Sales Reps in Control States?

[Outlaw Distillery]

Hey All,

Does anyone have experience, tips, or advice with hiring Sales Reps in control states?  

I envision this role would be focused primarily on bars and restaurants, with state owned liquor stores as a secondary target.  But I am struggling to come up with a good way to compensate (salary + commission) these reps (we don't get good sell-through data from the state).

Thanks for any help.

-Tyler

 

[Sudzie]

What control state we operate in a couple and their different. 

[Outlaw Distillery]

@Sudzie  We are currently focused on Utah.  But would like to be able to create a commission structure with scalability potentially beyond our home state.  Thanks.

[Sudzie]

That is a tall order.  The average craft distillery sell less than 1000 cases per year. Let’s say their 6 packs that would be 6000 bottles.  If you wanted to pay someone poverty level compensation let’s say $28k per year their Commission would be around $4.70 per bottle or $28 per case.  You will also have to pay them mileage if they use their own car to go around. The last figure I saw was .58 cents per mile driven. Let’s say they drive 6500 miles in that year to sell your 6000 bottles then that overhead cost would be $3770.  Your are now at $5.30 per bottle or $31.77 per case.  I’m not going to touch on expense account reimbursement at all. 
 

My 9 years of doing this is the owner needs to peddle their hooch until they get to 2500 cases per year and then it makes monetary sense to creat a sales persons position.  We compensate our two sales positions $40-$46k (salaried) per year and provided each of them with a wrapped Wiggly car.  You will go broke paying the IRS minimum mileage reimbursement and not have a billboard driving around.  Been there, done that.  And if you don’t pay the IRS reimbursement and it’s found out your screwed.  And they only find out from past sales people.....

Now you could have a person that just loves what you do and wants to be part of it.  That’s awesome.  We have done this in the past and works marginally.   We paid $6.50 for every bottle placed.  Tracking is hard but doable.  Don’t forget the competition is using professional sales people and the mistake craft distilleries make (we did) is they don’t.   We lucked out, now our two sales people are huge fans and left their previous sales position to come on board.  We do bonus them out when agreed to numbers are hit for the quarter.  And that can add up to an additional $3000 for the quarter. It’s only been hit 1 time in the past 8 quarters since we started this but, you know there is this COVID thing going around and they feel secure having a job.  We’re just now seeing improvements on the sales side. 
 

Best, Dave

[Outlaw Distillery]

Thanks @Sudzie.  

This is all great info and makes perfect sense.  I have always been of the mindset to pay your people before yourself but there are some things best not outsourced.  Not too mention that building a sales organization from the ground up needs intimate knowledge and experience to create scalable processes and culture.

I really appreciate your thoughts, feedback, and effort.  If we ever get to meet in person, I look forward to it.

[Glenlyon]

Don't forget when selling to liquor stores and restaurants, you generate less revenue per case because you'll be selling at wholesale prices. So you'll need to sell that much more to make it pay, therefore - you'll have to make more booze and then spend more money marketing to make sure to sell all that extra booze. 

[whiskeytango]

11 hours ago, Glenlyon said:

Don't forget when selling to liquor stores and restaurants, you generate less revenue per case because you'll be selling at wholesale prices. So you'll need to sell that much more to make it pay, therefore - you'll have to make more booze and then spend more money marketing to make sure to sell all that extra booze. 

Most control states you sell strait to the state there is no "wholesale". Then the state turns and sell it to the final retail outlet, restaurant or Direct to consumer where they run their own stores. 

 

But to answer OP question 10% Of sales is pretty standard in control states. 

 

[Glenlyon]

Thanks for clarifying. I keep forgetting our business environment is so much different.

[Deep Creek Distilling]

I agree with Sudzie on many topics but still at a standstill.  Our small distillery sells roughly 1000 cases (12 bottles in a case) a year.  We are in a control state (Virginia) where the ABC stores are the only retail supplier.  The bad part is that the ABC store controls how many stores they will put your products in, everything else has to go special order, which means that the bar managers have to ask for the delivery the first time.  I used to do the sales (as I think all owners should because we usually do a better job) but there is just not enough time to do sales and distillery operations.  The time that I am not selling, I am delivering bottles to individual restaurants/bars- which is ridiculous and not cost/time effective.

BTW, did I mention that the ABC takes roughly 69% of bottle price as a tax?  The ABC does pay us for stocking fee and sales commission per bottle if I sell and self distribute.  So, my profit per bottle is between $8 and $11 depending on the spirit.  I don't see us getting to 2500 cases per year without a sales rep and I can't see where hiring and paying a sales rep will work either.  Any ideas??