It is amazing to me that the vast majority of dealerships continue to pay sales consultants on gross profits. Straight commissions comp plans no longer make sense. Don’t dealers who pay sales people on the gross realize that there is this little thing out there called the Internet, which gives virtually every customer almost perfect pricing information? The days of tomfoolery and trickery are long gone. Let me share with you the four reasons not to pay sales people on the gross:
1. You’re paying the most money for the easiest cars to sell; I pretty much sucked at economics, but I do know that there should be higher rewards for more difficult tasks…
2. Gross based pay plans are very hard to explain to anyone who has never sold cars. Let’s see, “you get 25% of the gross with a pack of $400 on the first 8 sales; on unit 9 it is retro to 35%…” Remember, if you can’t clearly explain a pay plan to your spouse, they won’t let you take the job.
3. In most stores, over half the deals are “mini’s”, which now range from $50-$150. When I know I might be spending 3-4 hours to get a mini commission I’m going to be less enthusiastic to push for a sale than when I’m on a vehicle that will yield some gross.
4. The goal of the traditional pay plan is to make as much money as possible from everyone you “meet and greet”. This is totally out of step with the values within our society.
Keys to a more modern sales compensation begin with an initial training salary. Depending on the market, it should be at least $2,000 per month for two months. Paying new people not to practice on your precious assets/customers until they are ready for the rotation is one of the smartest things you can do. Once our new sales consultant has the appropriate amount of training, compensate them as follows:
- A salary based on a rolling average of unit sales
- Flat fees per car ($150-$200)
- Monthly volume bonus (not retroactive)
- A variety of small $20 bonuses (accessories; finance contracts; service contracts; etc)
I’d be pleased to email you a worksheet that outlines our suggested pay plan. Simply click on the email address: email@example.com. Also, if you asked but didn’t receive my no-cost recruiting tips, let me know and I’ll include them as well.