Why Paying Salespeople More Makes Security Companies More Profitable

Paying your sales team more sounds risky, until you realize it can actually make your business more profitable.

In this episode of Entry & Exit, Stephen Olmon and Collin Trimble break down the compensation strategies that attract top-performing salespeople, drive better results, and help security companies scale. They discuss why most operators underpay their sales teams, the dangers of commission caps, how to structure base salary vs. variable compensation, and why trust and transparency are critical to retaining great reps.

They also share lessons from building Alarm Masters' sales organization, including how they handle quotas, clawbacks, commission timing, and incentive structures that keep salespeople motivated without creating desperation.

In this episode:
→ Why paying salespeople more can increase profitability
→ The ideal base salary vs. commission split
→ Why commission caps destroy motivation and growth
→ Common compensation mistakes security operators make
→ How to structure quotas, accelerators, and clawbacks
→ Why salespeople need a clear path to wealth
→ Creating compensation plans that scale with your business
→ The importance of transparency and predictable commission payouts

Connect:
Stephen Olmon — https://x.com/stephenolmon
Collin Trimble — https://x.com/TXAlarmGuy

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Transcript

Hungry Not Desperate

SPEAKER_00 0:00

You want your sales people to be hungry, but you don't want them to be desperate. So when they start acting out of desperation, they're afraid to do the things that are hard.

SPEAKER_01 0:07

I've been a salesperson guilty of been behind in my number and super scared attitude of a of an owner that's like, well, I don't I don't want to pay my salesperson that much because I can do it.

SPEAKER_00 0:18

Sort of a bad analogy, but like in gambling, they always talk about how you should uh continue to double it. So like you when you win, please don't listen, please please don't listen to this gambling advice.

SPEAKER_01 0:30

Gambling is from the devil, not financial advice. Didn't do all the skills yourself and don't hire a sales person operating under a crappy agreement. That's not how you grow a skill business. And so that's the wrong question.

Pay More Win More

SPEAKER_01 0:47

Welcome to Entry and Exit. My name is Steven Ullman, and I also have Colin Trimble with me, who is my co-host of this podcast and also my business partner. We run Alarm Masters in Houston, Texas. And today we're going to talk about why you should pay your salespeople more, and it makes you more profitable when you do that. Yeah. Believe it or not.

SPEAKER_00 1:11

Yeah, I think you need to give your salespeople a path to wealth that excites them. And I think that what a lot of people do is they s they are hesitant to pay salespeople good money because they're afraid that they're gonna basically be stuck with them and they're gonna be mediocre talent. And so what happens in this industry a lot is you keep a B player around for a long time and they're making okay pay. And instead, you should get a person in and have a really good vetting process. And if they seem like the right person, you should pay them a lot of money and you should let them fail fast or succeed quickly. Um, and you should know within six months if your salesperson is worth keeping all almost all the people we've hired, aside from our sales manager who came from the kind of manufacturing side. So really nobody had any experience um in the installation side of security. And we have known in the first six months, sometimes as early as 60 days, if a salesperson is the right fit. Um, and all of our salespeople now are fully ramped, building pipeline, doing the things they're supposed to be doing. Not perfect, need to be better. We plan to pay them more dollars. We're gonna reward the top performers. Like I I think that you've got to pay your salespeople. And this goes back to being like operations led or sales led. I think a lot of companies in the security industry are operations led. Because a lot of the yes, a lot of the operators are were former technicians and former ops

Fix Base Commission Split

SPEAKER_00 2:52

guys.

