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Salesman Pay Survey
Today it appears the industry average for salesmen who work for companies that “discount” their leases ( sell their lease contracts to others ) is approximately 50% of the profit. This is the present value of the lease contract, less funders discount charges. Many are paid a percentage of the override is fees charged, such as for documentation, site inspections, etc. Some provide other expenses, such as health benefits, travel, but that is not common. A few will pay up to 60% over a “quota.” One company did report paying 30%, but all expenses, health, medical, and when the residual was received, 30% of the residual, if the salesperson was still working for the company. ( This company is no longer in business .) Another paid 45%, and when the quota was exceeded, 55%. Volume was basically $10,000 to $20,000 in gross profits per month ( less processing fees ), meaning the salesmen made anywhere from $60,000 to $120,000 a year, averaging $80,000 per year. As anywhere, 20% of the salesmen made in excess of $120,000 per year, always exceeding quota. All were paid a draw against the commission in either by-monthly or monthly installments with charge backs against quota not met; often implied. Most were not given “house accounts”, but relied on their production of signed leases. The industry average for salesmen who work for companies who act as lessors, not selling or discounting their lease contracts, is more complex to state due to the various volume requirements for salesman. The main difference is “rate” versus “volume.” Lessor salesmen generally have accounts that the lessor services and remuneration is not on the difference between the rate of the lease, but primarily on the volume of transactions. Most salesmen here earn a base salary versus a draw. They are paid in excess of making their quota, or an additional percentage based on volume. Where minimum volume was $6 million, .0075 to .008 was common, or $45,000 per year. A report of .02 on volume over $200,000 was stated, meaning the quota was $2.4 million a year in sales for the base salary. One salesman reported making $50,000. plus.0025% of volume. He was hoping to make $100,000, meaning his goal was $20 million a year. It appears the average lessor salesman must produce $10 million a year. This figure, of course, is based on the market. Larger ticket or smaller tickets have a different ratio. To sum up the remuneration schedule to satisfy all requirements would take many, many more pages than this report. Again, this report is from our readers. It was also reported that transaction the lessor did not carry, probably for credit reasons, were either brokered by the company, giving a split of 30% to 50%, or as the circumstance with many, some approved by the company, such as practiced formerly by Sierra Cities, the salesmen could send to another source and received the total commission. It was not reported if this is common wide in the industry for lessors. In the 1970's, most leasing companies had salesmen who handled “house” accounts, this changed in the 1980's with the growth of brokers who worked solely for a “commission.” The 1990's saw the growth of “super brokers,” who funneled other brokers transactions for a commission. In addition, many funders were in essence super brokers, discounting transactions for the present value, often including the residual in the discount or pledge of the contract. Discount Response: From your survey it appears that we may be giving the shop away. We have a very simple commission only program. As a small to mid ticket lessor broker/discounter we pay 50% of the gross fee on the transaction. Higher amounts up to 60% are paid to consistent producers, We pay every Friday for deals that fund that week. We provide complete office and back room processing and pay for all internal costs such as D&B, CBR, rent, phone, overnight etc.. Salesman pay for all external costs such as entertainment and travel. We share in all promotional and trade show expenses. We will work with established, proven producers for a few months should a draw be necessary and we are always interested in finding new talent. Len Sperl, Onyx Capital Corp, Pittsburgh Pa. occ@sgi.net +++\\ Here in Minneapolis at NFG our sales reps earn 50% of GP on all transactions. We provide office, phone, internet, marketing and trade show reimbursement. We have a credit, documentation and funding staff to handle most of the non-selling processes. In addition we do a draw on future commissions if a rep is new. Our monthly bonus plan is $240 over $7500 (which is the reps 1/2) and $600 over $10,000 . Quarterly bonus is $720 over $22,500 and $1800 over $30,000. If a rep hits $100,000 annually then the company provides a $600 per month car reimbursement for the entire next year. We feel we have an aggressive compensation package because we want all of our people to succeed. We are nothing without our people who got us here. Oh yeah we also have a condo in Vail available to all our staff and reps to use at no cost. We are currently attempting to create a way to pass ownership to super stars as well, but have not finalized it as of yet. Will Abbott ++++ We pay our sales reps 50% of the GP after inspections, UCC's and routine office costs. We also pay for marketing and promotion items, business cards, brochures, handouts, mailings, etc, etc. The reps responsibility is to bring in the business and that is it. I do not require a monthly volume, but do ask that they stay in contact, preferably in person, with any customer or vendor once a month at least. I price, doc, close and fund the deals. All they do is make the contact. Any deal originated or referred by that salesperson's vendor or customer is theirs even if they haven't talked with them about the specific deal. Average annual compensation is usually 50 to 65K, but the opportunity is unlimited. We are presently looking for reps in northern New Jersey and western NY