Sales Compensation Structures in the Painting Industry

Michael Murray: Hey Jon, want to chat a little bit about paying sales reps. So basically what's on my mind—we at Textbook, we're currently hiring a new sales rep. We'll probably be hiring two here in the next few months. And we are debating changing our sales compensation structure or tweaking it a little bit. Whenever you have reps, changing how they get paid can be challenging and stressful. But now we're looking to replace a rep and add to the team. So it seems like it's a good time to kind of evaluate that. I would love to hear from your experience. How have you paid sales reps? How do you guys currently do it? What have you learned from maybe other ways that didn't work out so well?

Jon Bryant: Yeah, totally. I mean, exciting times for one. I think having sales reps is such a fun slash scary part of business. So I'm pumped for you. I know what kind of struggles you guys have gone through with some of these positions. Sales rep compensation is something that's so vital to the whole structure of bringing somebody on. And I love it. I think this is such a fun topic because it lets you use creativity and try to build something that works for you. And there's no right answer. And we've tried a bunch of things. So I can dive into a couple of them and see if anyone learns anything from this. That would be phenomenal. Let us know if it's helpful.

I can kind of tell you what we've done. I've had a bunch of discussions with other business owners in the painting industry over the last few months. A lot of people end up finding PaintScout when they're looking to add a sales rep. It seems to be a really critical time for them because they're trying to figure out how to pass off this information into a standardized, repeatable, accurate way. And with that, they have a lot of questions around how to successfully bring this person on.

When you set the compensation model, it has pros and cons. It will influence people's behavior in your direction, depending on what you do. It's going to have positive results and also going to have some negatives. And so you need to understand that coming in. I've heard a lot of people jump straight to straight commission. "I want a full-time rep on straight commission." And my first reaction is, who's going to take that deal? We've done some straight commission, but it has been once the person has been an established team member. We did that years ago and it has its pros and cons too.

But I've always challenged people to say, when you bring on a rep, what's the environment you want to create? Do you want a team? Do you want to have a long-term person here, or you're just looking for essentially a hired sales assassin? And if you have no commitment to them, why do they have any commitment to you? And so structuring these things so that it's kind of a win-win on both sides—you're gonna take risk and you want them to also have to take some risk too.

So anyways, I'm excited to get your thoughts on this. I'll kind of go through the four that I know of really briefly, and then why don't we dig into each one of them?

Michael Murray: Yeah, what are the main four options?

Jon Bryant: So first off, straight commission. So you're paying a percentage of the job value straight off, no matter how the job performs, and you're just giving that commission. We've got salary plus commission. So this is where you would introduce some type of a salary as a baseline, and then that person is going to get a commission on top of that.

We've got commission on gross profit. So this is an interesting one where you got to sell good jobs in order to get paid. If you sell really good jobs, you get paid more. And then the last one, which I know you've been a fan of over the years, is salary plus bonus plus commission. And in a way we also use a similar structure on our team, but I'm excited to hear from you about that. So that's all four of them. Is there anything missing there?

Michael Murray: Yeah, no, I mean, I think there's variations of each of those. You can do a draw, which I think is just going to add extra complication to the conversation. We can maybe touch on that. And I think the other part that can add some significant complications is: is this a W-2 employee or is this an independent sales rep?

I think for the most part, what we see from business owners in the painting industry are W-2 model sales reps. But there are significant independent sales rep models in home improvement. I know some of the bigger window companies or even some roofing companies and things like that do utilize a more independent model. I'm not a huge fan. There's certainly tax implications and all sorts of stuff that I don't think are worth diving into all the details on here. I think we probably just focus on more of that employee model for the sake of our conversation.

Jon Bryant: Totally. So yeah, so employee model.

Jon Bryant: I think overall, the question I get a lot is, what is the percentage should we pay? Any thoughts there? I have my thoughts, but I'd love to get yours there first.

