ISM Compensation Plans

newslmasthead_articles
September 2004
Kristen M. Stanton


Compensation plans for Internet sales professionals vary widely, but everyone agrees, it’s worth your time and effort to find the perfect model for your dealership. The key is structuring a pay plan that motivates high performers, provides them with a lot of upside, plus, a reason to stick around. And, of course, all this has to benefit your dealership’s bottom line. In preparation for this article, we surveyed our readers last month about their own comp plans. While pay structures varied, survey results showed that most ISMs get a combination of base salary plus commission. We also interviewed some leading dealers and consultants to see how they structure the pay plans for their Internet departments. We got some great feedback that’s worth considering for your own dealership.

 

August Survey Results: 

 

 

How is your compensation plan structured?
Straight Commission

29.1 %

Base Salary + Commission

42.2 %

Commission + Unit/Volume Bonus

19.9 %

Draw

4.0 %

Other

4.8 %

 

 

 

 

What’s your annual pay, before taxes?
< $50,000

37.5 %

$51,000 – $75,000

30.3 %

$76,000 – $100,000

20.3 %

$101,000 – $125,000

7.6 %

$126,000 – $150,000

2.0 %

$150,000 +

2.4 %

 

 

Here Are Some Recommendations from the Experts:

 

Ryan Hanlon, Internet Director

Formerly with Miller Honda of Van Nuys, CA

 

To begin, Hanlon says, salespeople should be able to sell a minimum number of units per month. When he was at Miller, that number was 15. In addition, he recommends a minimum monthly gross on all sales, for instance $25,000. Compensation should also be partially based on CSI scores. Hanlon required a minimum of 94%+ for Honda dealers. After minimums are met, Hanlon recommends structuring compensation plans as follows: 25% commission on the front; 3% on the back; as well as commission on total monthly gross – front and back. He recommends a bonus plan such as the following:

 

$20K Gross = $500 Bonus

$30K Gross = $1,000 Bonus

$35K Gross = $1,500 Bonus

$40K Gross = $2,000 Bonus

$45K Gross = $2,500 Bonus

$50K Gross = $3,000 Bonus

 

For example, a new sales person sells 17 cars in their first month at $33,000 total gross. It’s projected that they’ll make about $6,000 in front, back, and bonus. Hanlon says an average sales person with at least a three-month tenure should make about $60,000-$85,000 a year. 

 

Hanlon claims his pay structure benefits all three areas of a dealership’s business – overall profits, customer satisfaction (the CSI score requirements), and low turnover, which brings stability and profit to the dealership.

 


Linda Swiecicki, Internet Sales Manager

Dayton Ford of Dayton, NJ

 

Swiecicki recommends a comp plan for Internet dealerships where there’s an ISM who handles Internet leads, sending correspondences, setting appointments, etc. but also works with a team of floor sales people to close the sale. Swiecicki recommends a base salary + a set dollar amount bonus per car sold, based on productivity.

 

For example:

 

Base salary + 1-19 cars/month sold @ $35 per car

Base salary + 20-29 cars/month sold @ $40 per car

Base salary + 30-39 cars/month sold @ $45 per car

 

In this case, the salary can be paid weekly, and the per-car bonus paid the following month, on a monthly basis. Weekly salaries at Dayton for Internet sales/appointment setters usually start at $300/week, but can range from $300-$700/week depending on experience.

 

In cases where ISMs and floor sales people close a deal together, she recommends a split commission structure; while in situations where the ISM works the lead from start to finish, she recommends the full base salary + commission on number of cars sold. 

 

 

Scott Jenkins, Internet Sales Manager
Independence Lincoln Mercury Mazda of Independence, MO

 

Jenkins’ compensation plan at Independence is straightforward and comes close to standard in the industry. Independence pays a $2,000 base for the month + 30% commission on the front end and 1.75% on the back. ISMs are also paid a bonus for gross – $100-$150 on $1,000 gross for new; and 27% commission on used, with a $100 bonus on $2,000 gross.

 

 

Donald Skarzenski, Internet Director

Formerly with Bossier Atkinson Toyota in Bryan, TX 

 

Skarzneksi comes from high tech sales background, but has also worked in a few different dealerships with varying compensation plans. Skarzenski cited a couple of different models that work well, depending on the size and structure of your dealership:

 

Decreasing Base:

 

Months 1-2: $7,500 base (for staying two months) + 25% commission on gross

Months 3-4: $5,000 (for staying another two months) + 25%-30% commission on gross

Monthly, thereafter: $2,500 + 25%-30% on gross

 

Additionally, he recommends 0.5% – 5% of backend gross.

