Good or Bad? 40% Commission

Is 40% a fair commission split for roofing sales?
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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.

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 in the comments section below or go back and read this article.

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

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 about commission structures, let’s do it in the comments section below.

About The Author

Mike Coday

Mike Coday is a retired youth pastor turned serial entrepreneur, roofing marketing consultant, author, speaker, sales trainer, and sentimental family man.

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2 Comments

  • Isaac Garvin

    Reply Reply May 1, 2016

    Do you only work with stormers? Some of your comments are right on. However I own a well marketed retail metal roofing company and want to know your thoughts on my techniques to compensating sales. There is no split. We have standard retail pricing that has provisions to charge for different conditions like chimneys, skylights, roof pitch, etc. Their commission rate is based off what they sale the job at in comparison to our retail price. Commissions range from 5% to 13% with 9% being the commission for a 100% retail deal. They get paid once our field tech verifies the job measurements and conditions. I believe the waiting 3 months to get paid or waiting on job close outs to figure commissions leaves to many quality reps suspect of their companies. Sell it and know your $$$$ on your way home to the wife seems to keep my people happy.

    What are your thoughts?

    • Mike Coday

      Reply Reply May 9, 2016

      Isaac,

      I believe you have a solid compensation plan for your salespeople.

      Obviously, your business plan is structured around retail sales. You are going to have different a overhead, along with fixed & variable costs, in your business plan.

      Your point about salespeople waiting to get paid commissions is well taken. I agree with you — the sooner a salesperson can get paid, the better!

      Mike

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