If your landscape company has decided to go with the salary plus commission pay structure, there are still a lot of variables to decide for your team.
Some considerations include when commissions are paid out, how the commission is handled if a project goes over budget and if any additional bonuses should be awarded. How you choose to handle these elements can greatly impact your sales team’s morale.
Commission and Morale
For the lawn care and landscape companies that offer salary plus commission, they say it often attracts the right type of talent who are motivated to sell more.
“For my people, they love it and would not want a straight salary,” says Chris Vedrani, president of Planted Earth Landscaping, based in Westminster, Maryland. “Commission gives them the opportunity to make more.”
Ivan Katz, owner of Great Lakes Landscape Design, based in Oak Park, Michigan, notes that this will depend on the individual as some prefer a higher base salary versus commission. They have one salesperson with a higher base salary and a minimum sales figure they must reach before commissions are paid. Jonathan Lucci, general manager for Weed Man of Winchester and the Shenandoah Valley in Virginia, adds that when a large part of an employee’s income is commission based, they’re encouraged to make more sales, which brings in more business for the company.
“Because we pay so heavily on commission, it adds that financial incentive and motivation to people and rewards them when they’re doing well, which is the key to keeping and retaining top talent,” Lucci says. “If they don’t feel like they’re being rewarded for their performance, then I think they’re going to go elsewhere.”
As for when commission is paid out will depend on your company’s cash flow and the nature of the services you provide. Lucci says if a person makes a sale, that commission goes on that pay period’s paycheck.
Krisjan Berzins, founder of Kingstowne Lawn & Landscape, based in Alexandria, Virginia, says their sales team is paid immediately for their commissions rather than waiting weeks or months, depending on the type of job they sold.
“People tend to like that,” Berzins says. “It’s instant gratification as opposed to getting little pieces or little breadcrumbs along the way.”
Blair Walton, owner and CEO of Element Outdoor Living, based in Wilmington, North Carolina, says at his company, the commission is paid out monthly.
“There is a strong focus on meeting sales goals and with a monthly payout on commission, the design/sales team can get motivated to get the sale closed at the end of the month to hit their sales goal and see it in their next commission check,” Walton says.
One major consideration is how to handle when a project goes over budget and how this impacts a salesperson’s commission. Berzins says their commission is not based on profitability. He chooses to look at it as you win some and you lose some. There may be cases where a project wasn’t priced quite where it needs to be.
“You could say, ‘Wow, you guys are paying all this commission on that. You should be taking some back,’” Berzins says. “But that’s a very negative interaction between us and the designer or the account manager and that can really crush morale and really make somebody feel pretty low.”
Conversely, if a sale was a home run, Kingstowne’s salespeople don’t get paid extra. He says this is the fairest thing to do as opposed to constantly penalizing someone for not having enough man hours on the job or the crew not being as efficient as you expect them to be.
“You couldn’t even control that, and then, oh, we’re going take that out of your pocket?” Berzins says. “That’s not right.”
Walton says their commission is based on gross profit sold, but they’re looking at converting a portion of the final payout being tied to the actual gross profit. Katz says they pay their commissions on the gross margin of the project.
“All proposals are done through LMN and reviewed by our controller for accuracy, profit margin and throughput,” Katz says. “In addition, I review with salespeople during meetings to check for thoroughness and the perspective of construction and potential issues to ensure they have considered different scenarios. We have established production rates using time studies and job costing, gain feedback from our field workers and work together to tweak those to ensure we provide the proper hours. The salesperson’s job is to determine the materials needed using established formulas and the labor hours using our templates for production. Our field workers are given an incentive to bring work in under the hours. While we have jobs that go over budget by paying on the gross margin, we are able to reduce the commission accordingly.”
Vedrani says if a project goes over budget, the second half of the commission is reduced, as they pay 70 percent of the commission when the job sells and the other 30 percent when the job is completed.
Whether your sales team can earn bonuses on top of their salary and commission is another choice you have to decide. Katz says they conducted their first profit share in 2022, and they included their sales team. Berzins says they have a year-end bonus based on corporate profitability that varies from year to year. How much each employee earns in the bonus depends on their tenure as well as other factors.
Setting Sales Goals
One aspect that is tricky with sales employees is determining what to pay new hires and setting up their sales goals. Walton says their new salespeople spend the first 90 days training, shadowing and taking in new clients. He doesn’t expect sales right away as their sales cycle can be four to eight weeks for a high-end custom residential project.
“When we are setting sales goals for our team, we factor in company and individual data on the number of leads incoming, closing rate, and average dollar sale, which can help us determine how many and what type of appointments they will need to go on to reach their goals,” Walton says.
Lucci says he doesn’t set sales goals for his new hires immediately.
“For the first few days, I don’t care if they get a sale,” Lucci says. “What I care about is how they sound and if I think they’re doing the right things because if they’re doing the right things the right way, the results will always follow.”
Katz says they back into the sales goal number using the structure of the individual’s compensation.
Berzins says they tend to undersell a salesperson’s potential salary when recruiting so that individual isn’t focused on the high end of the pay scale and discouraged when they don’t reach it during their first year. Vedrani says they will discuss sales goals during the hiring process and will discuss this prior to setting the budget for the upcoming year as well.