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Tree service

Tree Service Sales Commission Calculator

Works sales commission, where paying on revenue rather than margin causes trouble.

Your numbers

$
$
%
$

Result

Commission earned $1,800
Total pay $4,400
Gross profit on the work $18,000
Left to the business $13,600
Pay as a share of sales 10.5%
Commission of $1,800 plus base pay makes $4,400, leaving $13,600 of the gross profit for the business.

Paying on revenue rewards volume and quietly rewards discounting; paying on gross profit rewards the jobs that actually earn. The choice changes behaviour more than the rate does.

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How the calculation works

Commission as a percentage of the sale, or a share of the gross profit, against the revenue or profit generated. The structure matters more than the rate. Commission on revenue rewards volume regardless of whether the job made money, which in a trade where bids vary in accuracy means paying for underpriced work. Commission on gross profit aligns the salesperson with the outcome rather than the sale.

What moves the number

  • Whether commission is on revenue or on gross profit.
  • Whether the salesperson sets the price or quotes a standard rate.
  • How job costs are attributed back to the sale.
  • Whether commission is paid on invoice or on collection.

Where this one goes wrong

A salesperson paid on revenue who also sets the price has every reason to discount, because a lower price wins more jobs and their commission falls by only a fraction of what the margin loses. Commission on gross profit removes that, provided the job costing is honest enough to attribute properly. Paying on collection rather than on invoice is the other protection, since in a trade with any bad debt a commission paid on an invoice that is never settled is a loss twice over.

Before you quote

  • Pay on gross profit rather than revenue where the salesperson sets price.
  • Attribute job costs honestly before calculating profit commission.
  • Pay on collection rather than invoice.

Questions

About this calculator

Should commission be on revenue or profit?

On gross profit where the salesperson influences the price, because paying on revenue rewards discounting: a lower price wins more work and costs them only a fraction of what the margin loses. Revenue commission works only where the price is fixed and they cannot move it.

When should commission be paid?

On collection rather than on invoice. In any trade with bad debt, commission paid against an invoice that is never settled is a loss twice over. Paying on collection also aligns the salesperson with helping resolve a slow-paying customer.

How do I calculate profit for commission purposes?

With honest job costing, including equipment time and burdened labour rather than wages and fuel. If the profit figure is inflated by treating equipment as free, profit-based commission overpays, and the salesperson is being rewarded for a margin the business did not actually earn.

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The formula

commission = (revenue or gross profit) x rate

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How to use this calculator

  1. Sales in the period ($). Enter your own figure; the page starts at $42,000.
  2. Cost of that work ($). Enter your own figure; the page starts at $24,000.
  3. Commission is paid on. Enter your own figure; the page starts at Gross profit.
  4. Commission rate (%). Enter your own figure; the page starts at 10%.
  5. Base pay for the period ($). Enter your own figure; the page starts at $2,600.

The result updates as you type, so you can try a figure, see what it does to commission earned, and change it back. Nothing you enter is sent anywhere or saved.

A worked example

These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.

What goes in

InputValue
Sales in the period$42,000
Cost of that work$24,000
Commission is paid onGross profit
Commission rate10%
Base pay for the period$2,600

What comes out

ResultValue
Commission earned main result$1,800
Total pay$4,400
Gross profit on the work$18,000
Left to the business$13,600
Pay as a share of sales10.5%

Commission of $1,800 plus base pay makes $4,400, leaving $13,600 of the gross profit for the business.

How sensitive the answer is

Holding everything else steady and changing only sales in the period, this is what happens to commission earned. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.

Sales in the period ($)Commission earned
$21,000 -$300
$31,500 $750
$42,000 example above $1,800
$63,000 $3,900
$84,000 $6,000

Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.

What each figure means

Sales in the period ($)
A money amount, starting at $42,000.
Cost of that work ($)
A money amount, starting at $24,000.
Commission is paid on
Choose from Revenue, Gross profit.
Commission rate (%)
A percentage, between 0 and 60, starting at 10%.
Base pay for the period ($)
A money amount, starting at $2,600.

What the results tell you

ResultWhat it is
Commission earnedThe headline result. A money figure.
Total payA money figure.
Gross profit on the workA money figure.
Left to the businessA money figure.
Pay as a share of salesA percentage.

Estimating is the easy part

The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.