Sales Commissions February 15, 2008 **Results**

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1 Sales Commissions February 15, 2008 **Results** Objective: To evaluate the pay structures of sales persons, and more specifically to determine whether they are paid a base salary or a draw, how the commission structure is set, what perks or benefits are provided as part of the position, and how leads are handled within the group. Respondents: 138 out of 507 (27%) Summary: Sixty percent of responding members require sales reports while forty-seven require call reports. Eighty percent set sales goals for their sales people. Those goals include orders (92%), quotes (26%), calls (21%) and visits (20%). three-fourths set annual goals. Eighty two percent of those who responded have inside sales teams and outside sales teams. The roles of the inside sales person are to qualify leads (68%) and sell machinery (67%). Seventy-eight percent of the leads received are turned over to an outside sales person. Out of those seventy-eight percent, eighty-nine percent are paid a full commission on the sale. half of the inside sales people handle parts calls. The following commission is paid; machines (5%), refurbished machines (4%), rental machines (1%), used equipment (3%), parts (2%), installations (1%), service trips (1%), and service contracts (1%). Only a mere four percent pays their sales personnel a higher commission if the leads are self generated. Commissions are based on gross sales (86%) and net profit (14%). Commissions are paid when the machine is shipped (31%) and when the receivable is paid (69%). The average salary structure is 63% base salary and 37% commission. The base salary is considered a draw against sales goals by only four percent. Sales people receive eight percent commission for OEM sales, four percent for distributor sales, and four percent for manufacturer rep leads. Commissions are paid to the sales person managing the OEM and distributors sixty percent of the time. Eighty-one percent pay the commission on the net sale. Companies provide their sales people computers (97%), cell phones (88%), and company cars (35%). When new products are introduced, an increased goal structure is set to include the new product line by twenty-five percent of responding members. Seventy-five percent add the goals to the base. Commission rates are kept the same for new products (92%). all - $50, Number of Companies

2 all - $50, Do you require sales reports and/or call reports? Sales Reports Yes No Call Reports Yes No Do you set sales goals for your sales people? Yes No A. If yes, do goals include: Calls Quotes Visits Orders B. If yes, are goals set by: Quarter Year Do you have inside and/or outside sales teams? Inside Sales Teams Yes No Outside Sales Teams Yes No A. What is the role of the inside sales person? Sells machinery Qualifies leads When a customer needs a visit, is the lead turned over to an outside sales person? Yes No

3 all - $50, A. If yes, are they paid the full commission on the sale? Yes No Does the inside sales person handle the parts calls? Yes No What percent commission do you pay on the following (Average)? Machines 5% 6% 8% 5% 4% 5% 4% Refurbished machines 4% 4% 4% 5% 3% 4% 3% Rental machines 1% 3% 2% 1% 1% 1% 1% Used equipment 3% 4% 3% 5% 2% 4% 3% Parts 2% 5% 4% 2% 2% 0.5% 2% Installations 1% 2% 0% 0% 1% 1% 1% Surveys 0% 0% 0% 0% 0% 0% 0% Training programs 0% 0% 0% 0% 0% 0% 1% Service trips 1% 2% 0.2% 0% 0% 0% 2% Service contracts 1% 2% 0.4% 0% 1% 0% 1% 8. Do you pay your sales personnel a higher commission for leads they generated? Yes No A. If yes, how is this measured? If they source and sell to a new customer without inside technical support a higher commission is paid. It is tracked as a new customer in our system database. Base salary is agreed upon; each sales person goal is 1.5MAfter he reaches that goal he gets 1.5% on everything he sells form dollar one. Salary bonus plan If lead was not a prior customer or never contacted prior. New order 9. Commissions are based on: Gross Sales Net Profit Commissions are paid: When machine ships When receivable is paid What percent of the salary commission structure for your salesperson is (Average)? Base Salary 63% 70% 55% 68% 63% 57% 65% Commission 37% 30% 45% 32% 37% 43% 35% 3

4 all - $50, Is the base salary considered a draw against sales goals? Yes No What percent commission is paid to a salesperson for? (Average): OEM sales 8% 13% 4% 3% 4% 3% 12% Distributor sales 4% 13% 4% 3% 4% 4% 2% Manufacturer rep leads 4% 2% 4% 3% 5% 4% 5% 14. Are commissions paid to the sales person managing the OEM and distributors? Yes No A. If yes, is the commission paid on the net sale? Yes No Does your company provide the sales people with? Cell phone Computer Company car Other Other Allocation for car expenses (22) All necessary office equipment for selling from home, including fax and internet (6) Blackberry (4) Camera (3) Travel expense coverage (3) All Expenses with receipts (2) Company Credit Card (2) We offer allowances for cell phone and pay mileage Inside sales support to allow them maximum face to face selling time Expense account for entertaining A. If a company car is provided, what are the criteria? Serves a business purpose. Cost under $30, That the person be full time and provide the required sales reports, track mileage for Internal Revenue purposes and keep the vehicle in good condition. We either provide a car (30K$ limit) or an allocation of 600$ USD per month +.16$ per mile. Direct external sales role. (4) Can be used at any time. When for personal use, employee pays for gas. Most expenses are covered by the company. Employee pays for gas used during personnel use. We pay mileage per IRS guidelines fro business use of personal car Reps pay for personal miles Personnel miles paid by driver 4

