How much should you compensate your cannabis sales team?
We get this question all. the. time. Which makes sense since the cannabis industry is new territory for many people.
The truth is that the way our industry compensates salespeople has grown and developed rapidly over the past few years. (Surprised? We’re certainly not!)
Just as we’re all still learning the ins and outs of the cannabis industry as a whole, we’re also learning the ins and outs of how to appropriately compensate your cannabis sales team.
Why it’s important to know how to compensate your cannabis sales team
Let’s face it. While Senator Schumer’s push for federal legalization is exactly the push the cannabis industry needs… but we doubt it will pass (this time!). But although we don’t believe it will pass this time, federal legalization is definitely in the pipeline. And when federal legalization does happen, every company on the planet is going to try to sell to the cannabis industry.
When this happens, the salespeople with existing relationships are going to be in demand and at a premium salary. And those salespeople with existing relationships will be the people you want on your team. Because those are the people who will lead companies to their goals.
It’s critical for cannabis companies to meet their goals if they’re going to make it in this hyper-competitive world of cannabis. And it’s extra critical for plant-touching companies.
The cannabis supply chain is very complex. The same companies are buying from companies that are also selling products right back. Increasing revenue and developing strong business relationships is how plant-touching companies will surpass competitors.
We’ve talked about how every cannabis job can be a strategic hire. But how do you develop the right strategy to both reward performance and retain the sales talent that you’ve strategically hired? What is fair base pay right now?
FlowerHire has prepared a FREE 1-page PDF, Create a Compensation Plan as a handy reference. Download it now!
How to compensate your cannabis salespeople
How do you design compensation packages that are relevant to the value of the industry? As always, it’s about the fit of the cannabis salesperson to the company. But it’s also about compensating for both employee retention and company growth. Companies want people to feel well-compensated while encouraging them to bring in revenue.
Before we dive into the cash-money side of compensating cannabis sales managers, it’s important to understand the responsibilities of cannabis sales managers.
Cannabis sales director
What are cannabis sales directors responsible for?
Depending on local market size, some cannabis sales directors are leading sales representatives in multiple smaller markets. They have sales representatives from multiple states/markets underneath one regional sales director. This is seen more often on the East Coast where the markets are still small.
On the other hand, a sales director focusing on a large state like California has multiple sales representatives underneath them in the same market.
So depending on the location, you’ll see a sales director focusing on either one market or multiple markets as markets continue emerging. But regardless of the state or market that the cannabis sales director is leading, they’re typically responsible for:
- Setting goals and staying competitive
- Training their sales team
- Managing compensation structures to incentivize the right behaviors
- Confirming and designing their own strategy as it relates to the day-to-day performance of the sales team
- Managing key accounts
- Speaking to the executive team about progress towards hitting goals
- Use the systems they’re setting up, but also get into the field
Sales directors are the positions that you want to have some kind of intelligent compensation package design. Compensation packages should be based on the company hitting its goals.
What are cannabis sales directors getting paid?
Most people want to understand what their on-target earnings are and what it means in terms of their total cash compensation. It’s important to clearly lay this out for your new and potential hires. If they’re making $75,000 how can they make $125,000? What are their goals? If they’re making $150,000, how can they surpass that $200,000 mark? Companies need to have it scripted and mapped out before new hires come on board.
For top-performing sales directors, we’re seeing the compensation of what others are getting in the consumer packaged goods (CPG) space. Many times, these sales directors are getting paid $200,000 or more after commissions. Their base salary is typically in the mid-$100,000s range. And then their commissions bring them to over $200,000.
Cannabis sales directors are going home with $130,000-$450,000 after commissions.
Have you downloaded your FREE 1-page PDF, Create a Compensation Plan yet?
We want to see a world where cannabis companies hit revenue goals, the team meets goals, and the sales director can get another 100% of income in restricted stock units (RSU) if it’s a publically traded company.
How can cannabis sales directors unlock the potential of sales?
