Sales Lingo vs. Rhetoric —DeWese
On the last day of this month, I will be 65. And, dammit, I’m still not grown up. I still don’t know what I wannabe when I grow up.
This is sad. I ask myself: “How am I defined?”
Ever wonder how you are defined? It’s scary to think about.
When I finish this column, I will have written 251 “DeWese on Sales” columns for PRINTING IMPRESSIONS magazine. Does that define me as a columnist?
I owned the Marple Crawdads semi-pro baseball team, coached more than 1,000 baseball games and won nearly 80 percent of the games. That’s better than the win percentages of Connie Mack and Casey Stengel. If you look up “baseball manager,” you won’t find Harris DeWese.
I have painted and sold more than 700 oil and watercolor paintings, but you won’t find me defined as an “artist” anywhere.
As an investment banker, I have sold more than 140 printing companies in M&A transactions. Don’t drop my name on Wall Street. It won’t do you a bit of good.
So how am I defined? Maybe I’m defined as a “definer?” Many printing executives and lawyers call on me to define things for important matters that they are deliberating. Some of those Wall Street types call me occasionally to define something about the printing industry for them.
For example, a printing executive will call to ask me to define some element of sales compensation. A lawyer will call on me as an expert witness to define some element of a lawsuit, usually involving a printing company and a former employee.
Too many owners promise something orally and never memorialize the promise in writing. So, if trouble arises, and the employee thinks the promise was broken, there are two recollections of what was promised.
I guess, maybe I am defined as a “definer.” After all, I have counselled more than 500 printing companies, sold more than 140 printing companies and have received calls, cards and letters from thousands of owners and salespeople. So, I am a bubbling cauldron full of printing company information, practices and policies. Or, some would say a cauldron full of rhetoric. In fact, Attila the Nun (my wife, Anne), refers to me as “Old Rhetoric Breath.”
Here are some of my more common and useful definitions.
• DRAW—as in “draw against commission.” A draw is provided to a salesperson as a convenience to smooth the peaks and valleys of commission income. It means the salesperson is given advance payment against future earnings. Ordinarily, it is based on the salesperson’s actual commission earnings for the previous period, preferably the previous quarter. If, however, the company sales (or the salesperson’s sales) are highly seasonal and the previous quarter is a seasonally slow period, then the draw amount should be based on average weekly or monthly earned commissions for the previous calendar or fiscal year.
When a salesperson’s commissions exceed the draw amount, then the excess is usually paid on a monthly basis. When, however, the commissions are less than the draw, a receivable is established and is collected from future earnings when commissions exceed the draw. Although implicitly correct that the salesperson actually repays the excess draw, it is rarely collected and, over time, is collected by reducing the draw and then repaying the company from the excess commissions.
• NON-REFUNDABLE DRAW—This type of “draw” sales compensation works the same as the pure draw above, but the salesperson is never required to repay the shortfall difference between the draw payments and the actual commissions earned. This plan, in effect, makes it a fixed-salary-plus-commission program. For example, if the company and the salesperson agree the non-refundable draw is to be $1,000 per week, and the commissions earned are actually $750, then the salesperson is not required to repay the $250 shortfall.
• COMMISSION RATES—The printing industry is interesting because it is comprised of about 30,000 firms that occupy about two dozen product classifications (according to the Department of Commerce), but I can think of more than 300 specializations (call them niches within segments). Each of those 300 specializations has its own set of micro-economics, peculiarities and problems. This makes printing companies look very much like thumb prints and, as a consequence, their sales compensation plans are as different as thumb prints.
A very rough range of commission rates is from 1.5 percent of sales to as much as 12.5 percent of sales. For example, long-run, low-margin, low value-added print jobs, usually web or gravure, might be commissioned at the minimum of 1.5 percent. On the other hand, short-run, high-margin, high value-added work might be compensated at 10 percent or more.
Many companies prefer to compensate their salespeople at rates based on value-added vs. sales. If, for example, a four-color commercial sheetfed job has value-added of 65 percent, then the commission rate is applied to the value-added amount. So, for a $10,000 sale, 10 percent of sales ($1,000) is much greater than 10 percent of 65 percent value-added ($650). Companies that use value-added as the base for their commissions adjust the rate to make their compensation competitive with other companies in their market.
• OVERAGE PRICING—Many companies permit, even encourage, their salespeople to price their work above the company’s target price if the market permits. These companies then share the overage margin with the salesperson at rates ranging from as little as 10 percent to as much as 50 percent.
On the other hand, many companies permit salespeople to reduce the target price to “get the work” and reduce the commission, using a published schedule or through an ad hoc negotiation process with the salesperson.
• GOLDEN HANDCUFFS—I was shocked recently when a very experienced lawyer was not aware of this form of bonus. It is also known as a “stay on bonus.” A company uses this bonus to encourage key employees, especially salespeople, to stay on for a specified period of time by promising to pay a bonus.
• GOLDEN HANDSHAKES—Later, that same lawyer was unfamiliar with golden handshakes, which are bonuses paid to employees who are departing the company due to a change in control. This happens when a company is sold and the owner(s) wish to reward a key employee(s) for helping the company achieve the value received in the transaction. There have been occasions, in my experience, when an owner paid a golden handcuff to an employee to stay on under a new owner and a golden handshake to reward them for helping to build the company’s value.
I bet I can fill a dictionary of printing sales terms. I’ll have to try that sometime.
Meanwhile, before you nod off from reading these definitions, please get out there—take a deep breath of June fresh air—and sell something! PI
About the Author
Harris DeWese is the author of Now Get Out There and Sell Something, available through NAPL or PIA/GATF. He is chairman/CEO at Compass Capital Partners and an author of the annual “Compass Report,” the definitive source of info regarding printing industry M&A activity. DeWese has completed 100-plus printing company transactions and is viewed as the preeminent deal maker in the industry. He specializes in investment banking, M&A, sales, marketing and management services to printers. Visit www.piworld.com to interact with the The Mañana Man by posting questions and comments for his review. For matters not related to his column, he can be contacted via e-mail at DeWeseH@ComCapLtd.com.