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-Is this healthy to build a business, though, that doesn't factor in for a office?
CLAY: So what do you think Greg should have budgeted in for this office? I mean, Tulsa's pretty inexpensive.
-Right. And he works-- I mean, he's graphic design. So he could work at home if he had his own home.
CLAY: He could work at home. OK.
-Yeah. I mean, you could do that if you had--
CLAY: Is $500 a month-- I mean, if he has a home office or something? Is it $500 a month what we should?
CLAY: OK. And Greg, we're trying to help you here, buddy. We're saying with Greg, you got four weeks in your month. Maybe if you're watching this, Greg, from a different planet, maybe you don't have-- you know, you have different number of weeks in months.
But for you, Greg, we're just gonna say there's $4,800 a month that's coming in. That's the most you can make under this scenario. And your office is $500. Now Deedra, you hear this, I'm sure. I hear this all the time. It drives me nuts. They're like, well, you can write it off.
CLAY: I don't want to write it off. I want money in my pocket.
-CLAY: But $500. It's an expense. What are other expenses that--
-I mean, utilities, if that-- I don't know if that's included in that.
-No, no, no. Because he has some utilities. So utilities. And I'm just going to make it up here. I'm just trying to help somebody. But we're gonna say it's $100. OK? Deedra, what are expenses at 918moms or any business that you just don't think of. They just sneak up and get you.
-Yeah. I mean does he have his own insurance? Does he have to pay, you know--
CLAY: We're going to pretend that Greg right now-- Greg, our main man Greg, he's 27. He's married. He just got married to a wonderful lady. Weird deal. Her name was Sarah, but she spells it with an H. But you just don't say that part. You don't say that. So that's Sarah.
He married Sarah. He's 27. They're married. They don't have any kids yet. Insurance. So he's got to spend some on insurance, right? So insurance is probably-- I mean, Deedra, what are we talking about? I mean, we're not insurance brokers here, but probably $1,000 for health insurance and all that? I mean, it's probably a lot.
CLAY: Health, life. What else does he-- I mean, does he have a phone for business?
DEEDRA: Yeah, cell phone.
CLAY: OK. And keep-- you just keep giving them to me.
CLAY: He's got a computer.
CLAY: Is he gonna lease the computer? Like where he gets it and he pays a little each month? Or is he gonna buy it one time.
-Uh, probably buy it one time, I would think.
CLAY: Greg, I'm gonna pretend for some reason you don't have any cash right now. And I've been there, buddy. I bought a computer from Micron-- it's out of business now-- for, like, $6,000.
DEEDRA: I didn't know you could lease.
-Yeah, you can-- [INAUDIBLE]. I had no money. It was a bad deal. So let's go ahead and say you got a sweet deal. You're paying $29 a month for your computer. And then your software and all your hoo-ha. You're going to drop another $100 a month for all that. Your phone, you know, is another $100.
So we add this up. Greg, Greg-- listen to me, Greg. You have $1,000, $1,500, $1,600, $1,700 $1,800--
CLAY: All of a sudden, Greg, you're out right now, my main man. You're out $2,000. So now, Deedra, we were in business. And at the end of the month, we only have $2,800 to take super Sarah to the grocery store to pay for.
I mean, it's not really cool living in your mom's garage. And she's like, can we move somewhere else? And you're like, no, baby, we're gonna live in Mom's garage. And she's like, Greg? Go to bed. Greg? And you're like, sorry, Mom.
So you got this whole dynamic going on. And you only have $2,800. So if that's you, do you then raise your prices? Or what would you do, Deedra?
-He needs to offer more products to those same people. So he does cards. What else can he do to the same client?
CLAY: OK. So now, Greg, you're gonna go from cards to offering what else? We could do maybe like a brochure?
DEEDRA: Yeah. Any print piece.
CLAY: Pring pieces.
DEEDRA: Website design.
CLAY: Website design. You can do handwriting classes. No, OK. Cards, brochures, web, print. A lot, actually. You come back. Now, Greg, if we're lucky, we call the same people. Would you agree it's easier to sell more stuff to the same people than it is to sell to new people?
-OK. So we say that Greg-- great things have happened for you, Greg. Boom, dude. Now, through a miraculous turn of events, you have now doubled your income because you've listened to Deedra's super sale system. And you've called your clients not to sell but to find more problems you can solve.
CLAY: So let's just pretend for a second that you had to call me. And I'm a client of yours.
-What kind of stuff do you say to me to see if there's more things I want to buy?
-Yeah, I mean, I think asking what other services they use with a graphic designer. And if they've been happy with your work, can you take care of those services, as well?
-OK. So you're like, hey, beep boo doop, hey, Greg. Yeah. This is Clay. I want to call and see, are you-- it's weird I'm calling Greg to sell Greg. But just work with me, Greg. But I call him. Hey, so are you happy with the work? Yeah. Well hey, I wanted to tell you, we also offer web design and brochures. Is there anything else you need right now? Or are you all good? Are you good?
Well, I do have a trade show coming up. OK, well, cha-ching.