Michael Murray: Yeah. I mean, I think we maybe even talked about it at one other point, but I believe there's a fairly good consensus around the numbers of like 6% to 8% of total top line sales, somewhere in that range. I think it depends on exactly—I think if you wanted to broaden that out, you could say 5% to 10%. And I think that's going to come back to: if it's at the high end, it's probably for somebody who generates all their own leads and you're taking what would be marketing cost and paying it to them in the form of prospecting and networking and things like that. And I think if you're down into that 5% range, you're probably providing them with all sorts of other benefits—vehicles or retirement plans or health and all sorts of other things that are part of that total compensation package.

But 6% to 8% seems to be what I hear the most common. How about you?

Jon Bryant: Yeah, that's pretty much it too. And that number makes sense to me for a few reasons. One is that it kind of mimics what an average painting contractor might make in terms of profit. And so it's kind of aligning interests to say, this is a very valuable role. And so that number hopefully is inspiring to build a team. And I think it also matches into when you run the numbers on a well-functioning painting company, that works well. So yeah, that's what I hear too.

And so what we're talking about when we're looking at these, we're trying to build that structure around that percentage. We're trying to essentially take whatever fringe benefits—whether vehicle, health benefits, retirement stuff—and build that back into the compensation model, such that it meets our company's values, and it aligns with the individual who's joining the company.

I've also heard rumors of people allowing someone to choose—choose whatever method you want, as long as it fits into that. I personally would find it too challenging to align the team, but I think it would be possible to have variations, but we've just chosen to have one. So which one do you like the most out of this?

Michael Murray: Well, I mean, so the one I—it's so complicated. So the one I like the most is one that we use, I guess. I do think it really has to align with the business owner's core values and the sales professional's values and kind of what they're looking for. I have to align and the compensation structure is that kind of byproduct of that.

So you talked about it at the beginning of having long-term team members, team oriented. That's very much how I want our sales reps and our sales team to function. I don't want lone wolf, independent minded sales reps. There's always some independent mindedness with somebody in a sales role. I think in general, something that's going to do well in sales has a good amount of that individual self-reliance and competitiveness, I guess. But I'm trying to find that balance where they want to be a team player too.

So we like the idea of having a salary for that reason. It's going to give them some comfort, some peace of mind. They know that they're going to be taken care of. We want the salary to generally be about 50% of their total compensation in that ballpark, and then we want them to be able to go earn the rest of it so that they do have a high incentive to perform well and feel like they're not limited on what they can earn. But there also is a limit to how little they can earn if they are struggling and they have a bad month, they hopefully know that salary is still going to cover most of their bills and things like that.

Jon Bryant: So you like to set that standard for the team. So it's salary and then you mentioned commission and bonus or bonus and commission. Do you want to kind of walk through that a little bit?

Michael Murray: Sure. Yeah. So yeah, we do salary plus bonus and commission. And so the bonus is more or less based on three factors. How much do we sell? Do we hit the sales goal? If we hit the sales goal, we're going to earn the bonus. Everything after the sales goal, we're going to earn a commission on. That commission is typically lower because of salary and the other compensation. So we're not paying like 8% commission on everything over the goal, because again, we do have to factor in the salary and the bonus money that they're earning as well.

The reason that I like that is we use an employee model for all of our painting. And why that's significant is this might come as a shock—it's not always easy to go instantly hire painters. And so we need to have some predictability into how much work are we going to have for our crews in a month or two or three months from now. There's that lag of whatever I'm selling this month is what we're gonna produce in a month or two or three. And so I need to have some predictability. I don't want sales reps to have these huge swings in terms of what they're selling. One month they sell $25,000, the next month they sell $250,000. And it's just like, one month I need a few painters and then the next month I need 50. And it's like, how do I run a business that way? I don't know what I'm going to get.

What I believe having the bonus based on hitting your goal does is it allows me to have some of that predictability where I can say, okay, give or take, you're going to be pretty darn close to this goal. Even on the months that don't go great, we're trying our best. We're funneling towards hitting that goal. And if we miss it, we shouldn't miss it by much. But kind of to the same point, if we're selling double the goal, that's great. And I love it. And I want that person to make as much money as they possibly can. But I need to know: do we need to—can we raise the goals and raise the compensation? Is this something that we can be confident happening in the future, or was this just a one-off blip?

