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PepeTheFrog

percentage commission for sales and BD

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In government contracts, the "rainmakers" are people who can somehow secure large contracts for tens or hundreds of millions of dollars.

This is usually described as "business development" or BD, but some people call it "sales." Distinguish the two as follows.

Sales. Small-time. Repeated. Powerful contacts not needed. PepeTheFrog thinks that sales implies repeated, smaller, commodity sales, such as software licenses or medical products. Think of a college graduate who is hired to generate and administer sales from a GSA Schedule contract.

BD. Big-time. Infrequent. Powerful contacts needed. PepeTheFrog thinks that BD implies infrequent, larger contracts where a personal or professional relationship with the client is more important. The former head of an agency does not go into sales, making phone calls and writing emails to contracting officers for FAR Part 13 software license purchases at the end of the fiscal year. Instead, the head honcho goes into BD, where he uses his contacts, knowledge, and experience to land large contracts in one or more government contracting industries or agencies. Think of a former acquisition leader or military general who is hired by Boeing or Lockheed to generate and close deals on large defense contracts.

Given this understanding of sales versus BD:

1.  What is the commission schedule, percentage of the contract award value, or compensation structure for sales?

2.  What is the commission schedule, percentage of the contract award value, or compensation structure for BD?

 

Example answers:

1. Sales. Base salary of $35,000 with an unlimited commission schedule based on 4% of sales revenue.

2. BD. Base salary of $90,000 with an unlimited commission schedule based on 2% of the contract value up to $10 million and 1% of the contract value over $10 million.

 

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44 minutes ago, Retreadfed said:

Pepe, are you asking what would be reasonable and allowable on government contracts?

No, the original question is for what industry pays. What you've seen. What your colleagues tell you. Your experience.

However, PepeTheFrog is intrigued by your question. What are your thoughts on that issue?

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For your question about what is reasonable and allowable, it seems like your FAR citation is spot-on for determining the upper limits, and that contractors would not get reimbursed for amounts beyond those limits.

PepeTheFrog is not convinced that those limits are an important factor in this specialized area of BD in the big leagues.

The contractor can always "eat" the cost (not get reimbursed). In the realm of winning $300 million contracts, reimbursement of the rainmaking employee's salary is a drop in the bucket. What's more important, getting a $300 million contract and paying top-dollar to ensure you get it, with no reimbursement from the government...or making sure this one-of-a-kind rainmaker's salary is reimbursed?

Is this discussion accurate, @here_2_help?

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I won't bother with numbers, but your proposed example seems reasonable for Sales. That's a clear incentive to churn out revenue. Just to be clear, in return for winning a service contract with options, would the employee earn commission on just the basic period or the total contract value to include options?

As for Business Development, to incentivize repeat sales and build on the relationships with my "Big Ticket" customers, I'd consider gradually increasing commissions for winning contracts in the same target market/niche.

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Suggest you distinguish domestic and international sales. International sales seem to always take much longer, since you are negotiating with two government bureaucracies not just one. Consequently, international sales and BD should generate higher commissions.

 

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Pepe, I have admittedly never encountered a ‘rain maker’, but I have heard of them and know they are out there.

In my experience, though, BD folks are far less prestigious generators of ‘business’ than anything you described. They are often (but not always) folks with subject matter expertise in whatever they are ‘selling’, and have performed the work themselves in their careers before BD. They are normally qualified to walk the walk and talk the talk.

As it pertains to government contracts, I haven’t personally met many BD people that were overly persuasive or well-suited for sales. It’s often someone who knows the business reasonably well (or is an expert), knows just enough about government contracts to be dangerous, and knows what a teaming agreement is and why we need one. They are good at evaluating RFP opportunities, are good technical writers, and they know enough about the opportunity to know if it’s rigged or ‘wired’ for another company. They know whether or not they or their partner firm has ‘capes’ and can be competitive for work. Sometimes they assume the position of a proposal coordinator for a big, competitive RFP.

I guess I have a pretty jaded view of BD because a lot of times the opportunities they 'win' turn out badly. In my experience BD folks are quick to make a ‘sale’ at any cost. Which often means an ill-advised budget compromise, a persuasion to accept contract terms knowing full well they shouldn’t, and a lack of awareness or caring for contract administration, traded for ‘client’ relations. They would be the enemies of many Wifcon members.

Oh, and I have never seen them paid on a commission basis. The position I described is salaried and in the range of $140K - $200K per year.

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@Michael11 Your characterization of sales/BD versus contracting is familiar to PepeTheFrog. The other side of the lily pad is that the BD professionals view the contracting people as obtuse, close-minded, myopic, ignorant of business considerations, and allergic to profits. The accusations on both sides have merits although they are both based on stereotypes. The best in either camp do not display the negative stereotypes. In the best companies, the BD and contracting wars are resolved amicably, with a synthesizing path forward decided by a CEO or VP who knows what he's doing. If either camp gets too much power, it can result in either paralysis and decay or cancerous growth.

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