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Need Advice On Restructuring Sales Commissions

Posted By Russell, 6/4/2012

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Hi Larry,

Greetings! First of all I want to thank you for the valuable articles that you have posted on the Furniture World website! These are truly great insights and help us drastically. I recently read your article on Variable Rate Commissions (http://furninfo.com/Furniture%20World%20Archives/4770).

My name is Raj Kumar and am the Sales Manager at Sierra Living Concepts, an Online Retailer of solid wood furniture. We have been established since 2003 and sell furniture purely online. Our Sales Reps work from home on a 3 & 4 Day schedule. We have a Base Pay + Commissions where we the commissions are based on the total net sales after deducting promotional costs. This has worked for us so far but we are exploring options to streamline the commissions process better to keep it in line with the Industry standards. 

Could you provide any valuable insight into a model that might work in our scenario? Thank you in advance for your time!

Raj Kumar


From bardiqian, 11/20/2012  4:25 AM

Hi, Raj,

I suggest you to find a company who can provide the  furniture drop shipping service, you just focus on your business. which maybe can improve your margin rate.

If you can have more single orders, you can buy from China directly, if your shop is big enough.

I know some outdoor furniture wholesale in China, if you are interested, you can mail me

From mcmahonlive, 7/9/2012  6:48 PM

Hi Raj - thanks for reading.  From my experience in the industry the most effective commission method is a variable sliding commission based on gross margin %.  This motivates your best people to add directly to your bottom line.  It should be implemented in conjunction with properly functioning inventory management systems and procedures.  Proven results of this are a jump in gross margins from 3-7%.  I also like to implement this with a pay for performance team bonus.  I'm available on a consulting basis if you wish professional assistance.

David McMahon
Furniture World Writer
Certified Management Accountant

From Russell, 6/4/2012  6:59 PM

Hello Raj, Larry Stark's article on variable rate commissions was posted many years ago and he is no longer at PROFITSystems. I will forward your message on to David McMahon, who is also a frequent contributor to Furniture World Magazine and works with PROFITSystems as a consultant to furniture retailers. Perhaps he can offer some advice.

Hopefully some of Furniture World's other message board readers will respond with helpful advice as well.

Russell Bienenstock
Furniture World Magazine

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