And so anyway, so that's why we pay the bonus to the goal. There's two other bonuses that our reps can earn. They're not worth quite as much. They are certainly secondary to the amount that they sell. So the next one is going to be win percentage. Marketing's expensive. And so the more leads I have to give a sales rep to be able to go and sell the number of jobs and then the amount of work that they need to, the more it costs me. And so if they have a high enough win percentage, they can earn that goal. Talked about it before, it's typically around 40% to 45% depending on the experience and tenure of the rep.

And then the third factor for us is how much per hour are we selling jobs at. So we give our reps some ability to negotiate and discount and have those conversations with homeowners. But if we're not making good decisions and maybe we're underbidding a project or discounting it too much, that is going to lower the total amount that they sold on an hourly basis to the point where they might not earn that bonus. So that bonus factor I believe holds them a little bit accountable and incentivizes them to make sure that we're selling profitable jobs. So we're not just selling jobs, but that they're profitable.

That's how we do it.

Jon Bryant: Couple of questions here. So one, are you happy with this method right now?

Michael Murray: Yeah, I mean I think—so I'll say this, I think there is some—I think it's on the scale, it is towards the level of complicated. It is not as simple as saying go sell stuff and I'm going to pay you 7%. Whatever you sell you get 7%. That's simple. I believe that ideally all employees should be able to go home and tell their significant other or friend or mom or whatever, "This is how I get paid."

I think our system—I'm certainly open to the idea that what I just described can be a little complicated. I don't think it's—I don't really think it is when you maybe write it on a piece of paper or whatever, but I'm open to the idea that it is complicated. We've done other things in the past. I've paid salary plus commission and I've paid salary plus commission based on gross profit. And some of the problems I just mentioned with profitability or wild sales swings were things that I experienced. And in general I would say we get less of that with this type of a model that we've been using now for about three years.

Jon Bryant: So, I mean, I guess there's a couple of variables there. One, you mentioned you run an employee system. So that's an important decision based on that need. Have you ever seen anyone or heard of anyone run a sub model where they can just sell as much as they want and make it work? I mean, I think that's the dream, but obviously you and I have chosen a model that is not that for a number of reasons.

Michael Murray: Yeah, I mean I think—so I think that is the air quotes advantage, I guess, of having a subcontracted painter model. If the work is being produced by subcontracted painters, in theory you have a Rolodex, if you will, of a lot of them and so you can go produce things quickly. And I have a friend who used to own a propane franchise. And he told me that their business model, at least for his location, how he did it, was whatever they sold was to be produced next week. And the idea was sell as much as you possibly can, and then we're going to go produce it next week and then go do it again. And that sounds stressful.

Jon Bryant: How did he feel about that model at the end of the day?

Michael Murray: He thought it was great. They were correct. Oh yeah. I mean, max revenue. I can see where with the right people and things in place, man, you gotta have a lot of good office staff and logistics and getting projects ready quickly and things like that. But if you can pull it off, you're going to maximize revenue by doing that. But I mean, holy heck. And I know from hearing stories that, you know, not all subcontractors are good. And certainly you're going to have projects that turn into nightmares and you have bad customer experiences. And you're just accepting of a hopefully relatively small percentage of that.

I would say I'm personally—I would just say I'm probably less accepting of that. My tolerance level for unhappy customers is significantly lower. I don't think that makes the way we do it better than that way. I just think it fits my personality better. He was producing more revenue, making more profit. Hard to argue. He was doing well. But probably had maybe a slightly higher percentage of unhappy customers because of it. And I don't think it'd be fair to say one is better than the other.

Jon Bryant: Yeah. So, I mean, at the end of the day, what we're—the reason coming back to the basics here is that we got to choose models that actually fit with what our vision and mission are and the structure of the company matters. If you're just looking for as much as you can sell this week, and you've got fairly low overhead, maybe straight commission works, but you're putting a lot of risk. So figuring out what works for you and your business is important and knowing what the options are.

