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Good or Bad? 40% Commission

By Mike Coday •  Updated: 10/21/23 •  9 min read

Commission Rates

This topic about sales commission rates comes up all the time…

Specifically, salespeople want to know what a good commission percentage is for roofing sales?

As you know, there are primarily two schools of thought when it comes to sales commissions. The first believes in paying a flat percentage of the total contract. The second believes in splitting the total profit with the salesperson at a certain percentage. There are good and bad aspects to both.

Quick Summary

  1. Two Commission Models: In roofing sales, commissions are typically based on either a flat percentage of the total contract or a percentage of the profit after expenses. Each method has its advantages and disadvantages.
  2. Common Concerns: Salespeople often express concerns about the transparency and fairness of their commissions, especially when they receive checks without a detailed breakdown or when payments are delayed.
  3. Standard Commission Rates: A 40% commission is considered decent in the industry, though it’s not the highest. Some companies may start salespeople at lower rates, like 25%, but ideally, these lower rates are balanced by strong company support in training, leads, or other resources.
  4. Importance of Support: Effective salespeople focus on selling, often relying on their company for support with leads, production, and paperwork. If a salesperson is handling all aspects of the job, they might consider seeking another company that offers better support or even starting their own business.
  5. Transparency in Commissions: Salespeople should receive a breakdown of job costs to understand their commissions better. Knowing the specifics of labor, material, and overhead costs helps them estimate their earnings and identify any discrepancies in their payments.
  6. Delayed Payments: Waiting for the final payment from insurance is standard, but a delay of 2 to 3 months is excessive. Salespeople should be proactive in following up on payments, and companies should assist in expediting this process.
  7. Active Role in Payment Collection: Salespeople can expedite their commission payments by actively engaging in the collection process, such as following up with customers, mortgage companies, and insurance adjusters. This involvement helps move the final check along faster.
  8. Timely Commission Payments: Once the final check is collected, salespeople deserve to be paid promptly. Consistent delays in payment after collection are a red flag, indicating possible cash flow issues within the company or other organizational inefficiencies.
  9. Assessing Overall Compensation: While a 40% commission is decent, salespeople should consider the entire compensation package, including the level of support they receive. Those doing more work than they’re compensated for should consider their options.
  10. Grass Isn’t Always Greener: Before considering a move to another company for higher commissions, salespeople should assess their current situation holistically. The quality of support, resources, and job satisfaction can be just as important as the commission percentage. Changing companies doesn’t guarantee better conditions, as each company’s support level and operational efficiency can significantly impact effective earnings.

How Much Commission Do Roof Salesman Make?

I’m not going to focus on what’s good or bad about either commission model right now. If you want to talk about it, we can have that conversation or go back and read this article about average roofing sales commission rates.

What I want to do here is share a recent email from a roofing salesperson about the concerns they have with their current commissions.

Commission Check With No Breakdown

Hey Mike,

I’ve been in roofing sales for almost 4 years. I am currently with the same company.

There’s a couple issues I have…

I’m supposed to be making 40% commission. I get my check with no breakdown–a lot of times it seems less than the 40%. Also, I have to wait for final payment from insurance–that takes up to 2 (almost 3) months before I see a check.

Is that standard procedure? I’ve never worked for another roofing company…

Thanks Mike

40% Is Decent

First of all, I want to start out by saying that 40% is a decent commission split.

No, it’s not the greatest–probably below average–but it is decent. Some roofing companies pay their salespeople much less. I’ve even heard of one national restoration company that starts all of their salespeople out at 25% commission. To be fair, they might invest quite a bit in training and draws. In my opinion, if you’re going to get paid anything less than 40%, you better be getting some seriously good support from your roofing company.

Since this particular salesperson has been with the same company for almost 4 years, their support must be pretty good. The biggest support a good salesperson can get is roofing leads. The other big support items are production and paperwork.

