Why sales guys make all the money

Sales staff working on an hourly wage do not apply to this discussion. They usually make minimum wage and work at big box stores like Best Buy or Future Shop.

But the all-mighty commission salesperson... The profit potential is boundless!

Every item in a store has a price tag. A percentage of that price goes to the salesperson when you buy it. This is sometimes as high as 15%, more often 10%, and most often by far in the 1-5% range. Warranties and other non-tangible add-on items are usually pegged around 10-30%.

Case in point. A salesperson makes one sale - a $10K Sony Plasma TV with $500 stand, plus a $2K warranty.

3% of the TV is $300. 4% of the TV Stand is $20. 20% of the Warranty is $400. For spending around an hour with you, this salesperson has just made themselves $780. That's one hell of an hourly wage.

This is of course balanced with the extreme opposite, spending 2 hours with a customer that buys a $50 VCR making you 50 cents.

Smart salesmen spot you and your fancy new shoes and know how to upsell. "You don't want that $50 VCR, you want an $80 VCR! Honestly!" It's all in the sales pitch.

What is more curious, however, is that supervisors over the salespeople usually get a small percentage. 0.5% plus a monthly salary, for example. The store managers will get a larger salary plus a big bonus structure. Regional managers are well rewarded for the amount of volume their region ships. But when you get down to brass tacks, they are all salesmen at heart. The only people not making a boat of money at a retail store is the customer service reps and the warehouse guys.

Yet another nodesave! I'm on a roll.

The reason a salesman can make a lot of money is very simple: no matter how efficiently a business is run, it will go under without revenue to pay the bills. Investors pay the bills when a business is starting out, but they want their money back in spades. In order to gain revenue, you must make sales.

There is a difference between thinking an item might be cool to have, and handing over your credit card. Or for a larger film, the purchase order. In a capitalist society for almost every product the new firm will face competition. Which means somebody else out there is making something similar, and maybe even better than your product or service. A good salesman can be the difference between your firm getting the order and one of your competitors.

In other words, salemen make the big bucks, because they bring in the bucks. In wholesale, that is. Unfortunately, in retail the salesman don't often make that much. My stepfather used to manage the Nautica department of a nationally known department store chain that shall remain nameless. Even with Nautica supplementing his income, and his commission, his earnings were in the $20K range. Which is half what I earn in a good year working construction. The presumption is that the store and its advertising matter more than the salesmen.