Jon Bryant: So yeah, I can tell you what we do too, because it's a little different. So we went with—we have for a number of years gone salary and commission. And it's a commission structure where you earn your base salary, you earn a commission. And if you sell jobs that are over certain gross profit number, you receive an additional commission on that kind of on a longer term time scale. So we do it yearly. But we're reevaluating this because it comes with pros and cons too.

A couple of the issues are that we have—we have a rep who sells over $3 million a year. And that makes that salary—and that kind of discrepancy of what every dollar he brings in decreases that salary. He's actually getting paid less salary-wise than the people who are selling less work. Although the number is the same. Do you understand what I mean there? His percentage of salary is so much smaller.

Michael Murray: The percentage, right. Yeah, I mean, just simple math, if you pay me $50,000 salary and I go sell a million, or if you pay me $50,000 salary and I go sell $2 million, the percentage of my sales that salary is is half, or double, depending on what side you're looking at. Yep, I get it.

Jon Bryant: Yeah, exactly. And so it ends up—also one of the issues there is that the percentage total commission paid gets smaller as the number gets bigger. Because instead of that being a benefit to the person, it actually becomes more of a benefit to the business.

And so we've had to kind of reevaluate this based on a really high performer in the business to say, what does this look like? And we're—the evaluation is, can we band this maybe quarterly? So if you hit certain sales thresholds, that commission level goes up. And I've seen this method—Certapro uses this method. There's a few other painting companies that I've seen, more franchise level that use this method too, where they incentivize as much sales as they can in a quarter. And then you start at zero the next quarter, and you're trying to work your way up. And so it's a constant game of how much commission can I get this quarter?

I think there's issues there too, but overall it starts to incentivize the right behavior at the right time of year. So that might be a way to kind of bring that more into equilibrium.

The other issue we found—and you mentioned it kind of in how you structured it with incentive for gross profit—is that our method doesn't take into account bad sales profitability. And so we've—we found that we have reps who might hit their target numbers, but are selling bad jobs. And it's a risk that we take and we're not properly aligned on that. So but in an effort to keep it simple, we've just done it this way and that's worked for us, but changes are definitely needed. So we're looking at that pretty closely to incentivize our top performers as well as de-incentivize this kind of negative profitability that we're seeing.

Michael Murray: Question on that. Have you done it or considered where, if a job comes in at too low of a gross profit—whatever that is, a bad job—not just we missed it by a little, where the sales rep actually loses that commission on that sale? Or essentially if you do it monthly, it's like they're starting this month with a negative they got to kind of work out of because of this bad job that they sold last month. Because reality, obviously you're not going to get money back from them, but you're kind of taking it out of that future commission. Have you done anything like that or thought of that?

Jon Bryant: We have. Inevitably there's fighting that occurs with that—finger pointing. Why did it happen? And the why becomes such a big issue that sometimes it's more valuable for us to look at a long-term performance. You might have a couple of bad jobs in a month, but that might get sorted out. And what you're saying, I think is true, but you might be able to sort that out in the next month. So if it's done quarterly, you have some time. Whereas because then you'll see a trend—are you actually selling poor jobs and nobody can perform them? Or was it just a couple crews who actually quit the next week and they weren't incentivized?

And so we're trying to give as much time as we can. That's why we've gone with the year long kind of—over the year, if you could—the ebbs and flows, if you can make that work, but the time horizon's not right. And the punishment isn't as direct as what you're talking about. So that might work. We might be able to get that done, but man, it's always the crew's fault. And the crew, when they don't get their bonus, it's always the estimator's fault. So it's very difficult to tell other than seeing trends.

Jon Bryant: But yeah, I think it's worth mentioning too. So we've got salary and commission, commission on gross profit. Do you want to just cover that a little bit? I know you mentioned you did it, but how does it actually work?

Michael Murray: Yeah. So we did similar to what you just described, except instead of calculating the commission on the top line sale, we calculated the commission on the amount of actual gross profit that came in. So this is going to really solve for the problem we were just talking about of profitability, selling bad jobs. So really at the end of the day, what matters in our business is that gross profit. How much of that is flowing so we can cover overhead and then obviously drop that down to operating or net profit.

