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Help needed in sliding scale sales commission chart / workbook

W

WallyWally

New Member
Hello all,

I'm a sales guys who has been just “verbally” hired for a software group. My new boss has already had me submit my self-authored contract and now he'd like to see an Excel workbook / spreadsheet on how to PAY me a sliding scale commission on the software license leases our potential clients will buy from me.

Leases are for 24 months and are about $400.00 a month.

I already asked him to just pay me up front on the “lifetime value” of the contract and be done with it…As in : “Next…?”

That was shot down and the “sliding scales” idea was proffered. He'll pay me a "draw against commission" and I see a bigger hit when they sign up, and smaller, ever so slightly declining payments for 23 months until it’s RENEWAL TIME...When they renew…I still get a monthly stipend from the account for keeping them as a client …”farming” as it were.

Also…some clients simply buy outright instead of “leasing”. They don’t “believe” in the concept I gather. But, they will pay me straight percentage for clients who buy licensing outright. I want 25% of the gross amount for those sales right up front. Simply put; if the employer is getting paid all at once by the clients, then I should be paid up front as well.

Making up my own contract and pay plan is an admittedly “different” situation which I’ve never encountered. But I need to get a spreadsheet acknowledged and mutually agreed upon before work can begin. I don’t have a clue where or how to start…Please help…
 
Hi, WallyWally!


First of all welcome to Chandoo's website Excel forums. Thank you for your joining us and glad to have you here.


As a starting point I'd recommend you to read the three first green sticky topics at this forums main page. There you'll find general guidelines about how this site and community operates (introducing yourself, posting files, netiquette rules, and so on).


Among them you're prompted to perform searches within this site before posting, because maybe your question had been answered yet.


Feel free to play with different keywords so as to be led thru a wide variety of articles and posts, and if you don't find anything that solves your problem or guides you towards a solution, you'll always be welcome back here. Tell us what you've done, consider uploading a sample file as recommended, and somebody surely will read your post and help you.


And about your question...


Doing things within an Excel worksheet is not quite different to doing it manually in a sheet of paper, you have columns, rows, you enter data, you tell Excel to perform calculations and you get results.


I don't know how actually a leasing contract works and is calculated in my country (and even less in yours), so if you could explain it as if you have to write it down on paper, with examples of input and calculated values (and with explanation of how to), it'd be very useful for people who read this and might be able to help you.


If you could do it right now, I'd be glad to start helping you, if I understand your problem, of course.


Regards!


PS: BTW, I hope you don't mind if I change slightly your topic's title, because of words "urgent" or alike, as you would see when you read the third green sticky topic, paragraphs 12th and 13th, are not well seen in this forums.


"Never title your posts as "Urgent", "Priority" "Immediate". It may be Important to you, but not for rest of the members here. These words will be moderated out.

Consider that the world is operating 24hrs a day. A late post today may well be answered by someone else overnight."
 
Hi ,


To add to what has already been suggested , since your problem is in developing a spreadsheet , why don't you just work out two examples of the calculations you have described , one involving leasing , and the other involving outright purchase ?


Work out these two examples on a piece of paper , scan it and upload the .jpg or any other type of image file ; with this before us , preparing the spreadsheet will be simple.


Narayan
 
Thanks for your response. Apologies for the urgency, I agree; what’s urgent to me doesn’t necessarily mean the rest of the community. Also, please know that I did look thoroughly through the site as well as many other sites looking for what I thought would be a fairly common compensation program. I didn’t really want to advertise, anonymous or not, my Excel naïveté on a global stage!

I have but one product, as compared to some representatives with 100’s or 1,000’s of offerings. This should simplify things a bit. My clients can buy a license outright…as millions of us bought Microsoft and other software suites for so many years before the advent of SaaS models. Incidentally, my product is decidedly NOT a SaaS software product. So, that type of outright purchase, as well as technical support as needed, periodic upgrades and optional training of staff will be paid out to me as a straight percentage of their respective a’la carte acquisition price; easy.

The tricky bit is the “sliding scale” commission payments on LEASES. The lease option still has inherent tax benefits for businesses here in the US. Additionally, the aforementioned upgrades and technical support are “free”; rather, built in to the monthly “rent” / lease payments.

So, as I muse over this, it appears that I am actually DEFERRING my full commission payment for over 24 months. The advantage is clearly to the employer. The employer is, for lack of a better term, holding back, or “deferring” payment to me “in full” for 24 months. And, for lack of a better turn of phrase and simplicity’s sake, I am “lending” them my commission dollars.


You are so right Sir JB7….writing this out is truly shining a light on this rather “unique” employer request. Now; when I leased medical hardware to docs and hospitals in years passed, a 3rd party LEASING COMPANY struck the rental agreement with the clients. My then employer not only got their money up front…but the leasing company used to toss in some pretty hefty BONUS money to both my employer, and ME! Yes, I had a choice as to what leasing company I would use. They would compete by sending me checks as “thank you notes”. Additionally, we, the sellers, didn’t have a care whether they made their payments, or made late payments. I got paid up front no matter what WITH a little bonus on top.

Now it’s become clear that when I lease the software, I should be paid more commission overall. Also, I don’t think I should NOT be paid monthly if any of the clients don’t pay or pay late. Again, thank you for asking me to write this out!!!


So, let’s say the lease term is 24 months and the lease is, for example, $1,000 a month. The LIFETIME VALUE (LTV) is $24,000.

Let’s just say my commission is going to be 30% OVERALL on leases. SO they owe me $7,200 to be paid over those 24 months.

Now, I need a good bump of that $7,200 heavily weighted up front…much like mortgage interest is heavily weighted up front over the term of a loan…How about if I just take their first months “rent” of $1,000, THEN, we “amortize” the balance owed me, in this case, $6,200 over the 23 remaining months, precisely as one would a conventional home loan.


Now, there remains one small issue to address; how shall I be paid when they resign? Its MY JOB to make certain they are happy with our product and that we are servicing their needs. THAT has value and its critical to the ongoing survival of the company. Clients who don’t re-sign with the vendor are referred to as “churns”, and a “churn rate” is the percentage of clients due to re-sign in any fiscal year…who do NOT re-sign a lease thereby extending their contracts.


I was told that they are willing to pay me a “flat rate” in perpetuity, starting month 25 and for as long as the client remains on the books. This software is for a very small specialty client. There are only about 6,000 possible clients here in the US of which I hope to grab a third, or less. Meaning, I need month 25 and moving forward to provide me a nice salary. There’s a finite number of offices who would use this product and securing a third of them would be EPIC in the world of software sales. For now, I’ll just slap in the arbitrary figure of $15.00 per month per lease client after their initial 24 months.


So, I used a few terms to hint of OTHER application in other industries. Now I’ll start searching for those applications starting with a mortgage amortization schedule worksheet.


Thanks!
 
Hi, WallyWally!


Correct me if I'm wrong, but as far as I know leasing involves concepts like capital, interest rate, residual value, ...

Here there's a link with a detailed explanation:

http://www.ridewithg.com/index.php/the-lease-formula/


Now the main question is... what's your question? What do you want to do with the tables that can be build in Excel with all those concepts?


Regards!
 
Hi, WallyWally!

Today I read a post regarding commissions, upfront payments and so. This is the link, just in case:

http://chandoo.org/forums/topic/in-what-month-will-we-earn-a-profit?replies=2#post-35205

Regards!
 
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