SPEAKER_01 2:52

So let's let's talk about some of the bad habits um in terms of how what we see, and I would say this is not just true in the security industry. I think this is a lot of sweaty sales. Yeah, a lot of commercial sales divisions or sales departments are run this way. So um one thing right out the gate to me is a the ratio of base to commission is often. Yeah. So if you are paying someone, let's just say, let's say you're in a decent sized market. We're not in like far east Texas or something, you're in a pretty decent sized city and you're paying a sales guy 80, 90k base plus commissions, and you're in if you're thinking in your mind, oh yeah, his OTE, like his total comp, you know, if he does well this year is gonna be like 130. And like if your ratio to base to commission is really significant base, you're you're not gonna have a hungry enough salesperson. I don't think they're gonna be motivated enough. Um, and and and maybe depending on how good they are and how large you are and what role they're playing, maybe their base is 80k, but that OTE should be 160. Yeah, right. You know, I agree. We we do a lot of 50-50, so like that ratio's off. There's other bad practices too. Feel free to jump in.

SPEAKER_00 4:10

Well, it would be hard for me to justify paying a salesperson anything by 50-50 ever, all the way up to the CRO. I think should the their comp should be tied to variable. Um and I think that you really shouldn't go below that. If anything, I would advocate to go slightly more on your base because you don't want you want your salespeople to be hungry, but you don't want them to be desperate because when they start acting out of desperation, they're afraid to do the things that are hard.

SPEAKER_01 4:39

That's true.

SPEAKER_00 4:39

And the best sales reps, the sales reps that we have that are performing the best are the ones that are currently at or above their quota because they're not acting out of desperation and they're following the playbook because they're not behind. And so when you're behind, you make emotional decisions and you don't think things all the way through. And I've I've I've been a salesperson guilty of this. I've been behind on my number and super scared and didn't know what to do, and just fell back onto bad habits, and it did not help me. And I learned really early on that you follow the plan always. You ride it through the down and the you know the ups and the downs. And it's sort of like um this is sort of a bad analogy, but like in gambling, they always talk about how you should um continue to double it. So like if you win or you lose, you can or if you if you lose, you double your bet. Um, and then basically what happens is like eventually you when you win, you get the money.

SPEAKER_01 5:38

Please don't listen. Please please don't listen. Hey, well, are you one of those guys that thinks like this is not gambling from the devil? Not financial advice. Please don't hold us accountable for Colin's terrible take.

SPEAKER_00 5:49

This is your pastor's kid coming out right here. You're gambling for the devil. Are you afraid to wear shorts too? Or like can we my calves are beautiful.

SPEAKER_01 5:59

Anyways, keep going.

SPEAKER_00 6:00

Anyway, I think that you should continue to double down, and I think you follow the process no matter what, right? Like, I think no matter what you do, you follow your process and you know that eventually it's gonna come back your way. There's a fair amount of luck in sales. Um, so anyway, I just think that the I think the 50-50 should be the floor. If you're gonna do anything, I really wouldn't go above 60% base, 40% commission. I wouldn't go above that. Uh, but I really wouldn't go below 45, 65. Like you you don't really want to go below 45 on the base.

Avoid Comp Plan Traps

SPEAKER_01 6:27

There's other bad habits. Uh, there's there's even things that we have been guilty of or considered that were bad ideas, and then we just see this out in the wild. Other people that have left sales jobs and experiences they had, or even our own. Like I was in sales earlier in my career. So, a couple of things that you you really shouldn't do that's going to hurt the salesperson in that relationship, and ultimately that's going to trickle down and hurt your bottom line because they're not going to perform like they should. One is capping commissions. Capping commissions is the spawn of safety. Yeah, I don't know why anybody would do that. Do not cap commissions. I had I had a friend that like every September, October, he would basically just be brain dead for like the last couple months because he he hit his quota and they wouldn't pay him a dollar more for any more sales. And so he's like, all right, well, I'm just gonna kind of keep some of these leads warm until January 1st, and then I'm gonna push on them because I hit my my cap and now I can't make another dollar of commission. That is so demotivating. It's terrible incentive alignment, it doesn't make sense for your business either. Like, do not cap commissions. Another thing you can't do, it's going to hurt your relationship, it's gonna probably have someone eventually leave your organization that might have been quality, is withholding commissions. Like, if you made an agreement short of like you're going bankrupt type of scenario, but like do not withhold commissions and don't constantly move the goalposts. Yeah, like if one month or one quarter it's this, and then you're trying to change it because you realize, oh wow, they're making a lot of money, I don't like that, you're you're missing it because good salespeople want to know expectations, they want to have a goal to chase, they want to understand the money they're gonna make. And if you constantly are changing it, especially changing it in your favor, Mr. Business Owner, that's not it's not gonna serve you or your company well over the course of time. So those are those are some hot takes, those are some no-nos in our book that ultimately are just gonna kill your bottom line because you're you're acting short term instead of long term.