And so instead of paying whatever—let's just use the number of 6% of the top line sale amount—we're going to pay a higher percentage on the gross profit. So make math simple: if our target gross profit is 50% or half of the revenue, then we can double the commission percentage and the math is still the same amount of money. Sales rep is not losing out. So if we sell, let's say we sold a $10,000 project, we should have $5,000 in gross profit. If we were going to pay 6% of the top line commission or $600, we could now pay 12% of the gross profit of $5,000 and end up with the same number.

I think there's two main problems that we ran into. So one is what you just described. I've read before—I think we've probably all heard this—that we need to incentivize, whether it's through bonuses or commissions or otherwise. People's pay need to be tied to the things that they have some control over. In life, we like to think we have control over more than we probably actually do. But the perception of control, I think, is exceptionally important for motivating a team member or having them be motivated, I would say.

And like you just mentioned, if sales reps feel like, "Hey, I'm selling jobs and the painters suck and they're not producing it well, and they're painting slow or buying too much paint or whatever the factors are for why we're not hitting the gross profit of 50%, I'm not happy and sure as shit, John's gonna hear about it." And I got sick of playing, you know, whatever, the cop in that situation.

The other problem is the time lag. So I sell a job in January. We produce it in February or March. And so when I actually calculate that gross profit is not until the job's done, obviously. And so when am I paying that commission? Am I paying—do I pay some of it on the upfront, I'm going to pay you based on getting to 50%? And then when it's all said and done, we'll balance. I think that's probably a good way of doing it. Because if you wait—if I sell a job in January and I'm not going to get any commission or bonus or whatever for that until March when the actual job is done and paid for, how is that motivating?

I am not going to go out on Friday afternoon and, "Man, I can't wait to go sell some more jobs. Let's go so that in two months from now, I can get a little bit of extra money." Most people cannot connect what they do today to what they're going to have in the future, which is why we have problems with credit card debt and retirement savings and diet and weight loss and fitness and things like that. This is not a problem specific to sales reps or the painting industry. We are as humans, we want something as close to instant gratification as possible. Some people are better at this than others. But we have to be really careful as to how quickly are we getting sales reps their compensation. And if you're paying off gross profit, depending on how you're doing it, that could be a big problem.

Jon Bryant: Totally. I mean, we have a lot of jobs that could be sold a year out, especially with the summer season. So we've encountered that already where we do pay commission based on completed jobs. And it's like, "Yay, you just sold a massive job and we're so excited and we're going to pay you in a year." So the balance there is hard. We've found gross profit to be an incredibly valuable metric, but incredibly difficult to pay on because of what you just mentioned. And that's what's kept us coming back to this: keep it simple. Do something extra for gross profit kind of what you're talking about. When your jobs are profitable, bring that back around, but it's not something to ground it on now.

I know a lot of great business owners who use a gross profit model and it works great for them. And again, maybe their accounting systems are better. Maybe their reps have enough—been built up reserve to actually keep getting paid or they have some type of draw system to kind of benefit that as well. But I've seen a lot of great companies, especially in commercial, use straight gross profit commission. There's no salary. And it works. But again, it's just not something that's worked for our model.

Michael Murray: Yeah. I think I would imagine it works well when there is a pretty good predictability to what the gross profit is going to be. You're not seeing wild swings. I would imagine it works well with, again, more experienced reps that are working in companies that they've been at for a while and they know that while, "Hey, this project maybe didn't go as well, I know that most of them do. I'm not going to make a big deal out of it. I've got a track record, I know that our painters are good, I trust them, they're doing a good job. If this one didn't go well, I probably made a mistake just as much as they did and let's move on." But I can see that.

