The other advantage of this system is probably the most important: it increases sales! By empowering the sales staff with this ability to negotiate, you allow them to make their own decisions, increasing their ability to close sales. Customers have more confidence in your sales team if they can make pricing decisions on the spot. Customers want “can do,” not “I’ll get back to you.”

This pricing stuff is all about sales. The more tools you give yourself and your sales staff, the more sales you’ll realize, leading to an increase in your company’s profit. Here is an example of what a sliding-scale markup sheet might look like.

This sample is based on a 25 per cent G&A with a 1½ per cent sales expense on the profit & loss statement

Let’s review the markup sheet to see what it offers the salesperson. The estimate supplied by the estimating department for this product provides a cost of $4,350. The sales price ranges based on the markup used. The same sign can sell for as little as $6,829.50 and as much as $10,005.00. For example, if the price is marked up by a factor of 2.3, the sales price will be $10,500. Commission on that sale calculated at 15 per cent provides the salesperson with income of $1,500.75.

It is interesting to note the column that shows the company percentage of profit. Although normally company profits are not shown on a markup sheet, that information is included here as some companies might wish to make use of it. As you can see, the company in this example has decided to also “slide” its profit to help make its salespeople more competitive. Whether or not your company will do this is, of course, a policy decision to be made.

A salesperson armed with this single sheet of paper is authorized to change pricing on the spot, making him more likely to close a sale. This markup sheet is typically created by the estimating department for use in all estimates. Just think: for every sign estimate, you and your salespeople have a markup tool that empowers the sales department and removes you from an adversarial role with your sales staff. Things are looking up!

Using the Tool to Best Advantage

Now that we have this tool, let’s look at just how flexible we can make things for the sales department. Remember earlier (in the Imagemakers May/June issue) when I stated that the costs related to “buyouts” are fixed? (Buyouts are components of the cost estimate that the company does not directly do.) Because these costs are fixed, we can have confidence in them. This is what makes buyouts so nice. Here’s an example of how to leverage fixed costs with our new pricing system.

Let us assume you have a salesperson who brings in a really nice lead. It’s a new shopping centre that will require an extensive amount of signage. The main pylon sign is 40-plus-feet tall and has a double-face message-centre display. Additionally, there are two smaller pylons and some ID wall displays. This project is going to run into the hundreds of thousands of dollars and you are part of the bidding process.

Here’s the catch. Being part of the bidding process means you and several other sign companies get to bid this project. This, of course, means you have to compete. An architect firm has already designed the sign criteria for the plaza, a good thing because you know you will be dealing apples for apples on the bid with the other sign companies. All your company has to do is put a bid package together based on the architect’s drawings.

Your new sliding-scale markup system will allow your salesperson to negotiate price. I’ve created a sample to give you a better perspective on the numbers and how they work in the sliding-scale system. The cost (our cost) of the main pylon sign without the message-centre display is $52,195.79. The message-centre display is a buyout and will be purchased from a message-centre manufacturer at a cost of $27,433.00, delivered. This makes the company’s total cost $79,628.79. Here is how the markup sliding-scale system looks:

This sliding-scale sample shows us that the salesperson can sell this pylon sign for as little as $119,443.19 and as much as $183,146.22, or anywhere in between, depending on what he is looking for as a commission. Now, if the salesperson decides he wants a 10 per cent commission on the sale, he likely won’t get the order. Competition will dictate that the salesperson be more competitive in most cases. Keep in mind that this is a free-market economy and the buyer is looking for good service. Good service will include a low price.

So what do you do? How do you convince the salesperson to be more competitive if it’s going to cost him commissions? Show some more flexibility! Remember, our cost estimate showed the message-centre display at a cost of $27,433.00 in the buyout section of the estimate. Because buyout costs are fixed, that price won’t change (and you won’t have any overruns). You are very comfortable with these facts. It’s interesting to note that almost 45 per cent of your estimate on this pylon sign is for a buyout. So it’s time to negotiate! Sell the message centre at cost.

Let’s look at what happens to the sliding scale when you remove the price of the message centre and then add it back on after the markup. The total cost of the estimate was $79,628.79; after removing the price of the message centre, the price is lowered to $52,195.79. Example:

Now, the sliding scale shows a selling price, with a 10 per cent commission, of $101,781.79. If you add the cost of the message centre to this price, you get $129,214.79, as opposed to the original selling price at 10 per cent commission of $155,276.14, a reduction of more than $26,000 from the original selling price! The salesperson gets a 10 per cent commission on what he “sold”, which is valued at $101,781.79; this is the pylon sign without the message centre.

If the salesperson had sold the sign and message centre at $129,000 based on the original markup sheet, he would receive only a little over $5,000 in commission. By giving the message centre away at cost, you create a more-competitive price for your salesperson and the salesperson makes more money from a higher commission rate. Now keep in mind, this salesperson doesn’t have to sell it at 10 per cent. He, too, could be more competitive if he has to.

If you do offer the unit at cost (plus tax), you will want special consideration from your salesperson’s customer. As a condition of the sale, you might want to be paid in full prior to the order of the message-centre unit. This is a small concession on the customer’s part, especially given that he is saving so much money, and you, too, are out nothing! In fact, you might just make some money for doing it. Some manufacturers offer a 2 per cent discount on bills paid within 10 days. This would give you almost $550 for doing pretty much nothing.

Everybody wins! Your salesperson makes the sale because of the strategies you have implemented on the major pylon sign of the project. You make a profit based on your markup system for the rest of the project that your salesperson has sold, and the customer saves money. Creative pricing along with a flexible markup system can make your company a very dynamic sales-oriented business. It is this kind of company that good salespeople gravitate to.

How many times have you seen sign companies advertise for “good” or “experienced” salespeople? It’s safe to assume they don’t want bad ones! Sign companies are always on the prowl for good salespeople; many of them complain they don’t have any. How is it that some sign companies get all the good salespeople, while the others get none?

We want great salespeople, but most of us don’t have a sales-oriented company to support them. Good salespeople know this. Selling is negotiating with your customer. If you don’t give them the tools to negotiate with, then how can you expect them to sell? Support your sales staff with everything you can imagine. Salespeople have a way of knowing what company to work for.

It’s not enough to build good-quality signs; we are just fooling ourselves if we think so. The customer, not the sign company, defines quality. And it’s the customer that shows us that in the way of sales.

Dan Hale owns and operates a sign company in New York and consults to the industry. He has written several articles on this subject and a book, How to Estimate & Price Signs. He can be contacted at 716-933 7455 or QRSSigns@adelphia.net.