Step one: A good fit. Make sure your salespeople are the people you actually want out in the field representing their brand. Your hires, first and foremost, must be a good fit. How well do they fit in with your brand? Do they share the same fundamental values are you?
Step two: Understand your goals. Fully understand your goals and exactly what you’re trying to achieve before choosing incentives. Without fully understanding your goals, how can you choose incentives to reach those goals?
Step three: Choose your base pay. Your base pay must be competitive with other cannabis companies. Also, we’re seeing many cannabis companies hiring salespeople from outside the cannabis industry. In the beginning, salespeople were often friends and family associated with the company. Today, we’re seeing expert salespeople entering the industry. So your base pay must be competitive with both cannabis companies and other consumer packaged goods (CPG) companies.
Step four: Choose incentives. We’ve been seeing sophistication emerge in the way that companies, brands, and vertically integrated companies are compensating their salespeople. Choose incentives that both match your goals and are attractive to your hires. Your incentives will be largely dependent on your goals and business. But to get you started, here are a few ideas:
- Tiered commission structure
- New store opening bonuses
- Account generation bonus
- Bonus for teams hitting goals
- Goals to help push a product
- Ask the team what motivates them
Retail and plant-touching sales
According to Ian Keilty, FlowerHire’s Director of Client Services (and one of our OG founding team members!), sales for retail and plant-touching sales (i.e. wholesale, bulk flower) have massively up-leveled in the past several years.
Ian gave us some insight into what he saw in the early days, how and why that’s changed, and what he’s seeing now.
The old way
In the early days, companies were promoting high variability and a low guarantee – a high incentive and low base pay. Many of the buyers were shop owners or someone that knew cannabis products well. Buyers would be there to buy the product and make sure the price point matched the quality.
The old strategy was to buy as much product as possible – they didn’t care about flipping the product or how long it sat on the shelf. It was thought that cannabis would be more of an enterprise sales model. But that didn’t materialize quickly. Small mom-and-pop were forced to consolidate. During this time, retailers wanted to see more professional sales representatives.
The new way
Today, the old school sales representatives that were working on commission-only are less successful compared to the new wave of cannabis salespeople. We’re seeing that buyers are not necessarily cannabis experts anymore. Now, they’re more traditional when it comes to buying and selling products.
Today, buyers are more often seasoned in sales from outside the cannabis industry. There’s a different level of strategy, rapport, and product analysis. And it’s more about the actual cost of the product. Buyers are more willing to scale back the order so they can retain the integrity of the product.
Overall, there’s a new level of maturation that’s coming to buyers in dispensaries. And the buyers in dispensaries are drastically being up-leveled and moved into a higher position.
Sales roles are becoming more strategic. Systems and processes are becoming more mature. Salespeople who understand the sales process are desirable. So these salespeople need a higher base pay. You’re going to have to hit a certain number on base salary if you’re going to attract a salesperson who will get the results you’re looking for.
Strong sales experience from any industry is absolutely a skill set that transfers to cannabis.
What are cannabis retail and plant-touching salespeople getting paid
Today, since there is more strategy involved, companies are more willing to have a high base pay.
Companies are paying $55,000-$80,000 base pay plus incentives whether they’re in California, the Mid-west, or the East Coast. And if the salesperson already has strong relationships in the cannabis industry, companies are willing to pay up to $100,000 plus incentives.
It’s hard to build relationships in this industry. A lot of buyers are not on LinkedIn, don’t check their email often, or don’t have recognizable titles that you would normally see in other industries.
When companies come to us at FlowerHire, more often than not, they’re looking for salespeople who already have relationships in the cannabis industry. In cannabis, you gain credibility because of relationships. And there are not too many people will a good network of relationships.
This does not mean you can’t get into a sales position without cannabis-specific experience… it’s just harder to get a higher salary when you’re starting sales in cannabis. And, as we’ve mentioned before, sometimes you need to take one step back to take three steps forward. Once you get that cannabis-related experience, your value goes up exponentially.
We know this is a topic you’ll likely talk about with your team – that why we’ve created a PDF that pulls out the key information you need for developing a sales team compensation strategy.