 

ISMs must sell 20-30 units in their first month, with a goal of growing to 50-60 units. The key, says Skarzenski, is that the compensation model must evolve and continue – there must be a built in incentive for the ISM to stay around, which improves their skill sets and provides more stability for the dealership.

 

Another model Skarzenksi recommended was a base of $4,000 per month + 1% of the dealership’s entire gross profit. This was similar to his experience working in high tech sales. He says a good ISM should make $8,000-$9,000 per month.

 

Skarzenski says it’s a mistake for GMs to change a successful ISM’s compensation structure when they start to do well. Too often, he says, really good ISMs make the job look easy and so owners and GMs will put a cap on income potential. The truth is, Skarzenksi says, a great ISM is worth their weight in gold and smart dealerships should make every effort to keep them happy.

 


Greg Machado, Automotive Sales Consultant and ISM

Bluebonnet Jeep in New Braunfels, TX

 

In Machado’s article in the DotComInsider, where he writes a regular column, he shared his own experience with ISM compensation plans.

 

“Within my dealer group there are two different pay plans. For years I was an advocate of a reasonable base salary and volume bonuses that escalated with increased volume. In fact, I can cite dozens of stores that have incorporated a pay of $1,500-$2,500 base and then pay their ISM a per-unit commission with bonuses at 10, 15, 20, and some massive bonus for the seemingly unreachable 25 and 30 units per month. (I no longer believe this.) The problem with this scenario is that you are now promoting low grosses and if you have any real volume success, your GPC will dramatically decline and you’re F&I people will be looking for a ‘hit-man’ to have your ISM mysteriously disappear.

 

People that survive solely on a per-unit pay plan alone will find ways to maximize the volume and will begin to find the quickest way to make a deal at the potential demise of your supplemental income streams, namely your F&I. In almost every store I have ever consulted that had this sort of pay plan in place, F&I per-retail took a huge nosedive. Because suddenly Internet customers were showing up with drafts from folks like People First and E Loan.

 

Why not pay your ISMs like sales people?

 

I work in a store that pays me a slightly larger minimum than the floor salesperson. Last month I sold 24 units, 3 of my deals were minis (sort of). A flat mini for me is $100 + $75, so let’s call it $175. I also make:

 

$30.00 when financing with one of our captive lenders

$20.00 if F&I sells an alarm

$20.00 for a service contract

$15.00 for Gap

$20.00 if our aftermarket sells a seals package

$10.00 for A&H

 

All of our staff is rewarded for keeping the financing here at home. This will usually result in much larger GPF deals. So, potentially, a full boat mini could pay me $290. On those rare occasions that I am paid a mini, I normally make about $240. Typically, I do much better than that because I can almost always hold on the trade. According to our documentation, I’m holding an average of $850 on my trades, of which I’m paid 25% after pack, up to a $1,000 commissionable gross. Above $1,000 gross, we are paid 33% commission.

 

My normal commission works out to be about $393/unit. Last year, I averaged 22.31 units per month. 21.31 X $383.00 = $8,768.

 

Then, my volume bonuses work like this:

 

10 Deliveries ….$250

14 Deliveries ….$300

18 Deliveries ….$350

21 Deliveries ….$450

25 Deliveries ….$600

30 Deliveries ….$1,000

 

Last year, I produced over 30 units, four times.

 

We also have a number of Fast Start Bonuses that change from month to month, where I can earn an additional $800 – $2,000 in income.

 

A commission structure like this can be extremely beneficial to the store’s bottom line and can keep your ISMs happy, content, and never looking other jobs. It breaks my heart to see a good ISM get promoted to SM or F&I. If we would just let them develop and improve, everyone could make so much more money. If you’re wondering why the math doesn’t quite work out it is because I split 6-8 deals a month. I will not wait on more than one guest at a time. Perhaps that’s why I have a 99.67 SSI. Often, I have to give away half my deals, so in actuality, my average should be closer to 26.25/month.

 

I suggest you pay your Internet sales people like the sales pros that they are, then stand back and watch the improvement.’

 

Greg Machado can be reached at 888.384.8641 or on the Web at http://www.gMACgroup.com.

 

To see Machado’s article in its entirety, visit:

http://www.dotcominsider.com/authors/Archives/machadopayplans.htm.

 

Also, check out the DotComInsider message boards, where other compensation plans are discussed, at:

http://www.dotcominsider.com/phpBB2/viewtopic.php?t=13