I said give them 100 percent of the profit on the first sale. The company management’s response: “You’re insane!”
I have a client whose income curve was stagnant. It doesn’t matter what they sold. Pretend it’s your product or service. This company had a compensation program that paid the salespeople 10 percent of the profit. So, if the company made a $1,000 profit on a sale, the salesperson would get $100 and the company would get $900. I had them calculate:
• What the average new client is worth to them in dollars each time they buy • How many times that client will buy from them each year
• How many years the average client will be with them It turned out the first sale, on average, resulted in about a $200 profit for the company.
Of that, $20 went to the salesman or saleswoman, $180 to the company. On average, the client bought five times a year for three years. So basically, each time that company got a new client, they were receiving $3,000 in cumulative profits.
My solution: Instead of giving the salespeople 10 percent of the profit on a sale to a new, first-time client, give them 100 percent of the profit on the first sale. The company management’s response: “You’re insane!” I smiled pleasantly and went on to explain that as long as their salespeople maintain sales from existing clients at past levels or above, give them 100 percent of the profit on the first sale for every new client they bring in. They’ll be ten times more motivated to sell new clients. And every time they bring in a new client, the salesperson makes an additional $200, but the company makes an additional $2,800. The company implemented the plan and sales tripled in nine months.
Getting Everything You Can Out of All You've Got: 21 Ways You Can Out-Think, Out-Perform, and Out-Earn the Competition by Jay Abraham
“We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.
— Charles T. Munger”
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