$ Commissions: Everything Sales Reps & Owners Should Know About What’s Fair

Money, money, money.

Whether you’re a sales rep, an owner, a manager, or a leader, this is everything you need to know about roofing sales commissions.

I’m going to break down all of your questions, answering:

• What’s normal?
• What should I pay?
• Why should I pay it?
• How does this all work?
• Am I getting paid enough or appropriately?
• What’s the best pay plan to have?

I’m going to cover everything you need to know about pay and making money in the roofing sales industry.

Welcome or welcome back, by the way. My name is Adam Bensman, The Roof Strategist. Everything I do here — and on my YouTube channel, my podcast (on Apple and Spotify), and inside the Pitch Pro Movement — is designed to help you and your team smash your income goals and give every customer an amazing experience.

So, let’s hop right into today’s topic. I want to talk money.

Roofing Sales Pay & Commissions: How to Select the Right Pay Plan

First, let’s cover the essentials. There are two main ways to pay reps in roofing sales. You can pay based off of:

1. Gross sales
2. Profits

For our purposes, the only thing that I’m not going to address here are draws, which are advances on pay or a base pay. The reason is that those numbers can wickedly complicate pay plans because those are variables far beyond my control. Instead, I want to give you the bones of this.

So, I’ll share the most common pay plans I see. And I’m going to cover the two critical elements that will dictate which one to pay and how much. Those elements are:

1. The sales rep’s responsibility
2. Employment status (whether a rep is W2-ed versus 1099-ed)

Let’s dive in.

Roofing Sales Pay Based on a Sales Rep’s Responsibilities

What do I mean by responsibility? Oftentimes, salespeople are responsible for the whole job. We’ll call this cradle-to-grave selling, from selling the job all the way to collecting the job. That’s everything including the build day and supplementing — the whole kit and caboodle.

Meanwhile, the next company says, “Listen, all you got to do is ink the job and get the build order. Then, we’re going to take care of supplementing, production, collection, and everything else.”

So, the responsibility the rep has will dictate the type of pay and how much.

Obviously, having a supplement department, a production department, and collections handled for you frees up your time to sell more. When you have more time, you can sell more.

Roofing Sales Pay for Whole-Job Responsibility ⇒ Higher Pay Per Job

Let’s say a salesperson is responsible for the back end of the process. This is what happens after you turn in the check. Here’s the check, here are my colors, go build it. We have to:

• Order materials
• Schedule the jobs
• Sit on production
• Do the final walkthrough
• Submit our invoice to the insurance company (or collect the final payment if it’s retail)

All of this processing takes a substantial amount of time. Some folks love working the entire process themselves because they develop a deep relationship with the customer. Many companies run this model. In fact, some of the largest roofing companies in America still use this model. It’s about what fits the company culture.

With this “whole” model, usually:

1. The roofing salesperson is going to get paid a little more per job.
2. They also have the ability to sell less.

This model can be a win-win in that:

• The sales rep can make more money per job.
• The roofing company has one person handling it all.

Roofing Sales Pay for Front-End Responsibility Only ⇒ A Higher Volume of Sales

Alternatively, there are roofing sales reps who do not want to be responsible for the entire process. They may not want to babysit jobs, or they may not be the most organized.

Instead, they love connecting with customers, bringing the deals in, and turning them into someone else who’s really good at the back-end process. And let’s face it —salespeople, at least my salespeople, are not generally very organized. Many of them don’t want to have to take care of all this other stuff beyond the actual sale.

So, if I’m someone who’s just focusing on this front end:

• I’m likely going to get paid less per job.
• Now, I also have all of this time freed up, which means I can sell more.

So, usually, this person will have a higher volume of sales and lower responsibilities.

That’s how a salesperson’s responsibility can affect pay. Of course, their employment status with a roofing company also matters.

Roofing Sales Pay Based on Worker Status: W2s versus 1099s

What does this mean? Well, a W2 is for an employee, and a 1099 is for an independent contractor. There are pros and cons to each status, as the table below shows.

Also, it’s important to note that:

• The 1099 route is the way most folks go, especially those who are newer to roofing sales. That doesn’t mean it’s the best, though. And keep in mind that every company can offer a different advantage to a rep.
• A W2 employee is going to cost a roofing sales company about 17.5% more because of workers’ compensation coverage. This is money the company has to pay it out for its roofing employees.
• Perks and bonuses can affect roofing sales pay. For example, if you’re using a company truck, the company is covering wear, tear, and insurance. So, that perk can be factored into how a company pays an employee.

By the way, I go into this in great detail in my recruiting program, How to Build Your Dream Team, which is part of the Roofing Sales Success Formula. It includes my recommendations on the sales process, who should do what, and where those handoffs are.

It will also help you develop that standard operating procedure (SOP), give you hiring ads to run, and teach you how to pay with an incentive structure. This monthly plan keeps high-volume sales coming in. Plus, I teach you my entire recruiting process, including how to spot talent. So, check it out for more because I’m just covering the higher-level stuff here to get you on your way.

Two Types of Roofing Sales Payment Plans: Gross versus Profit

Now, let’s get into those two pay plans mentioned at the beginning to really break this down. The two most common pay plans, not factoring in base pay (which is very rare in this business), are plans based on:

1. The gross sales
2. The profits

I’m going to explain each model using an example of:

• A $10,000 sale
• A commission range of 5% to 12% (for gross sales) or 30 to 50% (for profit-sharing) — These are the most common ranges I see.

Example #1: Roofing Sales Pay Based on Gross Sales

For pay based on the gross sales, this varies according to the two factors we just discussed:

• Are you an employee?
• What are you responsible for?