Selling is vitally important because nothing else in the company happens until somebody sells something. Salespeople should be good at selling, but sometimes they’re not so good at the other aspects of roofing. Having a good support team working behind you is important. However, if you find that you’re doing all of the work, maybe it’s time for you to start thinking about working with another roofing company or working for yourself.

No Breakdown

I’m a big believer in working on a profit split.

The way a commission check is figured on a profit split basis is by subtracting the total expenses of the job (e.g. Material, Labor, Overhead, etc.) from the total collected from the customer and then multiplying the difference by your percentage split (e.g. 40%).

Obviously, you should know how much you collected from your customer–at least you should know!

If you aren’t the one picking up all of the checks, you’ll never know exactly how much has been collected. That’s fine when you work with an honest office. However, it doesn’t sound like this salesperson fully trusts their office.

The other side of the equation is the total expenses of the job.

If you’re just starting out in the business of roofing sales, I can understand you not having a good grip on what the total expenses for a job might be. However, if you’ve been in this business for more than a few months, much less a few years, you should have a good idea of what your job expenses will be before you sign up your next customer. You should know how much you pay your labor per square, for steep, second story, second layers, etc. Finally, you should understand how much overhead you pay.

If you have a good idea of what your labor, material, and overhead costs are in advance of selling a job, and you know how much the contract price is, you should have a good idea of how much money you’ll make before you sell the job.

Don’t get me wrong, you should get a breakdown of your job costs–at least a high-level overview for you to review.

If your costs are out of line with your pre-sale commission estimate, you can dig a little deeper and find out what went wrong. Did you have to order special material? Was the crew paid for steep? Extra material? Why was your commission different than your original estimate? Find out!

Waiting For Payment

Yes, waiting for payment is the general procedure for getting paid sales commissions.

Let me also say, if you’re waiting 2 or 3 months to get paid your back-end commissions, you’re waiting too long. There’s a breakdown somewhere.

If I know I’m not getting paid until the last check is deposited, I’m going to do whatever I can to get that last check in the bank. Sometimes that means you have to pick up the phone and call your customers, follow-up with a mortgage company, leave several messages for the adjuster, call the insurance claims desk and ask about payment, send a fax, send a few emails…

…in other words, do whatever you have to do to get that last check moving your way!

Obviously, a good sales support office will help you (should help you) get those checks collected. Hey, without collecting those checks, it’s harder for them to get a paycheck, too. However, you can’t wait for the back office to collect your checks for you. You have to take things into your own hands and move those checks along.

In my opinion, with a little bit of diligence and good notes, you should be able to get those last checks collected within a few weeks of completion. Even if you hit a snag with the financing, mortgage, or insurance company, the vast majority of checks (90%+) shouldn’t take longer than 5-6 weeks to collect.

With that said, if you’ve collected the last check, you should be getting paid soon after. If you’re collecting checks and it’s still taking the roofing company a few months to get you paid, that’s way too long. You deserve to be paid within a reasonable time of collecting the final check–preferably by the end of the week or the following pay period.

Some jobs may take a little longer because of waiting on invoices, but if that’s the pattern of how you’re getting paid, that’s not good.

Money should move quickly. When it starts moving slow, you’ve got a problem.

Final Thoughts

If you’re making 40%, you’re doing okay.

Yes, you could be doing better but the grass isn’t always greener on the other side. Most of the time, the grass is about as green as you take care of it.

If you’re getting support from your office, you’re doing okay. Paperwork, production, and especially leads are all important to support a good salesperson. However, if you’re the one doing all the work (e.g. Paperwork, Production, Lead Generation, etc.), you’re not doing okay.

Peace,
Mike

P.S. If you want to talk average roofing sales commission, subscribe to the 101 Sales Tips newsletter and send me an email.

Mike Coday

Mike started selling roofs in '95 while working as a youth pastor at a small church in North Texas. A decade later he transitioned to speaking at industry conferences and training outside sales teams. Today, he works exclusively as the premier consultant to roofing company owners who are driven for growth.