5 all - $50, Inside reps have use of company car Car or Truck, small deliveries & pickups, demos & sales calls, picking customers from airports & hotels, transporting equipment. 4 door sedan, 30 mpg Open usage No company car, sometimes a car allowance They either get a company car or a car allowance Must be a Sales Manager Actually we pay a car allowance which varies depending on amount of driving a sales person does. The only criteria are that no Luxury vehicle is allowed. Personal miles are to be reported and will be taxed as a fringe benefit Meet their annual goal We give a monthly amount (aprox $650) and sales rep chooses car. Car must be less then 3 years old Up to $500 payment per month Company car used to be standard for all field sales people. We are transitioning away from geography sales and to Strategic Account Selling. Now most of our travel is by plane. We are slowly moving off the standard practice of issuing a Company Car. Our service techs and sales use company cars if call is no more than 6 hr drive depending on air connections. They drive at least 10,000 miles per year on business. It is available for limited personal use. 16. When introducing new products, do you set an increased goal structure to include the new product line? Yes No A. If yes, are the goals added to the base? Yes No Are commission rates the same for new products? Yes No A. If no, what percentage is paid on new products vs. standard products? 1% % % % %

6 18. Other Comments: We sell our machinery without visiting customers using our web site as our primary sales tool combined with Pack Expo. No commissions are paid. No travel expenses and very little entertainment expense other than during FAT tests. Different levels of commission paid on sales once goal is achieved maybe up to 2.5% of gross. Straight salary On the latter questions, incentives such as commissions X 1.25 may be implemented if we decide that a faster penetration is needed or else. Plan is based on territory budget targets. This number is assigned a threshold of 40% and 80%. The comm. amt increases once they surpass these goalposts. Once they exceed 80% of their total budget goal, they earn at 2%. Should the account be a new one, we pay an additional 1% as a New Customer "Bump". Base Salaries range from 60 to 100K per year, with the addition of the commission plan and other benefits as noted. It is assumed that this information is held as confidential. No earning caps. Sales people should be compensated based on sales performance. The good ones stay, the others are sent to the competition Sales personnel are paid a base salary. The amount of commission is based on a set quota. Different levels of achievement above the minimum quota are paid at a higher %. It is really more an incentive compensation rather than a straight commission. We are not on a commission plan; our compensation is based on a bonus structure. Currently, we use only sales reps (no employee sales people other than office) Commissions are on machine sales only with $60K base pay and 1% for sales over $1M, 1.5% over $1.5M, 2% over $2M, and 2.5% over $2.5M. Commissions are split 50/50 if customer headquarters are in their sales territory and machines delivered outside their territory. Our inside reps are paid base salary and bonused on yearly sales projections from our projected yearly pro forma outside reps are paid a sliding scale based on input up to 10% The commission structure is actually a tiered structure, the higher the sales, the higher percentage for commission. Also, the base salary covers certain amount of sales with no commission paid out. Commissions are set on an increasing scale with bonuses paid on plateaus Base salary and commission (Bonus) based on attainment of GM annual target; reviewed monthly with sales team. Their is no cap to the commissions being paid Our commissions are based primarily on Team success. We do holdback 20% to distribute based on individual contribution and execution. All commissions are based on gross margin (expenses, discounts, etc. taken out). We pay a lower percentage commission (10%) from 90% - 110% of previous years sales, then a higher percentage (27%) for all sales over 110% of previous year's margin. We currently sale thru direct salesman and are now focusing on setting up rep agencies across the country Our salesmen are in the office 75 to 80% of the time. We do not sell to end users, only to distributors 1% higher commission rate for new Customers for a period of one year from first order date, new customer is anyone we have not done business with in over three years. We set annual sales revenue targets, there are three levels, the first sale revenue level receives up to 2% over this amount receives 2.5% and above their annual target receives 3%. We're considering (A) "inside sales" to be a "sales coordinator" and "customer service" person and (B) "outside sales" as our "domestic sales reps". Goals are set annually and looked at monthly. New products are added annually and are included in goal numbers. Two different commission structures: some on base salary + commission, other 100% commission 6