and eastern PA. 888-583-0400 + + + Here we make no salary, 45% of the gross margin on $1.00 residual deals, and 55% of the GM on the deals that we retain the FMV or 10% residual. We make 100% of the doc fee over what our sources charge and a draw is available on a case by case basis. ++++ I pay my in-house sales people as follows: Base Salary of 30K per year. this covers the first $5,000 in GP. I allocate 50% of any deal the generate themselves and 10% of the GP on any house deal that I assign to them to help them cover the first $5,000 in GP. On the second 5,000 in GP the sales rep earns 25% and 40 % on any GP generated after that. A rep working for me can justify their existence at about $800K per year in volume. They will make $45-50K at $100K per month in volume and about $75K at $150K per month in volume. +++ We get 35% of the first $10,000 per month in gross that we bring into the company. We get 45% above $10,000 and 50% above $18,000 per month. We split document fees over the amount required in the approval. It is all commission, no guarantee. +++ We compensated salespeople with a 50% split of the gross commission due on the leasing transaction. The salespeople generally had use of our office space, and we paid for special promotions. In addition, we provided an auto allowance of $300 per month, and a telephone allowance of $150 per month. We found it necessary, in virtually all cases, to provide the salespeople with a draw against future earned commissions. We found that even our most experienced salespeople did not break-even on this arrangement until they were employed with us at least three years. The most generous compensation program I have first-hand knowledge of provides the leasing salespeople with 65% of the gross transaction commission. This company, a longtime, successful leasing broker, also provides office space, use of telephone, and the payment of advertising promotions. In fairness to all leasing salespeople, their compensation potential depends as much on their company's access to capital, and flexible financing plans, as it does on their individual sales ability and work ethic. In our case, at just the time our salespeople began to realize their individual potential, their ability to grow their earnings was drastically curtailed by our loss of bank funding. My only advice to your inquirer is: carefully evaluate the company you represent or will represent. Your ability to cultivate vendor and lessee relationships depends to a great degree on your company's ability to deliver on its credit program and funding promises. Unfortunately, in today's economic and leasing environment, the only thing you can count on is uncertainty. Steve Chriest Working for a tech company, as the Leasing Manager in a captive scenario I find am in the a middle of the road in you compensation survey. I am paid a base salary of 45K, .0075 of volume on deals until I hit 50% of a 6MM quota. Over 50%, I am bumped to .1025 on volume. I also receive 33% of GP on fee income from transactions. Volume Commissions paid out monthly, and Fee commission paid out at the end of each quarter (the bonus incentive). +++ I work for a leasing sub. of a large foreign bank. Mostly small ticket. Bases are in the 30's-40's depending on experience. We get .008 of volume with a kicker on spreads that exceed 50 over. Quotas are $6mm-10mm depending on territory. ++++ $50K base ++++ As a sales rep, with 4 years experience I make a base salary of $48k with a chance to make commission once I make more money for the company than it takes to keep my seat, i.e. $4000 per month. It seemed to be online with the Advanta commission plan but unless you really generate volume you cannot realize commission. ++++ We pay 2% of equipment volume in compensation. Generally there is a base of $48K and the 2% commish is paid for volume over $200K. They also earn 25% of the fee of any brokered deal they bring in. The 25% split of broker income is independent of our funded equipment volume We pay monthly though will probably shift to quarterly. +++ Around here, be it small ticket or big ticket, I believe all the lease origination personnel have had a base salary and then a bonus once a certain minimum volume was done on a monthly (for the small ticket group) or annual (for the large ticket group) basis. Our most experienced and senior large ticket salesperson makes well into the 6 figure range I've heard but they consistently book volume in the tens of millions each year. I think all our large ticket group that have been here two or more years each make over $100,000 per year between base and bonus. Our small ticket people have had the potential to make six figures but it has always been heavily volume dependent. There are several different bases, based on whether or not they hit their bogey for the year or month. Bonus is only paid once minimum target volume is reached. If someone is not hitting their target within a year around here they usually let them go. *** we are still open to collecting comments as we are relaying on our readers for information and have no axe to grind. Comments may be “on” or “off the record.” To those who have responded, we have held your comments “off the record” as requested, or quoted you, giving you the opportunity to plug you compensation plan. editor ---------------------------------------------- Since the last survey results in October, 2001, not many participated, so in order to supplement the response we did receive, Leasing News asked several leaders in the industry how they would respond to a question received from a reader about going to work for a leasing company. Responses were listed in chronological order, first received: “My name is I am currently an outside sales rep with a fortune 100 company selling electronic payment solutions (doing well but want to move up into the six figure range). I have been offered a job with 888888 in SLC as an inside sales rep. I found your site by searching Yahoo for the company and the content is very informative. “This is quite a jump. From a Fortune 100 company selling electronic payment systems to a small company selling small ticket equipment leases? Are you sure you are ready for this transition(less resources, less name recognition, etc.)