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What are reasonable sales commission models for hardware/solution sales?

I am looking to understand what a reasonable sales commission model is for hardware/solution sales using independent sales consultants?

Based on HW devices and a backend SW solution - deal size can range from $10K up to $500K for hardware with recurring monthly sales revenues for $10-$50/month i.e. combination of CAPEX and OPEX. The HW pricing can also be bundled into an OPEX model. OPEX models are typically based on 3-5 year commitments.

5 Replies

Tom Ramar
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Tom Ramar Entrepreneur
VP of Growth at DrinKitz, LLC
Depends on what you're trying to achieve. What are your margin requirements? Do you have a loss leader to get in w/ the account? How frequently do you want a rep to call/visit a current account? What do you want a certain level of rep (leader vs. individual contributor) to be paid AT plan/quota? What kind of sale rep do you want becoming the face of your brand?
Richard Joye
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Richard Joye Entrepreneur
Disrupting industries @KCHK
On top of the above-mentioned important points and questions mentioned by Tom Ramar, it is also important to consider the workload and investment required by the sales people. Are you selling a solution or a product ? Sales guys would need to spend a lot of time mastering it or is it an easy sell ? Will they have to buy or carry hardware with them, organize demo, workshops, showrooms ? Is there any form of exclusivity, like territorial ? Who are the typical customers ? individuals, large corporations etc...?
So it depends on many many factors... commission could range from a very low 3% (i.e. selling to multinationals multi-million $ contracts if the sales guys have good relationships) to 30% (retail sales, requiring traveling, demo, etc...).
Suresh Kumar Neti
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Software Outsourcing Advisor | Custom Software & Product Development
As rightly mentioned above, it depends on what one is selling. We normally pay a fixed % of the revenue to our sales consultants (for the software services projects). I am guessing that it will be between 10% - 20%.
Yazdi Mehta
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Yazdi Mehta Entrepreneur
President at Sales Genii Inc.
We are a software company in Florida. Where is a good place to find good individuals to add to your remote sales team?
Steven T.A. Carter
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Steven T.A. Carter Entrepreneur • Advisor
Chief Operating Officer at 1PEL Inc.
I am a big fan of tying commission to gross margin. It ties sales behavior to a critical business factor. Typically the rates are much higher than straight revenue based commission models. But it give a solid incentive for the desired behavior. In media sales you see revenue based commission models in the 2 to 3% range at the top. We ran up to 10% of gross margin models for gross margins over 60%. 3% for under 40%. 4% for 40 to 50. 5% for 50 to 59%. We had a lot of sales folks figure how how to sell at high margins because they made a LOT more money that way.
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