Hi, we are looking at being able to offer to rent our equipment to our customers. Currently we sell only. Sales representatives receive appropriate % of commission on the sale. I am unsure on how to deal with Rental opportunities from commission perspective. Rentals agreement can vary, a minimum term is 3 years, invoiced quarterly. Is it reasonable to pay commission quarterly or pay all of it upfront? I guess from employee perspective, they would prefer it upfront in case they leave the company before the end of the agreement. However, from the company point of view, it is best to pay quarterly. Do you deal with such payments and what do you do? thank you
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Maybe think about both approaches, some commission upon sign up and annual bonuses later for those arrangements that perform.
It likely depends upon the payback periods re the bits of kit as to what mechanism is appropriate and this likely is partly determined by what happens with secondhand kit reverting to you from those that do not perform throughout the overall contact term.
All commercial decisions only you can answer.
There's a bigger question than just the commission:
If you're renting out your equipment of leases of 3 years or more, you'll soon have a lot of cash tied up in leased assets. It might be worth considering working with a finance company - possibly you sell them the equipment on day1 and they lease it to the customer.
If you do keep the the leases in house, you'll have to deal with the lease accounting. You'll also need enhanced credit-checking and credit management to contain potential bad debts. There are the commercials of how quickly you get payback, early termination provisions, maintenance and insurance while leased, what to do with equipment that comes off hire before the end of its life.
But then again you've probably thought of all of these.