? “ I am new to the leasing business (although I do sell small equipment leases in my current position), and need to make a critical career decision here. I am hoping that you could help shed some light on the following: 1. Is ******* an ethical, stable company in good standing as far as you know? I know there has been some turmoil in their past. I can t comment on this as I do not know much about ***** PB I think Pats response is as good as you can do without getting into any specifics about ***** LB Are Pro-rata Billing, Interim Rent, Evergreen Clauses, Blind Discounts, and High Interest Rates, unethical? Several debt sources in the past used to believe so. Most of those same lenders that have stayed in business for the past three years and have adopted such revenue enhancers would not agree. I always subscribe,” What's good for GE is good for me!” JR I don't know enough about the company or the principals to comment. DR Past is past... I will not make a comment but I would suggest speaking with some references ... clients, sales people... I would do this on my own... a list from the company could be biased. It is easy enough to research, identify and ask innocuous questions that will get the information. FS 2. Are the market conditions/demand for middle market brokered equipment leases (********t) stabilizing, or are they still soft from the economic downturn? I would characterize the market as still soft but stabilized with many leading indicators pointing to an uptrend. PB Pat did a good job of responding. LB Although interest rates remain low, the supply of money chasing quality credits is limited. Ever since CapitalWerks formed its Venture Leasing division, we have succeeded with highly structured transactions passed on by most traditional lenders. We have not seen a shortage in these types of deals. Good news is we have placed over 35 Million in this division alone in 2003. JR We run a hybrid shop; we do some repeat business with an established existing customer base but our main focus is to act as a high-risk funding source to a handful of intermediaries. Business couldn't be better ! Well, it could but first we need a couple more quality credit analysts. We hear competition is out there for deals and margins on” A” perceived credits are tight. “B” paper is a big concern for intermediaries. Buy windows keep closing (CIT just recently) and a few times a month we are asked if we would fund “B” paper at a 9 ½% to 11% buy rate. From what we see the banks have migrated to quality and raised the credit bar. That means a company with some hair on its credit is a bit more challenging to find a funder for. We have heard from vendors interest is increasing and soon that should translate to activity; but time will tell. DR A soft market is just another excuse to not work harder... The "New Guys" with a strong work ethic who are to "dumb" to know any better usually seem to have "beginner's luck" ... isn't that interesting. Yes it is a soft market... but it is a great time to learn the business... interest rates will rise again and learning this business in the "hard times" will groom you to excel in the "good times" to come. FS 3. ********* is offering me a $36k base, 50% company paid medical/dental etc., and 10% on gross margin (including GM on FMV buyout residuals), with a $10k bonus @ $500k in GM and a $15k bonus @ $1mm. Is this a competitive compensation package? I read the sales pay survey and had a hard time determining if it is. I have been told that their average rep makes $100k first year, $150k second year... I would say that this is competitive package for a vendor based sales rep that has sales experience but is new to equipment leasing. I find it hard to believe that a sales rep that is new to equipment leasing could make $100k in the first year with this package, but I have been wrong before. However, with the right resources, and time; I believe that a six figure income with this package is reasonable. PB What kind of marketing support, etc., will *****e give him to basically start from scratch? The base salary s nice, but how long will they guaranty that if he doesn't produce? What kind of quotas must he generate, at a minimum, to protect his base? Obviously, straight commission will always offer a bigger upside. BL I would say that this is competitive package for a vendor based sales rep that has sales experience but is new to equipment leasing. I find it hard to believe that a sales rep that is new to equipment leasing could make $100k in the first year with this package, but I have been wrong before. However, with the right resources, and time; I believe that a six figure income with this package is reasonable. JR Unless my 12C has run out of juice, at $500,000 gross fee the rep earns $36 base, $50 commission and a $10 bonus; that's $96,000 for generating $500,000 in fee. In the mid 1980's when I started in sales our comp program was a draw at 30%. We would have earned $150,000 and I recall when 30% was at the low end. A draw or salary isn't much different; if you don't make your numbers the employer can't recover the money and you won't be there long. DR Is the salary a true salary or a draw against commission??? That would be the issue. There are much better packages, 40-even 70% from 3rd party lenders, who would pay you a draw, but they want experience and vendor relationships. Can you do a 500k in gross margin in today's market though? I doubt that someone new will hold that kind of margin the first year in this economy. Reality is that you will make somewhere around 50-60k your first year if you work really hard, with the market the way it is. AND HEY... that's not bad if they are training you too!!! CAUTION: check out what the medical costs