Jon Bryant: Yeah, I mean, so let's—I mean, let's dig that back just a little bit. I mean, again, if you're going to go with this model or a lot of these sales models, you better understand your numbers. You gotta understand how to estimate. This can't be a wild guessing game. Because if you're going to use a gross profit model, can you imagine if you're sending someone in who doesn't have experience or doesn't have a system and it's like bid this job. And then the arguments are going to get into, or bid it on $500 increments. It's like, "I don't know." And so you need to have some predictability in your business in order to introduce some of these models.

And the other thing too, with this is if you have predictability—we have honed in our production rates over the years and know pretty darn well what is going to be acceptable for time and production. But inevitably when things go sideways, the positive is that you get a lot of involvement from the sales rep on the production side. The negative is that you get a lot of involvement from the sales rep in the production side. And now you've got another project manager in the mix. "Let me tell you how to do your job, because you're not doing very good." And no one appreciates that micromanaging. So yeah.

Michael Murray: I think the other problem though is, do you want your sales reps at jobs or do you want them out selling work? I don't think the answer is necessarily 100% never go to a job site, but it's like, I don't—I want you to go and sell jobs that can be profitable and then go and sell more jobs that can be profitable. I don't want you to go and sell jobs and then go and manage those jobs, although that is a model. There are people in our industry that do that, but that's not what we're talking about. I don't think.

Jon Bryant: Yeah, it's a tough one. We were talking about very siloed job titles here.

Michael Murray: Yeah, I don't—if your job is to sell, and you're really good at that, the time you're spending worried about how fast the painters are painting, or how much paint we're buying, is not good. That's not the best use of your time. Yeah.

Jon Bryant: No, no, not at all. All right. What else did I talk about here? I mean, straight commission. Have you seen that used before in a positive way?

Michael Murray: I hear about it all the time. I honestly can't think of a specific example in our industry. We mentioned—I think we talked about it before—you can call a salary a draw, which is kind of the same thing. There are differences. It just comes back to is it earned or not? I think one of the things that we've certainly run into over the years, and I think anybody doing this long enough is: when do you consider commissions and bonuses as earned, which comes up when team members leave? If you have a sales rep that's no longer employed, when are they eligible for that commission? Do they have to be an employee when the project is finished to earn the commission or do they have to be employee at the end of the month to earn the monthly bonus? Things like that, there are legal requirements and some of it is up to the company to make policies around, but those are certainly things that business owners need to make considerations on.

Jon Bryant: Yeah, absolutely. I mean, there's a lot of questions to kind of look at when you're thinking about that kind of stuff. It's not always clear, I think, when you set this up, what the issues are gonna be per se. You might—when the payouts happen, that's important to the rep, but it's not being discussed upfront. So figuring out how to get that information out in front—super, super important.

Michael Murray: Yeah. I mean, there's legit cash flow concerns. If you're paying—let's just say, again, you sell a $10,000 job and you make 6%, and you're going to pay that when they sell it. Again, we'll use this as an example. If you get no deposit, which I don't suggest that, but if you get no deposit, you're now in a negative cash cycle on that job. Let's say you sell it in January, you're producing it in March, maybe at the end of January you pay out that commission. You're now paying commission on that and you don't have the cash to pay it. You're paying it out of reserves. Again, those are all considerations as to how these things work.

Jon Bryant: Yeah, interesting.

Michael Murray: Yeah, we generally consider a sale a sale when a customer has signed and paid a deposit. And then from that point, we can count that as a sale for that month where they can earn their bonus.

Jon Bryant: Interesting. Yeah. We used to do it that way. But then the issue of that one year out type came up. So we pay out half the commission. We hold back half because the worst case scenario is the rep leaves and the job leaves and next thing you've got a $300,000 job with commission paid on that. You're like, "Okay, that's a hard one." Not that every job's that big, but it does happen.

Michael Murray: Are you getting a deposit on that $300,000 job that you're going to do in a year or how's that work?

Jon Bryant: A lot of the times when we're dealing with an HOA or condo board, we're not getting a deposit. We're going to sign contract.

Michael Murray: Makes sense.

