Survey: Partners Cant Live on Commissions Alone

Commissions on indirect telecom sales generally are going down, spurring two reactions: solutions providers either choose upfront compensation or make up losses by focusing on consulting services.

PHONE+ magazines annual partner compensation survey reveals the monetary landscape, like the entire industry, continues to fluctuate. One anonymous respondent puts it this way: [S]ervice rates and commission rates dropping means less and less money to me. Mergers and bankruptcies and service disruptions are making it harder and harder.

The news is not all bad, however. Several survey respondents argue the current environment forces solutions providers to branch out into the world of consulting. There are two conditions that a telecommunication consultant can thrive when the telecommunication industry is booming or when it is disintegrating, says William D. Savage, president and owner of Get Savage Consulting near Los Angeles. Under those circumstances, telecommunication providers seek outside help from consultants.

Savage makes most of his money consulting. Of his profits, 60 percent comes from consulting, while the remaining 40 percent stems from commissions on services. Business Navigation Systems LLC in Southern California, too, has made a name for itself as a full-service company that helps businesses including Amgen Inc. and Fannie Mae Foundation harness the power of collaboration. The company earns revenue from marketing programs provided to computer integrators where we teach them how to sell, support and market integrated convergent telecommunications services to their clients and to new prospects, explains Dane Woodruff, senior vice president of business development and sales. The company makes 50 percent of its profit from commissions on services, 5 percent from hardware margins, 40 percent on consulting fees and 5 percent on maintenance contracts.

Yet another California-based provider notes, Commissions are going down on services. We make it up on consulting. …We are up 10 percent from last year.

Commissions are staying flat, or falling, respondents say, but that compensation form remains an integral part of solutions providers income. Still, one solutions provider recommends agents be cautious about upfront money, since a lump sum is so easy to spend, leaving nothing for the future.

It is important to choose commission solutions that will meet your overall longterm needs, says Stu Johnson, president and CEO of Network Advantage. While it may be enticing to choose a large upfront bonus, what does that do for next years cash flow? Managed effectively, the diversification of providers and payment types can allow for cash-flow consistency and long-term viability.

Not everyone feels that way, however. With the volatile climate of technology, we like providers that offer as much upfront compensation as possible, says Ronnell Richards, president of RD Direct, a communications broker. The company makes 90 percent of its income from commission on services and 10 percent from margin on hardware.

In contrast, Johnsons company reports 65 percent of income from commission on services, 10 percent on hardware margins and 25 percent on consulting fees. Steve Braverman, CEO of master agency X4 Communications, concurs that upfront payments are critical. Some providers offer the choice of upfront commissions combined with a residual or just a high residual. This gives newer agents a chance to jumpstart their income, and seasoned agents the ability to continue building a larger residual base, he points out.

Overall, indirect channel salespeople seem to be viewing the industry with an eye toward innovation, tackling new areas they never before considered to stay on top of their games. For example, 45 percent of survey respondents say they are putting new services in their portfolios to add to income from service commissions. Those categories include consulting, telecom training and brokering the acquisition of telecom companies or assets.

Amgen Inc.
Business Navigation Systems LLC
Fannie Mae Foundation
Network Advantage
RD Direct
X4 Communications

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