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Given the economy, jewelers can’t keep "slackers” around in their store. In fact many jewelers had to make tough choices this past year. Keeping sales staff because "we’re family” was way past it’s prime. This was the year for many “put out or get out!”. But of course many jewelers over react. “I’ve had enough!” then they fire the staff. Like being in a marriage, waiting for an explosion is the worst time to try and solve your problems. By then its way too late. Most sales staff problems can be blamed on who? The owner! Most jewelers hire staff and toss them onto the floor, maybe even giving them a few books to read. Then when the staff doesn’t sell, both are frustrated. “Why aren’t they selling? I pay them well. We have lots of traffic! I give them 1% commission. It’s not that hard. If I can do it, anyone can!” Why is it that you sell so well with no formal training and they can’t? A couple of reasons: YOU
be able to pay your vendors. Or maybe you’ll skip a payroll. 2. Customers would rather deal with the owner. 3. You come to work to make a good living. 4. You’re a risk taker. 5. You love to sell. 6. You love the feeling of closing a sale. STAFF
There’s more to it than that. You first must have the right temperament of people. There are only two types of people in this world.
These would be sales people. Like a race horse they love to compete and win. 2. Work Horses These are bench jewelers, bookkeeper, administrative staff and “clerks”. Clerks write up orders, sales people move product out of the store. Hiring someone just because they’ve sold before and seem so nice just doesn’t make product jump off the shelves. Hire enthusiastic people! Teach product knowledge! So lets look first at how to gauge your store’s ability to put the staff on a commission system (there are reasons you can’t do commission) and what’s needed to be able to install a commission plan. Then we’ll look at how to do this. Why you may not be able to put the staff on a meaningful commission plan. A commission plan should be an incentive to sell. It must be rewarding. What’s rewarding? The staff must be able to spend that money on something other than burgers. A 1 or 2% commission might seem a lot to the owner (especially when 3 or more sales staff are paid you go “wow! They just got $600”.) Divide it up by day and $7 a day doesn’t even pay for burger & fries for lunch. Some incentive. If in your store you the owner sell over 50% of all sales then your staff may not be able to make any serious money from the crumbs left to them. If you sell the bridal, high end and leave them to sell earrings, charms, repairs and batteries, then they have no chance of making any serious money. Let’s talk about a million dollar store. If you sell $600,000, that leaves $400,000 to be divided amongst 2-3 sales people. Then each might sell about $133,000 each. So how much should a sales person sell? “Typically” sales people should sell between 8-13 times what there are paid. Take their W-2 and divide it by their total sales to see what percentage they cost the store. Sales includes product as well as repairs (repairs are sales my friend), watch batteries and custom designs. If you do a lot of buying gold off the street, I’ll discuss that further down. So if Mary makes $30,000 and sold $310,000, divide the $30,000 by $310,000 and you get 9.6%. That’s excellent. But if she sold only $250,000 she cost you 12%, not so good. Sales staff should cost you between 8 and 13% of their sales. At 8% they are very efficient and at 13% they are very inefficient. When you calculate the sales staff percentages calculate it based upon "sales” is their full time job. The staff will want to tell you “remember, I package the FedEx packages, that takes time.” “I call customers on the phone.” “I call Stuller orders in every day.” Yes that’s work but the question is “Does it take them away from selling?” If Mary calls customers or wraps packages and as soon as a customer comes into the store, she drops what’s she’s doing to wait on them, then her tasks doesn’t interfere in her selling ability. But let’s use the bookkeeper as an example. She sits in the back and helps out when everyone else is with a customer, then bookkeeping keeps her from selling. In this case you’d figure what percent of her time is delegated to selling. If she works a full week at 40 hours but ‘typically” puts in 15 hours a week selling, then she spends 38% of her week selling (15 hours divided by 40 hours). So if the bookkeeper makes $35,000 a year and sells you first figure out her "selling costs”. 15% of her time is selling and 15% of $35,000 is $5250. This is what you paid the bookkeeper to sell. Now if her sales are $75,000 a year (not much, is it?) and you divide her $5250 by $75,000 in sales her cost to you is 7%. Hey, she’s a darn good sales person when she sells.! Overall:
as well as each staff member. 2. Then figure out how much each staff member sold and add it up to get “Total Sales Staff Sales”. This automatically takes away the sales from the store owner. They can’t "steal” your sales so we focus just on their sales. Later when we have the staff so fired up, trained and motivated, then and only then can we then ask them to take some of “our sales” to give us more free time. First let’s concentrate on what they do now. 3. Use the methods as mentioned to figure up the selling cost as a percentage per sales staff. 4. But also figure up the whole staffs selling percentage as a group. Add up all of their “selling salaries” and divide that by their total sales. This will give you an average for everyone. You'll want to know your store's overall cost for the staff and then individually. When I did this for my store in the early 1990’s this is what I found:
2. The least experienced sales person (and youngest) and the lowest paid on an hourly basis cost me 12% of sales. 3. The most experienced sales person and the highest paid by hourly wage cost me 18%. 4. I couldn’t give the younger sales person (who cost only 12%) a dollar an hour raise because it would cost me $5 an hour. Why? Because sales staff members can’t keep a secret! All of the other 4 sales staff would want a raise. “I’ve been here longer than she!” “I have more experience than her!”. So I went to a Harry Friedman seminar in 1991 and learned the secrets I’m sharing with you now. You may not be able to do this but Harry said instead of everyone costing me 14% of sales they should cost 10% of sales. I was paying them $7 to $11 plus 1% on repairs and 2% on product sales. It really wasn't an incentive. So I placed all sales staff on 10% commission on total sales, including repairs with a guarantee draw of $7 an hour. (I’ll discuss commission systems in depth later.) All 5 sales staff members said their salaries would drop and they’d quit. They were right, their income did drop for the first month, but no one quit. Why did their salaries drop? Because they used to COST 14% of every sale and now they only COST 10% of every sale. So if you sell the same amount of course your income would drop. To make more money they’d have to sell more. Which is exactly what happened. It took about 1.5 months and it finally kicked in. It took us 18 years to get to 1.1 million. The next year in 1991 we started the commission plan in June and sales that year increased 35%. Typically most compensation experts would suggest that at least 50% of their pay come from a commission/bonus plan. My original plan probably gave them 10% of their pay in commission and it wasn't an incentive. So for many people I help them devise a plan that's 50% wages and 50% commissions. You'll find like others that giving them a good incentive will give them the carrot they need. But before you instill a commission plan there are two other things you must do first:
2. You must train them! Like I said before too many jewelers hire smiling faces and EXPECT them to sell when in fact they don't know HOW to sell. Training is the only way to get them to perform. Here's to a successful year. David Geller
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