Jon Bryant: Because they're not willing also to give us a deposit that far out. So exactly. So that's not our style. And I think our reputation speaks to that. But they've maybe been burned or heard of people getting burned before. So we'll try to get a deposit from them a month before. Just make sure they're serious. But we run into that quite a bit, especially when we're a year out. We might only take a $500 deposit on a big job just to shore it up and make sure it's legal.

Michael Murray: Yeah. Yeah, that's all interesting.

Jon Bryant: So yeah, I think, so the last thing here, I think, which is relevant to all of this is that there's a bunch of fringe benefits too, and we kind of alluded to them at the start. But we've kind of—when I look at it, I'm like, okay, it's the percentage paid plus sales reps get a couple of other benefits. What are they for you guys?

Michael Murray: Yeah, I mean, I think the things that you're going to really tie back to are going to be either company cars or vehicle stipends. Typically what we've done historically is that when a new rep starts, we don't go out and purchase a vehicle for them, but they do get a vehicle stipend to use their own. They're going to have a company credit card to purchase fuel and those types of things. Company cell phone, computer, iPad, a bunch of uniform—we give them a uniform budget where they can buy some logo gear from our vendor. And then some of the same stuff that all of our employees have, which is going to be our 401k with a match, health insurance, dental, vision, life insurance.

And paid time off. And the paid time off with sales reps is often tricky because the reality is that sales reps are often out of the office doing their thing. I don't want to micromanage their days and I don't want to know, "You only worked seven and a half hours today" or whatever the hell. I really don't do that with anybody, but especially with sales reps. And I don't think anybody in a sales role wants that. I think somebody who wants that type of a sales role really is looking for some sort of flexibility, give me some independence where I can make good decisions on how I want to use my time and really just judge me on my results. They don't want to be micromanaged, especially to their time.

And so generally what I've always done with sales reps is they have PTO, just like all other employees to kind of fit within the handbook and make it fair to everybody. But I tell them, "Look, if you're hitting your sales goals and things are going well, I'm not going to ask you what you're doing on Friday afternoon in the middle of summer. Good job, go do something fun. Don't take the company car so that our painters are wondering what you're doing at the pool or whatever. Let's—I don't want to hear about this later, but yeah, let's call it what it is. I'm good."

They're doing evening appointments. They're doing weekend stuff. It's not a—this job doesn't fit within a nice little box all the time. And so it's like, "Hey, if you want to go work out at the middle of the day, you go do an appointment or two in the morning, you go do an hour and a half, two hour lunch, where you get your workout in and you do your thing. And then you go do some late afternoon, evening appointments. Cool. That's fine. Don't really—that's all good."

Jon Bryant: So how do you present that upfront?

Michael Murray: Just like that. Honestly, we just have a conversation. I'm actually just going to share this. I'm going to share this podcast with them. No, I mean, that's how we—I tell them, "Look, I don't want to babysit you. I don't have time for it. You don't want it. I don't want it. Here's your paid time off. Here's your sick time. Here's your holiday pay like everybody else in our company gets. Those are yours. I want you to use them. And then in addition to that, you have some flexibility. If you abuse it, I'm going to take it away. That flexibility. If you are not hitting your goals, I'm going to take it away. If you're hitting your goals and you're being a good teammate and you're doing the right things, then again, I'm not gonna ask you what you're doing on individual days or whatever."

And really what we do is it's kind of just a model of they have to have some availability to do appointments. Generally it's like every other Saturday, you got to have the morning open to do two or three appointments. You've got to have, depending on time of year, one or two evenings available to do appointments. But they have a lot of flexibility as to which days and different things like that.

Jon Bryant: So you're selling a bit—I mean, not selling, but part of the role is that it's beneficial is that it's flexible. There's a good work-life balance. You kind of pick and choose how you want to do it. Meet your goals. No one's going to care. I mean, I love all that stuff. Do you actually structure anything around what the responsibilities are upfront? Like the amount of time or amount of results or how that's structured?