-Why don't we help you with your brochures, your banners, your-- so that required some sales.
DEEDRA: Right. Yes.
-So again, if you're starting a business, you gotta do that sales thing.
Grow your business with mentors like Clay Clark
-So, now, let's talk about this. How much money can Greg possibly make? Under this model, the most money that Greg can make in a month-- after it's all said and done, the most profit he can have is $7,600. And what we have to ask ourselves is that enough money?
-To reach his goals.
-To reach your goals. Which, in theory, you've written down, and you know what they are.
-And this is the game, right?
-Are we in the game? We keep going? And then, Greg has a baby. Now expenses go up. Now, we've got to bring in more. It's just this--
-And do you enjoy this cycle?
-Yeah, OK. As an entrepeneur you have to enjoy this, because if you don't, you're up for a rough spot. That's why there's this fallacy of, I'm a good designer, and screw the boss, I'm going to leave and start my own company. That's why there's so many borderline homeless designers. Just because you're good at designing doesn't mean you're going to be good at running a company.
-Because this is the game.
-The overhead, and everything you have to pay.
-So, let's get into this here. If you're going to start to hire staff, how much money is available to pay staff right now, Deidra? You've got $7,600. That's here, coming in. $9,600 coming in. $2,000 coming out. $7,600 is our total profit. How are we going to pay somebody? I only have $7,600 to pay myself, Sarah, to get my mom a gift so I can keep living in that garage. How am I going to-- maybe I pay for landscaping for my mom. Whatever I can do to stay in that sweet garage long term. What am I going to-- how do pay somebody, Deidra? Because you did it.
-Yeah, I think you have to look a profit and loss statement. This shows all every bit of income that's going out. Every bit that it's coming in. Projecting where your business is going to go and then hire people.
-And a great thing-- my suggestion would be to hirer a freelancer. Hirer a freelancer that's just contract. You can work, try it for a few months, see how it goes, so you're not committed to--
-Two options. My option would be, I'd say Greg, what you want to do is find somebody fresh out of college. And you want to tell that person, here's the deal, buddy. I am an animal of graphic design. If you will book me, I will share revenue with you. So, what we're going to do is we're going to go out and try to land clients. And every time we get a client, I'm going to pay you 50% commission on anything we land. And then we're going to assign our clients to a monthly retainer. They pay us every month to make their cards, brochures, whatever. I'm going to pay you residual, or an ongoing commission, on anything we land. So just an example of how I would do it is I would say, let's go out there and get 10 new clients who pay $1,500 a month. Thus bringing in $15,00 a month of revenue. This is like our plus here. This would be our goal. And then I'll pay you, new sales guy, half of anything that comes in. Plus 10% of what, on a monthly basis. That's how I would do it.
-And then I would pay some sort of hourly. I'd say, well, I'll pay you $10 an hour, $8 an hour to get started.
-Would you do that? Or would you like to go in and just throw-- are you more the idea of, hey, you do the work for me. I'll go sell some more stuff.
-Yeah, I would have somebody do the work, probably.
-If I found someone good. If I thought they were good. You definitely need a salesperson. Someone needs to sell these services for him. And he's a designer, he's probably not a salesperson.
-So, you have to ask yourself, how much is it going to cost to hire somebody else? And I would say there's a lot of business owners are stuck right here. You will never have-- for most people-- never have-- unless you have a huge stack of money somewhere-- never have enough money to hire a sales person right. So, how do you do it, though?
-Commission. So, real quick. Let's say you are in charge of Greg's. That's your company.
-Convince me to work there on commission. What would you said to me?
-I mean, I would do like the $10 an hour $15 an hour or whatever, so they have something guaranteed. And then do commission structure.
-OK, I hope we're helping some people here. But right now, I know of a man who sells phone books. We're talking about phone books! What year is it? 2014. What? Homie sells phone books. I'm not exaggerating. He's probably pulling in almost $200,000 a year right now. Sick.
-Before they he sold cellphones. Phones for yourself. The cellphones. And he would do cellphones. Before that, I don't know what he was selling.
-And he loves the idea of pay just $10 an hour. All goodies is 50s. You worked in the TV business.
-How do you structure the sales commission of a sales rep for a TV station?
-It'd be like on a draw. So, they start with a $24,000 a year, right out of college.
-Which comes out per week, $24,000 a year, it's roughly $500 a week.
-So, that's what they started with. So, they have something to take the leap. And after three months, your draw goes down, and you start making commission. Because the goal-- and a lot of people quit then. But if you're good salesperson, you want commission because you could make more money, in the long run.
-In the news stations, they're out there doing a draw.
DEEDRA: Right. They do a draw. It's usually a three month guarantee and then it goes to a draw.
-I hope I'm helping somebody. I have a guy I work with in the insurance business, and I work with him. And he owns his own, you know, location. He's got a lot of overhead. He owns his own agency. And he's always trying to hire staff. And he says, well, it's going to take at least 50 grand a year to hire a good person. I said no, no, no. Commission--
---with base. And anybody who's motivated to do a job for a commission is the person you want to hire.
