Many home improvement company owners pride themselves on knowing their fully loaded marketing costs. They should. The difference between, say, the 6% you may think is your fully loaded cost and the 9% it actually is can make a big difference on a balance sheet.
But have you done the same calculation for you company's sales costs?
WHAT IT INCLUDES Charlie Gindele has. The owner and president of Dial One Window Replacement Specialists, in Santa Ana, Calif., says his fully loaded sales costs have consistently been at 13.5% to 14%. That includes commissions to sales reps — all employees — which are just under 10%. “We also pay payroll taxes and workers' compensation, which adds another 0.7% or 0.8%,” he says. “Another 1.5% is for sales managers, and support staff is an additional 0.25%.” The remaining amount covers the company's bonus program, awards and plaques, annual dinners, and hiring and training. “When you hire people, that cost includes background checks and assessment tests,” Gindele says, “and the cost of training includes reps' salaries because we subsidize them for a short period of time.”
David Welch, president of Ben Hill Roofing & Siding Co., in Atlanta, estimates that his fully loaded sales costs are roughly 13%. They include the cost of hiring and training reps — a mix of employees and independent contractors — and labor burdens such as workers' compensation, payroll taxes, state and federal unemployment taxes, and training.
Then there are the hidden costs, Welch says. That oft-overlooked category includes things such as gifts distributed at the holiday dinner, which at Ben Hill Roofing & Siding Co. totals about $8,000 annually.
ADVERTISE TO HIRE Things aren't radically different at American Siding & Window Systems, in Urbandale, Iowa, where Pat Pagano, vice president of sales and marketing, says his figure is about 14%.
There's the average commission of 8.5%, along with an average bonus of 2.6%. Then Pagano adds between 3% and 5% for advertising to hire reps, and a $75 per diem for each night his reps are on the road — the company covers 11 states in the Midwest, so there's heavy overnight travel. Rounding out those numbers are two weeks of training, including the cost of a full-time trainer and a minimum salary draw during training.
“If somebody were to come into my company and say, ‘Your fully loaded sales costs are 14%,' and then ask, ‘Would you want to try to lower that cost?' [I'd say] ‘Absolutely,' as I'd do with any cost. But with everything we're doing and with what this job entails, I don't feel that that cost is out of line. Honestly, I feel comfortable with where it's at.”