If you’re just signing deals and turning them in, you’re probably not earning 12% commission. And you shouldn’t be because that money has to be split between you, the production team supplementing collections, and all that. So, let’s use 10% for the commission to keep it easy.

With a gross sale of $10,000 and a 10% commission, that means your commission is $1,000.

$10,000 sale X 10% commission rate = $1,000 commission payment

This model is easy and completely transparent.

That’s what I love about it. If you decide you want to earn $100,000 and sell a $1 million, you know what it takes to get there, and you can just grab your book of business and get to it. It’s easy for you, and it’s easy for the roofing company.

Disclaimer: Do not consider this as my recommendation. If you’re deciding your pay plan, I walk you through that program. There are a lot of factors to consider, and everyone’s different. Also, I’m not an accountant, so don’t take this as financial advice. I’m sharing what I see, after working with thousands of people in the roofing sales industry.

Example #2: Roofing Sales Pay Based on Profits

When we go with the profit model, we have to first to subtract out the overhead. That’s generally 10 to 15%. Sometimes, it may be a little higher, like 17%.

To keep it simple, we’re going to use 10% for overhead here. So, on a $10,000 sale, that means the company gets $1,000 from that job to cover overhead.

$10,000 sale X 10% overhead = $1,000 for overhead going to the company

Disclaimer: Don’t let overhead percentages freak you out. Whatever your overhead is from the company, rest assured that it’s probably below what the actual overhead costs are (that’s what I’ve seen about 95% of the time). In fact, when owners calculate their actual overhead expenses, it’s usually a lot higher than that 10 to 15% that’s subtracted out.

Remember, overhead covers all of those things you need but that don’t make you money — like the lights, the insurance, the phone and internet bills, business cards, T shirts, door hangers, yard signs, office workers, and a whole lot more.

So, salespeople, I just want to put you at ease. Because I know a lot of newer roofing salespeople may think that’s a lot of money, but it really isn’t because overhead can be extremely expensive.

Next, we calculate the commission. Again, to keep it simple, I’m going to use 40% for the commission. Let’s say the profit on this job is $3,000. That profit is calculated after we subtract the costs of labor, materials, and overhead.

With a profit-sharing model, you would get 40% of the remaining $3,000. That would leave you with $1,200.

$3,000 profit X 40% commission rate = $1,200 commission payment

Disclaimer: Typically, 30 to 50% is common for profit-sharing models. In my opinion, 50% is too much. Salespeople, when you start to understand the numbers of what it really costs to run a roofing company, you’ll realize they’re nowhere near as profitable as you imagine. They have huge expenses, huge liability, and a lot of cash flow.

Remember, a roofing company is what we call a pass-through company, meaning all the money comes in and then goes out because the expenses are quite high. So, many are shying away from 50% profit-sharing because it’s not really a financially feasible option.

Roofing Sales Pay Based on the Gross vs. Profit: What’s Better?

The answer really depends on your situation.

• Are you an employee or are you 1099-ed?
• What is your level of responsibility for each job?

Just comparing the numbers — $1,000 commission with the gross model versus $1,200 commission with the profit-sharing model — you may think profit-sharing is automatically better.

BUT that may not actually be true. You have to ask yourself:

• If I’m spending 40% more time processing the customer after signing the job, is it really worth just $200 more?
• Could I be earning more if I got back that time and could use it to sell more jobs?
• Or will that extra $200 add up in the long run and work out better for me?

Again, there’s no right or wrong answer here. It depends on your situation, and it’s important for you to make that choice for yourself — as a company owner, a roofing sales manager, a leader, or as a sales rep — so you can choose the right model or company for you.

Also, don’t choose what company to work for based on the dollar amount alone. There’s a lot more to consider, including what support a company offers, who you are, and what you’ll be doing with your time when you work for one roofing company versus another.

A Word on the Profit-Sharing Model: When It Can Go Wrong

There’s one more key point I want to hit on when it comes to the profit-sharing model. Because everyone loves this model until it doesn’t work.

When you’re on the upside of profit-sharing, you make more when the job is more profitable.

But what if it’s not? What if a job goes awry, something breaks, or you made a mistake?

If you’re in charge of profitability and you forget to supplement a miscalculation or you underestimate a retail project, you going to find yourself on the downside of this model. Then, suddenly, a job you worked so hard for leaves you with a $200 commission. That can happen.

So, the point is there’s no situation that’s 100% gravy. When you participate in the upside, you also have to take the hits that can come with the downside.

How to Choose the Best Roofing Sales Pay Plan

What does it take to choose the right pay structure? I have two simple answers for you.

1. If a sales rep is in charge of profits, pay based on the profit.
2. If they’re not, pay off the gross because those reps are in charge of volume.

At the end of the day, what you really need to consider with roofing sales pay plans are:

• The best incentivizes to get the behavior, sales, and performance you need.
• Transparency, regardless of what pay structure you choose, so you know what’s paid and why.

Once you choose a pay structure, the next thing is pairing it with the right sales process. That will inform your culture, your company structure, and your talent. So, it is entirely up to you and the company.

I hope this demystifies a lot of the unknowns about roofing sales pay plans.

A Word for Owners, Managers & Anyone Growing a Roofing Sales Team

If you jive with this topic and want a little bit more help, check out my program, How to Build Your Dream Team. The only way to get hold of it is to get the Roofing Sales Success Formula, which comes with all of my recruiting info, along with my entire training and strategy suite for teams.

This will let you put your team through lightning-fast training (in 9.5 hours) and get everybody accustomed to a daily sales plan built around their income goal. It can also get teams making sales, dominating neighborhoods, and closing more.

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Thanks for joining me, and I look forward to sharing more with you in the next blog.