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Hi guys, I was reading some articles about how to pay proper commission if I hire sales associates.

A few of the articles argue I should always base my commission on profits. However, if I pay according to profits, the sales associate will know how much my products cost and how much I am making so I thought it would make more sense to pay commission according to gross.

The problem that comes with awarding commission according to gross is, since you need to account for how much profit you are making, the commission percentage will sound very low. Whereas if I am giving commission based on profits, I can give a much "higher" commission percentage.

Any thoughts? Also, what is standard in the retail industry for wholesale commission?

Thanks
 

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The problem that comes with awarding commission according to gross is, since you need to account for how much profit you are making, the commission percentage will sound very low. Whereas if I am giving commission based on profits, I can give a much "higher" commission percentage.
If I'm understanding what you're saying, you would rather pay 20% of profit rather than 10% of gross simply because the percentage is higher, even though the actual dollar amount may be same. I think experienced sales reps will be savvy enough to know that it doesn't make a difference.

Any thoughts?
If a rep writes an order for $1000, they are going to want a percentage of that $1000. They don't want to deal with your variable production costs determining how much they make. Let's say an order includes royal blue t-shirts, but your source for them is low on inventory so you go to a secondary source which is a little more expensive. Cost goes up, profit goes down. You want the sales rep to accept a smaller paycheck because of that?

All reps I've dealt with have expected a percentage of gross sales.

what is standard in the retail industry for wholesale commission?
10-15% of gross sales.
 
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