What salary should you offer a new sales hire?
The question is a little like the rhetorical “How long is a piece of string?” since there are so many variables to consider when deciding on the wage package to offer a potential recruit.
As you enter 2015 in major hiring mode, here are a few scenarios that you may be facing:
Scenario 1: You want to hire a bright new graduate
With an average of $27,000 in student debt*, a new graduate is pretty incented to take the best financial offer on the table. While senior sales professionals focus heavily on “total income potential”—meaning they consider performance-based commissions and bonuses heavily in their decision-making—in our experience new graduates are a little more risk averse and often lean toward the biggest salary.
Salaries of $35,000-$40,000 are the norm for high-potential new grads, but many of our software clients pay up to $45,000, and top-tier consumer goods companies can pay up to $50,000.
It is important to remember that money is not the only driver for a new graduate hire. The most strategic of them tend to think five years ahead and take an opportunity that is going to get them where they want to be long-term. Having a role that offers a lot of quality training and a clear career-path can make your company’s offer a whole lot more attractive.
Scenario 2: You want to hire a stud from a competitor
Our biggest challenge with clients is getting them to understand that great sales people do not jump from one competitor to another without a really good reason. Occasionaly that reason could be a promotion or change in career potential, but most often it is cold hard cash.
The benefit of hiring a top performer from your rival is quick ramp-up time combined with the weakening of your competitor. But it will cost you; a typical rule of thumb is to look at their current salary and propose a 1020% increase. If they are making $90,000 in their current role, $99,000108,000 is the likely expectation for them to even consider moving to your side of the street.
Aside from a big price tag, there are other draw-backs to hiring from a direct competitor. They include:
- a high probability of a successful counter-offer (all your work and time wasted for nothing)
- sharing of company competitive information
- never really having a “loyal” hire—if they left their last employer for a healthy raise, they will do the same again
Scenario 3: You want to hire a hard-driving sales leader
No position adds more value to a growing company than a strong sales leader. From an increased focus on training and activity, to better alignment of territories and opportunities, a sales leader can be worth their weight in gold.
How much gold and how it is paid out is your issue. A strong sales leader will be looking at 3 financial “levers”:
- The salary: guaranteed money that will ensure their lights stay on and their kids are fed
- The performance-based commissions or bonuses: the carrot that drives their day-to-day and quarter-to-quarter behaviour
- Equity in the company: the “big exit” potential
Each of these levers should impact the others. For example, if your candidate wants a bigger base salary, their equity component should be reduced. The less risk they want to take on, the less reward they should be able to reap if a big buy-out happens. If there is no opportunity to provide equity at your company, you likely will need to make the salary and/or the performance-based bonuses bigger.
In our experiences strong sales leaders are more willing to give up some salary for a big performance-based payday, so a good rule of thumb is to negotiate a salary that is an average of their last three years guaranteed income.
One final tip
It is common to first offer a salary at the lower end of your negotiation range and have the candidate edge it up. The thinking is that if the candidate does not negotiate you get a good deal, and if they do you have some room to move.
One of our best (and most successful) clients does the opposite—they have our Sales Talent Agents make it extremely clear that they are going to be offering the candidate a salary that takes all of their compensation history and market value into account and is designed to be excepted and appreciated.
This client makes a fair offer every time (always erring on the side of being a little more generous), and consistently get acceptances from top-tier candidates without negotiation. Not only does this create a higher chance of making the hire, it also gets the relationship off on the right foot.
Your goal is to make a hire that lasts 510 years. Do you really want to start that relationship off with a tough and avoidable negotiation?
*as estimated by The Canadian Federation of Students
Sonya Meloff and Jamie Scarborough are the co-founders of Sales Talent Agency, Canada’s largest sales recruitment company and #181 on the PROFIT 500 Ranking of Canada’s Fastest Growing Companies in 2014. Meloff was on the PROFIT/Chatelaine W100 ranking of Canada’s Top Female Entrepreneurs in 2010, 2011, 2013 and 2014. Scarborough is an accomplished sales leader and speaker specializing in how companies find, attract, choose and equip sales talent.
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