There are a number of ways that roofing business owners can decide to pay their sales reps.
The most common method is a commissions-only structure, but some roofing companies have adopted a “split” payment system.
In this article, Roofing Insights CEO Dmitry Lipinskiy will break down each sales structure and also share which system he believes is the best for roofing business owners.
Keep reading to learn about the four different types of pay structures within the roofing industry!
1. Commissions only
Pros: Easy for accounting, low liability for a roofing business owner
Cons: Sales rep is in charge of generating revenue
This sales structure is the most popular model in the roofing industry.
In this model, commissions are based around an agreed-upon percentage of the total ticket price for a roofing job.
In many cases, the commission is ten percent of the total cost.
For example, if a job was sold for $10,000, the salesperson would receive $1,000 commission once the job was fully completed.
This type of payment system is easy to keep track of and allows for a roofing business owner to spend more time focusing on other aspects of the business instead of worrying about how roofing sales reps are paid.
“With this set up, everyone wins. It’s good for the business. It’s good for the consumer. It’s good for the sales rep. It’s the fairest model,”
says Lipinskiy, who ran a successful roofing business for eight years before selling the business to his general manager.
“Under this model, the roofing company will pay anywhere between 8-15% to the sales rep, but I have seen this number go as low as 5%.”
While this model can benefit everyone associated with a roofing company, it also can backfire if sales reps are not consistently inking deals and generating cash flow for the business.
“In this type of sales environment, the salespeople either will get all the blame or all of the credit,” says Lipinskiy.
“It’s a fair model, but in these cases the salespeople aren’t very protected, especially in the offseason.”
This is because in many cold-weather roofing markets, sales reps don’t work during the winter months.
Therefore, it is strongly advised that roofing sales reps are conscientious of their finances and properly prepare for lapses in revenue due to the inclement weather.
2. “Classic” storm restoration splits
Pros: None, unfortunately
Cons: Open-book accounting, no leverage, room for disputes
Anthony Delmedico is a popular figure within the roofing industry because he is reputed to have sold millions of dollars in roofs.
Yet, some reports have suggested that Delmedico previously lost his business due to financial mismanagement.
This makes Delmedico an enigma.
On the one hand, he is a sales savant.
At the same time, the financial distress his roofing business experienced implies that his sales aptitude alone was not enough to keep his company afloat.
These days, Delmedico teaches other roofing contractors how to run successful businesses, which becomes problematic because Delmedico is a staunch supporter of the “splits” business model.
The “splits” business model centers around a roofing business owner and a sales rep splitting profits on a job.
While in theory this method sounds fair, in practice the “splits” model rarely works.
As a former roofing business owner, Lipinskiy abhors the “splits” model and doesn’t endorse the fact that Delmedico is advising other roofing contractors to employ this sales structure.
“I respect what Anthony has done in the events space, but I don’t agree with the way he teaches other roofing contractors how to set up commissions,” says Lipinskiy.
“In my opinion, this model is the worst of the worst. I see so many disputes that come as a result of the `splits’ set up.”
The “splits” sales structure has numerous flaws, but one key deficiency in the paradigm can be traced to the fact that salespeople are given too much information regarding a roofing business owner’s financial records.
In turn, sales reps often want more of the profits.
To combat this, some business owners delay paying their sales reps until they can later get the sales reps to negotiate for a smaller percentage of the profits.
For the “splits” sales structure to work, both a business owner and a sales rep have to be honest, but history suggests that doesn’t happen, and the roofing companies who operate under these pretenses rarely stay in business for more than a few years.
Worse, sales reps typically make less under this arrangement than they would had they been paid solely on commissions.
“While the `splits’ model looks good on paper, what I’m seeing is that the majority of the storm restoration contractors are actually paying less than the commissions-only model,” Lipinskiy says.
In the end, “splits” have proven to hemorrhage cash flow from the roofing business and starve the sales reps who work for that company.
3. Sales model
Pros: Extremely profitable for sales reps
Cons: High-pressure sales tactics, not fair to the customer
This is another terrible sales structure that never seems to cultivate long-term success for a roofing company.
For further evidence of why this model does not work, consumers need to look no further than to LeafFilter, a gutter protection company who is notorious for their suspect sales tactics.
At LeafFilter, sales reps are encouraged to oversell gutter products by as much as $30 per foot.
Since LeafFilter will make a profit even if their sales rep only sells a job for $12 per foot, reps then are given the green light to go crazy and pitch homeowners gutter jobs for as much as $40 per foot.
“The sales reps get more commission based on how high they can sell a job for,” notes Lipinskiy, who adds that not only does this create an unhealthy relationship between sales reps and homeowners, but it also means a homeowner’s best interests are not being prioritized.
“The consumer is the loser under this model because they get high-pressure sales tactics. This business model creates so many bad deals and this is where the consumer will overpay the most because this type of model incentivizes the sales reps to massively overprice the products.”
4. Employee-based commissions
Pros: No pressure
This is a relatively new sales structure that only a few roofing companies currently use.
Most notably, Monarch Roofing in Myrtle Beach, South Carolina adopted this sales structure.
The employee-based commissions model revolves around providing sales reps with a base salary plus incentives, should certain sales benchmarks be met.
“I love this model,”
“I believe this is the future in the roofing industry. It’s one of the hardest things to do, but the roofing business has never been about doing what’s easy.”
“Under this sales structure, homeowners will be taken care of because sales reps won’t be as focused on commissions. This kind of system values employees. These types of roofing companies have already been in business for years and will remain in business for many more.”
What type of sales structure does your roofing company implement?
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