-Anybody who's like, well, I want a big salary and I don't want commission. And you're like, you're probably not going to sell anything, are you?
DEEDRA: Right. Exactly.
-Because a commission person thinks what's the upside?
DEEDRA: And I think you make the commission high. If you're not paying much of a base or you don't have that, make the commission higher. You know, I've talked to people all the time. And they'll say make it 30, 40 percent. And the business owner doesn't want to pay that much.
They think, well, that's coming out of my pocket. But it's more than you had yesterday. Right. They're making sales for you. So I wouldn't be scared to pay a high commission.
-So I'm going to-- just so we don't lose this thought here. I'm going to kind of do a little bit of adjustments here to our super chart. So let's just look at it for a second because I think it's really, really important that we mine into this.
And, Deedra, I heard you say that a lot of people don't want to pay that much commission. And you're saying, hey, that's more than you made last month. So let's get into for a second.
So let's say right now that Greg is making $9,600 a month. He has total expenses of $2,000 after paying everybody. He ends up keeping $7,600 a month. OK, so he has $2,000 expenses. That's his total income there. Under the commission model, let's say we paid $10 an hour. It's $400 a week, $800 for two, $1,600 is now going out a month for your salaries.
OK, so now, Greg, you went down here. Now you're only making $6,000 a month. Making sense? We've just spent 1,600 on paying our sales person. You're suggesting though of all the new business you would pay a commission?
-OK. So let's say we did land $15,000 of new business, Deedra. And I'm just making up a number. But you might say, hey, I'll pay a 30% commission on that new business.
DEEDRA: 30%. Mm mm.
-OK. So now over here we have $5,000 of expenses that are going out to bring in that new 15, right? So now we have a total of 21 that's coming in. And we have our total expenses at $3,686 right here. So our profit just went up from $6,000. When it's all said and done here we're at $12,000. I'm hoping my math's right here. But we're now making $12,400 a month of profit by simply bringing in one new sales person.
DEEDRA: And they're going to stay motivated at 30%. I think they're going to be more motivated than if you gave them 10%.
-Now, some of the things that I do for companies, and I highly recommend if you're doing this and you're strapped on cash-- and according to the Small Business Administration nine out of ten of us watching this are strapped for cash. I recommend that you'd say to your sales person-- let's give him a name. Let's say our sales person's name is Clayvus.
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So our sales person is Clayvus. You say Clayvus, if you stay loyal to my great firm, Greg's Garage based design firm, I'm going to send you to Hawaii at the end of the year. Or I'm going to buy you a MacBook Pro-- the videographer there-- I'm going to buy you a MacBook Pro should you do this or that.
And he's, wait, wait, wait-- I get paid and I'm going to go to Hawaii if I do this? Or my assistant, I say, hey, you guys can go to Miami on a vacation as long as you do this and that. So you offer a little bit of a prize. And now that person wants to stick around.
DEEDRA: And really, the key I guess, Deedra, is if prize is worth it and the atmosphere is worth it, they'll all probably stick around.
-They're going to want work harder.
-So I'm hoping I'm helping some people here. It's really important because eventually you're going to have to hire somebody to join our team in the sales capacity. Let's talk about this for a second. If you have your business and you don't put a big commission structure in there, what kind of people are we attracting?
DEEDRA: That's why I said the 30% because I think you've got to see what your industry, what your competitors are paying salespeople.
DEEDRA: So if you're going to want to steal somebody good, you're going to have to pay a higher commission to get a quality person. The 10% is going to be somebody that, you know--
-Permission to go off. I swear I won't curse because I want to be good. I want my mom to be proud of these videos. But I'm working with 100 companies over the past five years.
-And every one of them with an exception of, like, 20, do stupid commission structures where they say we'll give our people a base of $800 a week and then we'll pay them a 5% commission on new business. And I say to them, if I were them, I would be playing solitaire. I would be finding ways to look like I'm working. I would do anything possible but work because there's no incentive to work. And then I look at the companies that are successful and they have a low base pay with a massive commission.
-Like a super generous commission.
-And so the question, if you're watching this right now, is is your commission structure set up where it would motivate a producer? You worked in the sales at FOX?
DEEDRA: Well, I'm marketing side.
DEEDRA: Marketing side. But I did sales with [INAUDIBLE] and Money Saving Queen.
-OK. You did sales?
-Did you find that to be true? When you give a big commission, people get pumped?
DEEDRA: Yeah, absolutely.
-So it's a huge deal. We have to make sure that we do that. And, again, if you build a system that attracts ambitious people, it's great. But if you have a system that motivates the wrong people, you're attracting the wrong kind-- anybody who wants to come work for you for a $2,000 a month base with no upside is insane.
-Furthermore, they're not going to help you sell anything.
DEEDRA: And I've heard of company's capping. You know, you hit a certain amount and they'll cap their top sales person. Which that's ridiculous. You know, if they're producing that much, making that much money, your top sales person, they-- it should be infinite. They should be able to sell as much as they want because you're making more the more they sell.
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