Typical Sales Commission for Manufacturing Business?

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November 19, 2024

by a searcher from United States Air Force Academy in Austin, TX, USA

I'm looking at a small manufacturing business in the agriculture sector. Annual revenue is about $2M and products are wholesaled to agricultural retailers. The owner works with a salesman who also sells other agricultural products and he pays this salesman 5% of total revenue. Is anybody familiar with incentive structure for salespeople? Is 5% common or are there other common structures (i.e. a base salary plus a certain percentage)? Thanks for your replies.

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Reply by a searcher
from Emory University in Tucson, AZ, USA
This can vary by industry but typically in wholesale to retail, non-employee sales reps earn 5% on net sales when dealing with major retailers in the channel. Most will structure so the commission is payable only after receipt of payment from the retailer.

There are variances where high volume consumables are being sold to a mass retailer like Walmart, Target, dollar stores, etc (may be slightly lower or higher, depending on what value add services the agency may be providing).

Commissions can also be 10-15% when the rep is servicing small chain and indies based on order size/types. Think gift, apparel, gourmet, toys, etc.
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Reply by a searcher
from Humber College in Toronto, ON, Canada
There are many ways to incentivize/compensate folks in sales, as others have mentioned, the structure has to be compelling enough to motivate the salesperson. Also as others have mentioned, margins matter. Commission on gross sales can be problematic depending on how much leeway (if any) you give your sales team to discount your product or service to make a sale. There is some evidence that sales staff on salary perform better than those on commission, saying that, some folks love the unlimited potential of commission... and then there's everything in between, salary + commission, or salary + bonuses based on targets, etc.
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