Topic

Messages

New Business Compensation

We are an agency that has 30 people and are now hiring a new position-- A New Business Person. (for a long time we had the owners doing it but it took too much of their time)

I've read that this position should have a low base salary and somehow compensate the person with new business sales that are brought in. How do other agencies handle this? What is the basic pay for a seasoned New Business Person? This person will also act as a Manager over the Account Executives.

Suzanne Nolan

As far as the base salary, you can check stats for your area by going to www.salary.com. .We have found it to be a useful tool here.

As far as compensating for sales brought in by a particular person, commission, I have not found a simple way to handle this with C&P yet. I am sure there probably is something there, but I have just maintained a separate spreadsheet to track that sort of thing. Seems a bit redundant, but seemed to be the easiest "quick fix" I could find. If you find something that would work better, please share with me.

Thank you.

Teresa Nelson Office Manager MarginPoint, Inc.
www.marginpoint.com

We don't have a new business person, but I do want to caution you to be exceptionally diligent in figuring out how you structure this person's compensation:

Here are some pitfalls that we have experienced in the past-

1. The other employees who help secure new biz get jealous because they don't get any bonuses for their part. 2. The new biz person over promises so that they can sell new clients without any concern for the long-term profitability of the client. 3. The new biz person expects future commissions when a client grows because of the service that the rest of the employees provide. 4. The new biz person doesn't reject enough unqualified prospects. 5. The new biz person doesn't understand the nuts and bolts of the business enough. 6. The new biz person sells a lot of business, gets his or her commissions and then leaves the company before all of the problems with the clients are exposed. 7. The new biz person leaves because it takes such a long time to develop leads into clients.

Shanny R. Morgenstern, Chief Operating Officer Morningstar Communications Company
http://www.morningstarcomm.com

We are trying to get our employees to generate (be aware of) new business leads. We want to give them a credit or something maybe not monetary to the proportion of the role they play in the development of new business. Any ideas will be welcomed.

Thank You

Ed Miller Business Manager Grafica, Inc.

We offer a $1,000 to employees who give a new business lead that turns into a client.

Lynnette Kokomoor

a good bottle of champagne used to work, but these days perks and benefits seem to be either financially or time related: a day off, a shopping card, a referral bonus (triple digit). In a more team related spirit, a profit bonus at the end of the year for everyone often gets everybody to work together to bring in more work.

Ann Enkoji Business Development Ph.D

We offer 10% of the first year's gross profit.

Natalie Gerngross

There's a great paperback out entitled, "1,001 Ways to Reward Employees" written by Bob Nelson, published by Workman/New York, in which they clearly convey that "money isn't everything". Some of the options include additional time off; a magazine subscription; a day at the spa; a round of golf (to be used on a work day) dinner gift certificates at 5-star restaurants, just to name a few.

Good luck.

Jean Millner Veritas Advertising

New Business Revised

When compensating a new business development employee, is there a communications industry formula that is used to determine the commission percentage? Should the amount be figured on the gross billings of the business versus gross income? Should different percentages be used for different types of business, i.e. advertising versus collateral work?

Would appreciate any feedback.

Thanks, Kathi Sheehan Coyne Communications, Inc.

We are getting ready to hire a senior-level salaried employee who has interesting relationships that may lead to some new business. I am curious to know how other agencies compensate for such a thing. Is it done on a percentage? Is it a straight bonus? Should the amount be figured on the gross billings of the business versus gross income? Should different percentages be used for different types of business, i.e. advertising versus collateral work?

Thanks again for your help.

Kathi Sheehan Coyne Communications, Inc.

We love to encourage our employees to bring in new work so we give 5% of the gross income in the first year, 3% in the second and 1% in the third year. We like long term clients too!

It has the result of keeping everyone looking for opportunities.

Good luck!

Ann Adams Controller J. Stokes & Associates www.jstokes.com

What kind of "interesting" relationships are we talking about?????

Seriously, though, we had a new business person who received a base salary of around $45,000 and 5% commission on gross billings for the first year of a new account, and 2% of gross billings for the second year, nothing after that.

If this person will not be a true new business person, but is receiving a fair salary for another position, you might just want to work out a generous bonus scenario.

We have always talked about how to compensate regular employees who bring in new business, and have leaned toward some sort of a flat fee, rather than a percentage of billings. We have yet to come up with a good plan. We hope our semi-annual profit sharing-type bonuses will encourage people to contribute to the general profitability of the business in many ways.

I don't think the percentage should vary depending on the kind of work. It doesn't seem to make sense to do it that way, plus it would be more of a pain to track it.

Good luck!

Catherine Colangelo The Phillips Agency

I would like to know more about your semi-annual profit-sharing type bonuses you mention below. Please advise. Thanks

Lynnette Kokomoor

Shanny raised seven good points in the post on the pitfalls of new business compensation.

While the best solution (in my view) is a complicated one based on many variables, the short version is: Pay your BD specialist for everything he does. The base is for being in the office, admin requirements, participating in meetings, producing sals tools that don't yet exist, etc. There should always be a base and the BD person should understand what it's for. Commissions should be paid for landing a client, profit margin, ongoing revenue, volume goals, etc. This makes your structure somewhat complicated but your employee gets rewarded many times for doing many things correctly. Lots of little payments are better incentive than one big carrot.

I would also caution against hiring someone for the position based on his relationships. Hire someone for skills and experience. Relationships are his that he will take with him when leaves.

If there are other successful compensation formulas out there I would love to hear them.

