Readers who LBM Journal’s Sales Compensation + Benefits survey received a complete copy of the results of this study, with analysis from The Farnsworth Group, including regional breakouts for many of the questions. It is available for purchase for $495 at LBMJournal.com/salescomp.
One of the most critical components of your success is an effective sales force. If you want to attract and retain the best sales talent in today’s market, it’s important to understand how your compensation and benefits package stacks up against the competition. To help you meet this challenge, this year’s Sales Compensation + Benefits Survey was conducted by The Farnsworth Group, and reworked from the ground-up with input from LBM Journal sales editor Rick Davis of Building Leaders, Inc.
The survey was distributed by email in December, 2018 and early January, 2019 to LBM Journal subscribers who’ve opted in to receive our email communications. The 250 readers who took the time to participate in the survey and share details about their company’s sales compensation and benefits packages will receive a copy of the full report and analysis at no charge. For others, it will be available to purchase for $495. Here are some of this survey’s most notable top-line results:
Construction supply: The opportunity industry
A look behind the numbers of the latest sales compensation survey reveals an incredible upside for hard-working pros.
In LBM Journal’s Sales Compensation + Benefits Survey, we sought answers to many questions about attracting, rewarding, and retaining salespeople. The results unexpectedly validated a belief I have long held. Specifically, that this is the sexy industry.
During my travels around the country, captains of our industry lament the difficulty of getting people into the construction supply business while expressing the common refrain, “Let’s face it. We’re not a sexy industry.” I disagree. We offer a growth path in an industry that literally builds this country. More importantly, we provide career security few industries can match.
Show me an industry in which the barrier to entry is nothing more than a desire to work hard and show up on time. Show me an industry in which you can start working as a teenager, perhaps as a loader, and rise to make a six-figure income and gain lifelong financial security. Show me an industry that will never ship the core products we sell overseas, specifically the buildings we live in, work in, play in, and pray in. To the best of my knowledge, the only industry offering these all opportunities is construction supply.
Let’s cut right to the chase. Salespeople, inside counter staff and outside salespeople alike, make a lot of money…or at least they can. We asked you to tell us how much your “highest paid salesperson” earned, and the results prove that this is an industry of opportunity. The significant majority of the survey respondents, 85% reported their top inside salespeople earn over $40,000 annually. Close to 20% the top inside salespeople make over $80,000 per year, while 9% of the top inside salespeople earn over $100,000! Inside salespeople.
For outside salespeople, the compensation was even more significant. 57% of the companies reported that their top earners make over $100,000 annually. 18% reported that top earners are paid over $200,000 per year. Many outside salespeople earn over $300,000 per year, examples of the income potential for dedicated sales leaders in our profession.
The average income for inside salespeople exceeded $40,000 for over 80% of the dealers who responded to the survey. This is well above the national median (center point) 2017 income of $31,786 in the U.S. 40% reported that their average inside salesperson earns over $50,000, just above the national mean (average) 2017 income. At 20% of the companies, inside salespeople average more than $60,000 per year in compensation.
The survey reveals interesting information about bonuses, benefits, and incentive plans that enable salespeople to drive their income to higher levels. When it becomes available, the complete 2019 Sales Compensation & Benefits Report will contain many more details, but importantly, it will validate the simple truth that a hardworking individual with ambition can thrive. If you presume that many inside salespeople aspire to loftier roles, then the outside sales compensation results should provide ample incentive.
The average income earned by outside salespeople at three quarters of the dealers exceeds $60,000 per year while 40% averaged above $80,000. At 20% of the dealers surveyed, the average outside salesperson makes over $100,000 in annual income.
We broke out statistics for inside and outside salespeople as well as product specialists. In other words, we wanted to establish how companies compensate specialists for windows, cabinets, flooring, trusses and other specialty categories. We discovered, not surprisingly, they are compensated at slightly higher levels than inside salespeople.
The survey revealed two additional, unsurprising facts about our industry. We’re old and male.
The overwhelming majority of outside salespeople (94.2%) and inside salespeople (74.7%) in our industry are male. This indicates we’re not tapping into half of the brain power avail- able in the country today and raises abundant questions about the causes for omitting so many potential leaders to our business.
The survey showed that the majority of outside sales- people are over 40. Predictably more than three of four outside salespeople are over 40; one third over 54. Less predictable was the finding that more than half (62%) of all inside salespeople are also 39 or older.
These are just some of the highlights from this year’s survey. For me, the results show that we are an industry that is not tapping into the rich diversity of talent available today, possibly because of our bias and insecurities of what we have to offer.
My hope is that you’ll review the data and conclude there is plentiful opportunity for those who want to succeed, but the success must be earned. The study included a bench- marking question I ask all of my clients: If a salesperson sold $3.6 million at a 24% gross margin, what would the compensation be? The answer is approximately $102,900, a finding consistent with the data I have accumulated from my clients over the years. In other words, six figure incomes and above are attainable, but require hard work.
Obviously, your compensation plan is the one you currently have to sell, which is why it is important to benchmark your compensation against other dealers in the industry. The real power comes when you recognize that your compensation offer might be more competitive than you think. More importantly, you offer a learning environment in an industry that will never stop evolving, never stop building, and never stop being sexy.
— Rick Davis, Building Leaders, Inc.
Typical compensation for outside salespeople
35% of respondents pay outside salespeople with a base plus commission. Base-only pay accounts for 17% of an average employer’s outside sales compensation, and base plus commission and bonus accounts for 17%. Less common forms of compensation include drawing against commission (14%), straight commission (10%), and drawing against commission and bonuses (5%).