SPEAKER_00 8:38

Yeah. Uh I think that instead of gapping commissions, you should do the opposite and pay them more dollars for every dollar they hit above their commission. Because A, it's gonna and like it should be aggressive. Like I think that you should almost pay two times your commission rate above quota because it ins it incentivizes them to pull deals in this year. And uh in general, um deals that are kicked down the road because of the salesperson's timing is generally not gonna close. So you make the salesperson look bad, bad customer experience, all of it's bad, you should pay them more dollars because it's gonna make them hungry to want to get to their quota because they want to get to the double commission because that's where they start to really unlock dollars. Um, so yeah, not you should never cap commission. I don't even know if there's people really doing that anymore. I know that like if there is some outliers.

Pay Fast Use Clawbacks

SPEAKER_00 9:26

Another one is paying your commission dollars too late. We always try to pay all of our commissions at least within 30 days, sometimes within 15 or 20 of the month ending, basically. So you want to get the dollars in the hands of your people pretty quick. Um another one that I think is this is the big we've talked about this on the bottle all the time, is like don't pay your people on uh gross profit. I think that you are going to make them way more involved in estimation than they need to be. You're gonna make them way more involved in the project that they need to be. Uh so we implement a clawback scenario, and clawback means if it goes, if it dips below as a result of um if it dips below a gross profit percentage because of a miss by the salesperson uh or the customer doesn't pay us. So for example, we had a customer that paid the deposit, we went through the whole project, they basically went out of business, didn't tell us second half of the deposit never got paid. That came right out of the paycheck of the salesperson. And he he understood. And it's it's it should be written in the comp plant, it should be communicated, and it should you should also have some leniency, right? Like if it's a very small amount of dollars, it's not worth the administrative headache for you and for them. But you also should, if it's real dollars, you should not just give it to your favorite salesperson just because you're like, you need to establish, like, hey, the clawback is a real thing, and you like you win and lose with the company, and it makes sense. And like, I'm going to take those dollars out of your commission, not your base, out of your next commission checks. Have some flexibility on the clawback. Like we had a big clawback from a customer that got bought out and didn't even start the project. We prepaid the commission dollars to the rep. 100% of the commission was paid to the rep from when we got the deposit. So the rep was in the money before the company was, and we paid him uh we we did the clawback over a couple months. Um, and that worked for us and worked for him. And so I would also say um you should incentivize your salesperson to get. We, unless the job is really big, we will pay all of the commission from the day that the deposit is received. Um, I want my salespeople really hungry. I don't want them to have to win the project, work months, three months to get a project done, six months to wait for the project to end, then to pay them. We have done it where we'll pay them 50% of their commission. If it's a huge job, we'll pay the 50% of their commission on the front, 50% of the commission at the end. Um, but I think we've only done that one time. Um, so I think you just have to be really careful when you mess with the salesperson's money. Like if they are good, structure is important. You should have a fresh new signed comp plan every single year reviewed with the salesperson, answer the question.

SPEAKER_01 12:13

Yes and amen.