-Blair Enns

Business Development Position

Question:

We were wondering how many firms have a "New Business Development" Person on staff. This is a person devoted ONLY to getting new business, then turning it over to an AE to manage. We also would like to know if this model works for people. As it is now, we all work on "New business Development", but we also take care of the client once they come on board. We have never had a "http://www.clientsandprofits.com/salesperson".

If so, how are firms handling the salary? Salary plus commission (what percentage?), straight salary, commission only.

Thanks for your time,

Jean Kl»ndt
-- Jean Kl»ndt Kl»ndt Hosmer Design http://www.klundthosmer.com

Shouldn?t that be a normal function of a Principal at your firm?

Mike Thomas FUSE Inc CFO

I,too, would love to know the answer to this question. We are in the process of hiring someone for a new position that focuses primarily on new business and having feedback from other agencies would be very helpful.

Diana Decesaris

We've tried a "New Business" guy 4 times. Each time more disappointing than the last. If they were any good, they would have their own agency - that's my conclusion. (The commission/ salary thing was always an issue too. But generally, a small salary with some sort of commission based on gross sales (not including out-of-pocket costs) was the best model to administer).

We've found the principals of the company make the best champions of new business. Hire AE and production staff to allow principals to do nothing but sell. Those are the the best dollars spent.

Roxanne Cowan

At our advertising agency our new biz staff devote their time solely to finding and courting perspective clients. Once a client comes on board they are turned over to an account manager. Our new biz staff are paid straight salary.

At my husbands engineering firm, his new biz staff is paid salary plus 5% commission of the project proposal.

Donna Liebert

We have a "New Business Development" manager on straight salary. The manager pursues all new business and RFPs, and follows-up on all leads brought in by anyone in the company. The client is assigned to the AE whose experience best matches the client.

Pem Carter Work, Inc.

We tried a " Marketing Director" for about 9 months. He was very good and had a lot of contacts. However, it wasn't "cash smart" to keep him on board. One of the principals does business development pretty much full time, now, as she did before we hired this person. We paid salary plus commission. Salary was high at $65,000 per year, in my opinion, and commission was at 10% of fee sales. The salary may have been justified if the work brought in was comparable. He did bring us one of our biggest clients who is still with us, but that didn't justify the high salary AND the commissions he got for the sales. I think a more reasonable approach is to pay higher commissions with a lower draw. This motivates sales people to bring in more business and doesn't hurt your cash flow if they don't, since they don't get paid if you don't get business.

I know in other similar businesses ( I work for one of them), sales people are paid commission only - still at 10%. Results are usually impressive due to this structure due to the motivation they feel to get a paycheck...

Hope this helps.

Robin Scully, Controller Design & Image Communications, Inc.
www.d-and-i.com

Hi Jean,

We have had a New Business Development person on staff for the last one year or so and she does exactly what you have described. In addition, the new business activity is also regularly pursued by our President, Creative Directive, and regular account people. The remuneration arrangement is different for different individuals.

Johnson J. Paul Controller Campbell Michener & Lee Incorporated

I would also agree with Roxanne's response. We have tried several new biz people and they all have failed miserably. We typically pay them around $35 - $40K and then 5% commission on gross sales for the first year of an account, then a lower percentage the second year and nothing after that. None of them made it to a second year! If they had brought in any new business, it would have been handed off to an A.E.

We feel that having our principal do new business development is the best option. The trick is to keep her time free enough, which is very difficult to accomplish!

Good luck!

Catherine Colangelo Business Manager The Phillips Agency

We do not have a person devoted solely to new business development. We do have a small group of employees that participate in new business development meetings that manage a "hit list" and take on the task of making contact.

We have a program in place that we thought would help "push" employees into joining the effort of finding new business. That program entitles any employee that is primarily responsible for bringing a new client on board receives a bonus that is based on the first year of billings (excluding expense billing). If the client spends a fair amount, that number isn't anything to sneeze at.

I agree with the person that said the best salesperson is the business owner. We have two partners that sell the business better than anyone we've had or have on staff. Adding a person, which in turn adds costs, is something to think carefully about -- especially in this economy!

Jody Breiland McClenahan Bruer

We have tried a few different New Business people and haven't had a lot of success. It is tough to find someone who is good at Agency New Biz. Like someone else said if they were that good they would have their own agency. The best New Biz person is a principal who has the contacts and brings in the business. Most successful agencies I know do it thru the principals. You don't have to worry as much about that person or group of people leaving. We encourage our account service staff to cultivate prospects and keep a list. Call them, send them articles and information, and take them to lunch on occasion. This way when they are ready to change they will have you in mind. The weakest person we had was a pure salesman who didn't really understand the business. He said the problems he ran into was it was all timing and the client had to be ready to move. A principal can afford to wait on this lead even if it takes a year or two and there is very little cost to the agency. A sales person is just trying to land a sale and can't be that patient. We set the new biz person up on salary and commission. But commission only on the first year sales. They don't seem to last past that so it doesn't really matter.

Bill Scarpa

The topic of compensation for a new business development person came up about a year ago. A lot of things can change in a year, and more people have new experiences to share.

Judy Hector Clients & Profits

We hired a new salesperson in August. Our arrangement with him is that his income is strictly commission-- 10% of net profit on each job he brings in. Since it takes a salesperson a long time to get up to speed, we are paying him $1000 a week draw against future commission. So far, he appears to be learning the ropes, and is starting to produce. Of course, he has not gotten anywhere near the amount of advance commission we are paying him-- we are viewing his draw as an investment in the development of new sales. If at some point we feel he is not going to be a worthwhile investment, we will have to let him go. But for now, we are willing to take the risk.

Annette Rubelmann CD Squared