Cannabis Sales Teams: Why Your Commission Structure Matters
If you own a grow you will be setting up a sales team and looking to incentivize your team based on their individual and team performance. This is ideal for generating the best results from your team and building a company that your crew can grow with. When the grow sets a flat rate for commission, and the market has an abundance of product circulating throughout, grows put their “commission” sales reps in a spot to fail almost every single time. Let’s look at a scenario that has played itself out tens of thousands of times already.
Cannabis Sales Commissions
Cannabis industry jobs are red hot right now. So many people from all walks of life are looking to get their foot in the door with a promising company. Most think grower or budtender when asked what kind of careers are in demand. Personally, my “boots on the ground” cannabis education began by selling a vaporizer pen, and from there I became “badged” with the state of Colorado to do it for real. Right now the industry is in a race to the bottom as far as price goes. The enormous amount of regulations force ownership to cut corners and almost every grow in the state has a surplus.
Even still, industry pros are landing huge commissions left and right in the process. But at what cost? When we structure deals with grows or manufacturing facilities, we almost always settle on a percentage of the sale and rarely a flat fee. With edibles, concentrates and other manufactured products, it’s a percentage of the gross dollar amount sold. However, the majority of the grows I know in Colorado became accustomed to setting a flat rate per pound. In my opinion, that alone had a major impact on the price of wholesale cannabis plummeting drastically over the last year.
If you want to sell a pound for $1,500 and pay the commission as a flat fee of $100, another sales rep with the same deal will basically punt the ball on 1st down, and at first resistance, they will immediately drop to $1,400 to try and get the sale. Dispensaries are notorious for bending back the fingers on manufacturers and grows. When the first sales rep hears that his deal beat out, he will tend to come back offering those same pounds at $1,300 and wouldn’t think twice about it. Your pound is now $200 cheaper than it just was. That scenario alone perpetuates the furious race to the bottom.
Saving Time and Money
So what can you do about it as an owner? I personally feel that every single company that operates inside this industry needs a sales strategy implemented from day one. No room for winging it and trusting someone to hold price on your behalf. That sales rep is doing everything they can do to stay afloat and make a living. If you set up a flat rate for your grow, I believe you are setting yourself up for failure in the future. You need to have someone that can sell your products and not “tell” about them. This is a long-term business play, and making sure you have a wise and lucrative commission structure will guarantee that your team remains hungry and willing to stick to a price you set. Or, at the very least (as long as you have great flower), pitching a little higher than usual will ensure your company is treated with respect and taken more seriously than the group selling at the bottom of the market price as soon as the conversation starts. That is telling not selling!
This is an ultra-competitive market, and cannabis industry jobs are being fought over by everyone imaginable, and it’s as cutthroat as any industry around or worse. There are very few ways to obtain legitimate knowledge that is useful outside of the industry. So much of it is hands-on and other industries may not translate that well. Lately, many companies offer cannabis education online, but nothing prepares you for it like actually punching a time clock and being on site, or knocking on 50 new doors that you’ve never been to before in a week. With that being said, I believe a person that has done well in sales before can translate those skills over quite easily as long as they remain humble and want to learn something totally different. By the way, there is almost nothing more valuable than an outstanding sales team for your company to rely on when you are getting started. So hire smart and don’t be cheap with your commission structure! Without sales, there is no gas in the engine to drive the company forward. When the company stops moving forward, they either get bought out or close altogether. Neither of those results were even thought about when those owners decided to get involved. We see it all the time now.
So to wrap things up, let’s just remember a few things. Grows end up in far better shape with a commission structure that based on performance–low commission for poor performance and a much higher commission for getting the top price. Also, it would be wise to invest in an actual sales structure to be implemented and put in a format that can be taught to anyone. That will save you the two most valuable things long term: time and money.
There are no instruction manuals that I know of written to advise an ownership group on how to operate a grow efficiently. So much of your success depends on your team and the standards you set as the boss from the get go. Hiring the right kind of people for your company is one of the greatest challenges. This information is not being taught at the local community college yet, so someone with a legitimate cannabis education is priceless for your company. When you come across someone with that superior knowledge, do everything you can to keep them at your company.