Thursday, March 23, 2023

Sales Commissions for Life, and Beyond Life

 Recently I talked to a company advertising for fractional CFO/CEO. The business model is: introduce us to your business contacts, we’ll bring in the subject matter experts in 4-5 financial area, and you’ll get a sales commission based on the savings we generate for the new client. Not only will you continue to be paid a portion of the savings as long as the contract is in place, but they are payments that can be made to your estate.

I passed. As I’ve written before, I have a love/hate relationship with sales commissions. A person’s sales commissions can increase because the client’s business increased—without any effort or influence by the salesperson. They did nothing to earn the extra pay but they get it anyway. There is no correlation between the value they bring to the organization, the value they bring to the client and their pay. All they have to do is not cause the client to fire the product/service provider. So strike one on the advertising company is that when they should be paying a referral fee, they’re paying a commission. 

The company argues that nothing is paid unless savings are found and achieved for the client. Still doesn’t mean they should pay, nor should the person accept, perpetual commissions. If they weren’t paying these commissions, could they cut their take on the savings? Probably. Wouldn’t that help the clients to see more of the savings than 50%? Wouldn’t help their bottom line even more if they could retain 60% of the savings? 

Likewise, a lot of these savings could be achieved by internal staff reviewing A/P, credit card, freight, utility bills. Once you enlighten your tax accountant on several of the business credits—like R&D credits, which several of my companies took as we researched/designed new production processes to accomplish custom manufactured parts to customer specs—your tax accountant just automatically reviews those inputs annually after that.

If I signed up I wouldn’t be getting paid for my expertise, but just for my friendliness. I’d hate to have my friends and acquaintances be worried about who else I was going to ‘sic’ on them.

These are the biggest areas to help businesses either. Companies lose more money by not optimizing the one thing that attracts customers to them, instead of to their competitors. They also lose money by not building trust within the organization which can lead to alignment and engagement. These are not things that your competition is not paying attention to. You could really do well by gaining market share and improving your value proposition to the customers.

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