Michael Murray: Yeah, I mean, I do give some—yeah, I would say broad strokes. I would tell most sales reps, it's about a 45 hour a week job most of the year. Some times of the year, maybe in December, you might only work 35 hours a week. And that's okay. Not—again, that's as a business owner, I enjoy that same type of a privilege. But I also know as a business owner, there's going to be times in the spring where I'm going to be very busy on a Saturday and certainly working 50 or 60 hours. I think everybody can relate to that swing. So yeah, I think those are just upfront conversations that we're having during the interview process and stuff.

Jon Bryant: Love it. That makes sense. I mean, we have—we could probably do a better job at that. Just kind of crafting what the vision looks like. I've essentially always—we've always presented as being, you know, we work to our goal, so whatever it takes to get to that goal, I want to see you working to it. And if you—like you said, if you have a Friday afternoon that's available and you've hit your goal, why do I care? But the problem that I've run into is that I am the worst micromanager. My ability to shift my personality from being super chill to a crazy micromanager in a second based on performance is really hard. And so people—"Well, you never told me about these expectations." I was like, "Yeah, you just work to the goal." And it was like—and they're like, "Yeah, but I can do that in 20 hours a week." And it's like, "But you're not."

And so those discussions are probably really valuable upfront to say, "Look, here's how this should look. Here's the vision of what this looks like. Here's the benefits. These are fringe benefits to have a flexible work schedule. And here's how this looks if it's not being achieved. And here's your fringe benefits in addition to your compensation and let's go." That's kind of the total package I can see.

Michael Murray: And I think you would probably agree that once—if somebody's really enjoying those Friday's off because they're crushing it, maybe the next month they're not crushing it, it can be very difficult to change those behaviors and turn that person. You know, "No, you gotta work 60 hours this week to hit the goals." And I think it's—that is a very fine line to be very careful with. That once you give benefits and time off and flexibility, it's very hard to take it away. People get used to that.

Jon Bryant: Absolutely. Yeah. We see that time and time again. And it goes back to the discussion of when the results aren't there, how to change your behavior. And it's very hard. It's very hard. And so trying to give flexibility and also take away flexibility—I've found to be very difficult, but it's also needed for this position.

Michael Murray: For sure. Yeah. And that's where, again, it's like, don't abuse it. You have some a little bit of flexibility, but you're not an independent rep. This is not up to you to decide, "Man, I really just don't feel like selling much this week." Not acceptable. And that's where, again, having the salary and things like that is all a big part of our whole mindset. The salary is what you're getting paid to work full time here. And then the bonuses and commissions are what you're getting paid based on the results that you're driving.

Jon Bryant: Absolutely. So my last thought here, I mean, just to wrap it up, I mean, obviously there's a number of sales compensation models. We've covered a few of them. I'm sure there's other ones too. I've seen people do straight salary. I mean, there's unlimited. It's no one size fits all solution for sure. And whether you opt in for one straight or you combine these, I think it's important to remember that the compensation is not just financial. It's also in alignment with your business and with your vision and your values of that business. And that those core things drive the system, drive your team, allow people around you to be inspired and bring the talent you want on the team. So that's my thought.

We'll have an article about this on the PaintScout website, just at paintscout.com in the education section. Feel free to read it. Leave your comments. We'd love to hear if you're using another model that works. Let us know. I'm always open ears to this subject because it's so interesting. It's human behavior, it's human dynamics, it's psychology. There's a lot at play here. And so love to hear it. And yeah, I hope you guys found this valuable. You know what to do if you do.

Michael Murray: Yeah. I think that's a good last thought quick is I think this is a good place to—don't just go rip off what somebody else is doing because you really have to understand the pros and cons and the trade-offs of each one and there is no right answer. There are a lot of good answers, but there is no system that I've ever heard of that does not come with its own negative side effects, if you will. And you have to pick and choose which ones who are gonna be right for you as the business owner and your values and how you wanna do things. And so talk to a lot of people, get the input, but really try to understand what are the pros and cons and what am I incentivizing and disincentivizing by each of these decisions I'm making on how I'm compensating reps? Cool. Awesome. It's tough. Cool.

Jon Bryant: Totally love it Michael. We'll leave it there and as always we'll see you guys again soon. Thanks.

Michael Murray: Thanks man. See ya.

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