Highest-paid outside salespeople
18% of the highest paid outside sales people earned over $200,000 in 2018. 17% made $150,000 to $199,000, while 23% made between $100,000 and $149,000. 35% of respondents report that outside salespeople earned between $50,000 and $99,0
Outside sales benchmarking
Since the specific details of outside sales compensation plans vary widely from company to company, we added a question this year to create a benchmark based on a salesperson with net sales of $3.6 million at 24% gross margin. Based on the 250 respondents to this year’s survey, the average outside salesperson with those numbers can expect to earn about $102,900 a year.
What about inside salespeople?
Considering their growing importance in the industry, inside salespeople are a new element of this year’s study. More contractors are working with inside salespeople, especially as the remodeling market continues to be so strong. Dealers that serve both pros and consumers employ a higher number of inside salespeople, on average, than pro-focused or specialty dealers. A dealer serving both pros and consumers employs an average of 15 inside salespeople, compared to pro-focused dealers at 11 and specialty distributors at 9.
The typical compensation structures for inside salespeople are base-only, base salary plus commission or bonuses, and base hourly plus commission or bonuses. On average, companies report that 36% of their inside sales force receives base-only compensation, which is nearly 20% more than those in outside sales. Compared with outside salespeople, fewer inside salespeople tend to be paid base salary plus commission or bonuses at 26%. Base hourly plus commission or bonuses is slightly less typical at 23%.
As expected, earnings for the highest paid inside salespeople were lower than earnings of the highest paid outside salespeople. 65% of the highest paid inside salespeople made $40,000 to $79,000 in 2018. 14% made below $40,000, while 20% made $80,000 or more.
Because inside salespeople can be a critical pipeline of talent, you should examine whether your wages measure up to the market. Across all companies, the mean hourly rate for inside salespeople is just under $18. Hourly compensation varies across regions, with inside salespeople in the Northeast making the most and those in the South with the lowest average of just under $17. Companies said they determine hourly rates for inside salespeople primarily by experience.
Almost all companies offer bonuses for inside salespeople. When asked about types of bonuses offered, 61% of respondents said they offer year-end bonuses, 38% said profit-sharing, 35% said based on gross profit, and 20% said holiday. Monthly and quarterly bonuses and those based on gross margin were less common at less than 15% each.
62% of employers report that they calculate bonuses and commissions based on individual performance. Company performance is common but less popular at 40% of employers. Team, group, or brand performance also plays a role at 35%. Note that the total exceeds 100% because respondents were able to select multiple answers.
Compensation for specialty salespeople
Many dealers recognize the value of having a salesperson who specializes in categories like kitchen, bath, windows, or trusses. They serve a unique function and can be compensated differently from other salespeople. We found that 41% of companies paid specialty salespeople $50,000 to $69,999 in 2018.
Most of the highest paid specialty salespeople made less than $100,000 in 2018. 32% earned $50,000 to $74,000, and 25% earned $75,000 to $99,000. 20% made less than $50,000.
Employees expect two major benefits: a retirement plan and health insurance.
If you want to attract top talent, it’s clear from the results of this survey that offering a retirement plan is key. We found that 82% of employers offer some type of retirement plan. A 401(k) with company match is far and away the most popular plan, with 53% of respondents offering this type. A SIMPLE IRA and 401(k) without company match are a distant second and third at a little over 10% each. Just 18% of respondent companies offer no retirement plan.
Health insurance is also a very common element of most sales compensation and benefit plans, with 90% of employers offering health insurance to their sales force. But what type of health insurance do salespeople expect?
We found that 47% of companies offer health insurance coverage and pay part of the monthly premium for employee plus family coverage. Paying the premium for employee coverage alone is less common at 28% of companies. 10% of respondents said they pay the entire monthly premium for employee- only coverage, while only 2% said they pay the entire premium for employee plus family coverage.
28% of companies that cover a portion of the monthly premium pay 41-50%. The second most popular percent range for coverage is 71-80% at 27%. The mean percent coverage across all companies is 62%. Companies with a sales volume over $20 million have a mean percent coverage of 66%, while those with less than $20 million cover 60% on average.
Providing perks to your sales force is important as well. Nearly all employers provide perks such as phones, expense accounts, or car allowances. The most common perk is a company-provided phone, with 60% of employers offering it. Half of companies offer an expense account, and 40% offer a car allowance or company vehicle.
Profile of today’s salesforce
Outside and inside salespeople tend to differ in gender makeup, age, and tenure. Just 6% of outside salespeople are female, whereas 25% of inside salespeople are female.
Around 2% of those working outside are ages 18-24, and 21% are 25-38 (Millennials and Gen X). 78% of outside salespeople are ages 39 and over. Inside salespeople are a comparatively younger group, with 8% who are 18-24 and 31% in the 25-38 range.
On average, outside salespeople have slightly longer tenures. An outside salesperson has an average tenure of 15 years, while an inside salesperson has an average tenure of 12 years.
This study has a representative sample of U.S. regions. Nearly 20% of respondents work in the Northeast, and 19% work in the West. Companies in the South make up 31% of the sample, and Companies in the Midwest make up 30%.
Almost 60% of respondents work at a building materials dealer or lumberyard serving both pros and consumers. Around 20% work for pro-focused dealers, while another 20% work at specialty dealers or distributors.
About half of respondents have one company location, and 40% have 2-10 locations. Around 10% have 11 or more locations.
Sales volume varies considerably among respondents. 37% of companies reported revenues of less than $10 million in 2018, 40% make $10 to $49.9 million, and 36% reported making $20 million or more in 2018.
Readers who completed the survey received a complete copy of the results of this study, with analysis from The Farnsworth Group, including regional breakouts for many of the questions. It is available for purchase for $495 at LBMJournal.com/salescomp. If you’d like to participate in next year’s study, contact: James@LBMJournal.com, and we’ll make sure to send you the email invitation.