SPEAKER_00 12:14

Um and I think that you need to also conversely, like this is all about like protecting the salesperson and you should pay them a lot of money, and I agree with all that. And also, you've got to protect your company. So you've got to have some unusually large commission uh disclaimers in your commission plan. Like if you have a a house lead that comes in, it's a two million dollar job, and you give it to the rep and you're working the job the whole time, and it's you know, it's not single sort, like you've got to have some ways to to to compress commission if it's just unusually large. Like just like, hey, this doesn't make sense. This is not the spirit of your agreement. You gotta be really careful about that. Um, and they're and it really should be talked about before the deal is awarded. Like you should say, hey, I'm gonna give you this lead, I'm probably not gonna pay you the full commission if you win it. And do you want it or not?

SPEAKER_01 13:03

There's a couple other like when you have a salesperson that feels safe, like that they feel like they know what to expect, they feel trusted and equipped, they have a fair comp plan that scales and makes sense. I think that's gonna lead to like a higher conversion rate. You're gonna have um probably less discounting, you know. Uh you're also probably gonna have a higher average ticket. Like there's going to be positives coming out of having like a really healthy relationship with that salesperson, and that salesperson feeling like they know what to expect and what deal they're operating under. Um, because salespeople are almost like mini entrepreneurs, you know, like we were both sales guys before we became business owners, and so I think you you want to kind of keep that type of DNA in mind, and so um a lot of those things are going to be improved when they've got a really healthy, um, clear set of parameters to work around in within their contract. Um and then, you know, uh one thing I I really despise is the the attitude of a s of an owner that's like, well, I don't I don't want to pay my salesperson that much because I could do it. Yeah, that's a dumb but that is not a growth mindset. That is a lifestyle business, five, six, eight hundredk a year gross revenue type of mentality. And if that's you and that's what you want to do, then do all the sales yourself and don't hire a salesperson operating under a crappy agreement. But like if you are trying to grow and scale, you have to have multiple different salespeople. You're paying a lot of money to likely if they're succeeding and hitting their quotas or exceeding that. And your attitude shouldn't be like, oh, I could have done, I could have closed that deal. I I could have, you know, gotten 20 grand more out of that deal, probably if it was me running that deal. That's not how you grow and scale a business. And so that's the wrong perspective.

Simple Fair Quotas Wrap

SPEAKER_01 15:02

Yep.

SPEAKER_00 15:02

Yeah, the last thing I want to close on is um when you're paying your salespeople, you want to make sure that your your comp plan is easily understood, is not overly complex and is easy for them to calculate. I remember working at Salesforce, God bless them, made a ton of money there, but never understood what my comp plan was. Like I literally, my boss was like, Oh man, are you excited for your commission on this deal? I'm like, I have no idea what it's gonna be. I I don't know. I would like I would love to know that. So it was always a surprise when I would get paid my comp. And um, I could do some rough math because I knew like what my on-target earnings was for the year, but I never really knew. So you you shouldn't have that. Your salespeople, we have a report our salespeople can go look at live and they can every deal um that they can see and they can understand. And you've also got to you've got to use uh compensation to drive performance and and um attitude. And so, like if for example, we comp all of our sales guys on RMR, we RMR is a huge part of our business, and so we comp our salespeople on RMR. Um, and so you gotta have that element in there.

SPEAKER_01 16:09

Last thing I'll add before we wrap is you also do need to be realistic and right size the quota and/or if you're growing quota year over year for that same person based on what you're selling and what market you're in. Like you have to be realistic, and so I think you can also have a really good salesperson for what you're selling and what market you're in. But if you keep trying to bump their quota too aggressively, you might really demotivate them and kind of kill the morale if you're just like, oh, well, I've got to, you know, increase their quota by 30% every year, 50% every year. Eventually that's gonna break. So you've got to be mindful of that.

SPEAKER_00 16:48

Yep. Couldn't agree more. Pay your salespeople well, make it easy for them to understand and communicate really thoroughly with them, have a lot of structure, and you will have a magic winning compensation plan for your salespeople. Uh, what would be winning for me is if you like this content, you would go, you'd click the like button, boop, and you'd leave us a comment and you know, engage with our stuff. That's always helpful for us. That's how we are measured, is on those little boops that you make on the video. So anyway, we appreciate it. We hope you have a great week.