will be on the benefit package before you take the job... it can be a lot more than you think if you have any medical history... this is a big one. FS 4. Any other issues or 'red flags' that you know of regarding the company or market space, or advice you would give me in making my career decision? I would want to know what current vendor programs ***** has, what type of volume they are doing with these programs, and what the unique selling propositions they provide for these vendors. I would also be asking questions about **** s ability to process the leases. Does ***** have its own funds? If not, who do they sell their paper to? Additionally, how fast are credits turned around and how fast are fundings turned around? How do these figures compare with ******s competitors in the targeted space and how do they compare to some of the best in the vendor leasing arena (GE, DLL, Marlin, GreatAmerican, AMEX, etc). Finally, will you be expected to process deals or simply bring in the vendors? If you are looking to make six figures then it is going to be much easier if you have key strategic resources at your disposable. PB Are there any boundaries surrounding the numbers hes being offered right now? What are the average transaction sizes and what are the average grosses on their leases? Who funds their deals? Are they a direct lender, a super broker, broker, etc.? And, how do they get paid? Are they discounting or brokering? How do they calculate their commissions? Depending on what answers you get from these questions could lead to asking a bunch more. BL In the upper middle ticket business he needs to be creative and open minded. ******* will provide the training to be successful as will anyone with middle market experience that is still out there. This is not a business for someone who lacks problem solving skills. The most difficult part will be to manage the client'ss expectations with the products available in the marketplace. Sometimes this takes mo Guns" at every leasing company know what I'm talking about. JR Where do you want to go? If you know the leasing business find out who the employer has for funding sources and how long the relationships have been in place. If the broker doesn't last long with stable sources there must be a reason why. A far older rep once warned me if you walk with the lame you'll develop a limp. Work for someone with a questionable reputation and not only can it rub off on you but you could find yourself wed to poor business practices that could make you less desirable to your next employer. DR Can you think out of the box? Can you establish a Consultive relationship with someone and come up with solutions to problems that they didn't know they had? If you can relationally save someone money in this economic environment, and help sales people to sell more equipment you will be successful. You have to commit to learning everything there is to know in your spare time, while being available for your customers 24-7... UNDER PROMISE and OVER PREFORM... this is the best way to manage customer expectations and you will only be able to this if you understand the process and the deal flow completely... other than that it is a "piece of cake" good luck to you (I would suggest that you commit to 10 hours a day minimum... the harder you work, the luckier you get) FS ----------------------- In prefacing his remarks, Jim Raeder commented on the person who originally asked the questions about whether this was the time to get into equipment leasing sales: “ This is quite a jump. From a Fortune 100 company selling electronic payment systems to a small company selling small ticket equipment leases? Are you sure you are ready for this transition(less resources, less name recognition, etc.)? “Good company to join and learn the basics. They are primarily focused on larger transactions with unique structures. The sales cycle of these transactions are long and competitive. He should make sure he give ample time to hit a “Home Run” because there will be a few “Strike Outs” on the way. Once he's learned the business I'd be glad to discuss with him additional avenues of increasing income through alternative finance products. “To sum this up:. He's making the right move at the right time if he can commit more then 8 hours a day.” ------------------------- For every $1 of revenue that's generated in "fee" income, we average, this year, $0.44 (43.6%) in sales commissions and $0.25 (24.8%) in expenses to "facilitate" that business. That leaves $0.32 (31.6%) of every dollar in net income. We take no salaries, so that's what is split amongst the partners (the "facilitators"; the "risk-takers") for take-home pay. Commission structure . . . Our general compensation plan for salespersons is 50% of the gross profit commissions on a deal that they bring to the table and 35% on a "house" deal. We pay for virtually everything; telephone, marketing, trade-shows, travel, computer, etc., etc. While we have paid for health insurance in the past, we do not currently do so (times are tough!). Only very extra-ordinary, deal-specific, expenses are deducted from the gross commissions for purposes of calculating a salespersons commission on a deal. James Brustad --- Equipment Leasing association 2003 Industry Compensation Survey Regarding your Salesman Pay Survey, the ELA has just completed its 2003 Industry Compensation Survey, which includes several sales positions. The survey is available at elaonline.com for a fee. Ralph Petta “This survey provides an analysis of prevailing wage and compensation data. It reports on salaries, benefits and incentive plans offered by member companies and covers 33 leasing positions, identified by detailed position descriptions. “Member companies who participated in the survey paid $2,600.00 to cover the cost of the survey. Survey is free to companies who participated and $3,500 for member non-participants & $4,500 to non-members. “Member Price: $3500 |
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