tied directly to performance. I recommend an allowance of $25 per primary unit car, which maxes out at $500. Once a sales professional consistently maximizes this benefit, I recommend providing a wrapped company vehicle. I do not recommend paying for a sales professional’s fuel.
Cost of Employment: 25% of income. While the exact dollar amount varies with each company, an industry rule of thumb says that there is an additional 25% cost over the employee’s wages. This includes insurance and taxes, as well as other benefits provided.
Modular Education Program (MEP) Certification: $400. The Water Quality Assn.’s MEP is an excellent training tool. The minimal cost will yield a level of knowledge and professionalism that will prove exponential in value. I recommend pursuing this after the employee has been with the company for at least 90 days.
Reaping the Return
Given these upfront costs, I recommend budgeting for approximately $15,000 per hire for the first three months. The cost will likely be less than this because you will not have to pay benefits during this time, and some items are optional or can be reduced in cost. There also can be unexpected costs associated with a new position, so I believe it is better to budget high. After the training period, the sales professional should produce a return on investment, but it often takes six to nine months to see a profit.
Costs will be different for each organization, and there can be differences of opinion about training and pay structure. This advice should give dealers an idea of where to begin.