Does Your New Mexico Sales Pay Plan Drain Your ROI?

Something felt off about Vance's books the moment we pulled the P&L in his Las Cruces office. He was celebrating a $3.2 million year, but his personal take-home was actually $14,830 lower than the previous year. We sat there while the sun beat down on the gravel lot, looking at a commission structure that rewarded top-line volume while completely ignoring the brutal reality of rising material costs in the Southwest. His lead sales rep was driving a brand new Raptor, while Vance was wondering if he could afford to replace a single aging rig in his fleet. It was a classic "top-line vanity" trap. In the roofing world, especially across the diverse markets of New Mexico, a poorly designed compensation plan doesn't just cut into profits, it actively incentivizes your team to sell the wrong jobs at the wrong margins. We spent the next 5.5 hours tearing apart a 10% gross sales model that was effectively bankrupting the business one closed deal at a time.

The High Desert Margin Trap

Operating a roofing business in New Mexico requires a different level of strategic math than in the Midwest or the Coast. We have to deal with the Construction Industries Division (CID) and their specific GB-98 or GS-21 licensing requirements, which means our sales reps can't just be "order takers." They need to understand the thermal requirements of a TPO install in Santa Fe versus the high-heat UV resistance needed for a silicone coating job in Hobbs.

When I looked at Vance's structure, he was paying a flat 10.5% on the total contract value. On a $14,200 residential reroof, the rep took $1,491. That sounds fine on paper until you realize the rep was discounting jobs by 7% to "close the deal" because his commission only dropped by a few dollars, while Vance's net profit was gutted by nearly 38%.

In the New Mexico market, where competition in Albuquerque and Rio Rancho is stiff, sales reps often default to price-dropping. If your compensation plan doesn't penalize margin erosion, you are essentially paying your team to give your company away. I've seen shops transform their bottom line by shifting to a 32% or 35% net profit split. In this scenario, the rep only gets paid on what is left after labor, materials, and a 12% overhead burden are covered. This forces the salesperson to care about the estimate's accuracy as much as the owner does.

Breaking Down the ROI of Base Plus Commission

Many owners ask if they should move to a "salary plus" model. In my experience with over 43 roofing companies, a pure salary almost always kills the "hunter" instinct required for high-growth lead conversion. However, a small base (often called a recoverable draw) can be a powerful tool for retention in a state where the cost of living is shifting rapidly.

Let's look at the math for a mid-sized Albuquerque operation.

If you provide a $2,450 monthly draw, you give the rep a floor. This isn't "free money," it is an advance against their future commissions. If they sell $115,000 in a month at a 33% gross margin, and your commission is 10% of gross sales, they earned $11,500. You subtract the $2,450 draw, and they get a commission check for $9,050.

This structure protects the business during the slower monsoon months when getting on a roof might be delayed for 3.5 days at a time. It also allows you to demand more than just sales. You can require CRM updates, attendance at morning huddles, and strict adherence to OSHA roofing safety standards during the initial inspection. If you are paying a pure commission with no base, you have very little legal or cultural leverage to dictate how they spend their time.

Rewarding the "Clean File" Handover

One of the biggest ROI killers I've identified is the "sales-to-production" gap. A rep closes a $19,800 job in Las Cruces, tosses the signed contract on the production manager's desk, and disappears to chase the next lead. Then the crew shows up and realizes the rep missed a second layer of shingles or didn't account for 45 feet of rotted fascia.

To fix this, I recommend a split commission payout:

1. 145% at the time of the down payment: This keeps the rep's cash flow moving.
2. 255% after the Job Completion Certificate is signed: This ensures the rep stays involved until the customer is happy and the bill is paid.

Even better, many successful contractors I've consulted for are now implementing a "Production Bonus." If the job comes in under the estimated labor and material cost (because the rep measured accurately), the rep gets an extra 1.5% of the overage. This tiny shift in compensation turns your sales team into mini-project managers. They start caring about the 7-point verification process of the leads they are working because they know high-quality, verified prospects lead to smoother installs and faster payouts.

Factoring in Lead Acquisition Costs

You cannot build a sustainable compensation plan without looking at your Customer Acquisition Cost (CAC). If you are spending $350 to $550 per qualified appointment through traditional marketing, your sales rep is starting every meeting "in the hole" from the company's perspective.

Some owners try to offset this by charging the rep a "lead fee." I find this usually leads to resentment. A better approach is to vary the commission percentage based on the lead source. For example:

• Self-Generated Leads: 12% commission (encourages door knocking and referrals).
• Company-Provided Leads: 8.5% commission (accounts for the company's marketing spend).

When you use a reliable source for your pipeline, the conversion rate should be high enough that the rep doesn't mind the lower percentage. Many contractors find that previewing verified job opportunities allows them to cherry-pick the most profitable territories, like the high-end residential pockets in Santa Fe, which increases the rep's total earnings even if the percentage is lower.

According to a guide by IKO on how to get roofing leads, balancing your lead sources is vital for long-term stability. Your pay structure should reflect that balance.

The Scalability Factor

If you want to scale to $5 million or $10 million in the New Mexico market, you need a structure that works without you. This means moving away from "handshake deals" and into a formalized Sales Compensation Agreement.

I recently worked with a shop in Rio Rancho that was stuck at $1.8 million for 4.5 years. The problem wasn't the leads, it was that the owner was the only one who knew how to price for profit. We implemented a "Price-to-Commission Matrix." If the rep sold at the company's "Target Margin" (say 42%), they got their full commission. If they sold at the "Minimum Margin" (35%), their commission dropped by 2 points. If they went below the minimum, they needed owner approval and took a 50% hit on their commission.

The result? Within 6.5 months, their average job size increased by $1,642 because the reps suddenly found the "courage" to hold their price. They weren't just selling roofs anymore, they were selling the company's value. If you're struggling to find that same balance, don't hesitate to reach out to a professional or contact our team to discuss how to better align your lead flow with your sales goals.

Closing the Loop on Performance

At the end of the day, your compensation plan is the loudest voice in your company. It tells your team what you actually value. If you only pay on volume, don't be surprised when your crews are overworked on low-margin jobs that barely cover your overhead.

If you want to see a real transformation in your bank balance, start by looking at your last 12.5 months of sales data. Identify the jobs that had the highest net profit and look at who sold them and how they were paid. Usually, the data tells a story that the owner's gut has been trying to ignore. By aligning the sales rep's paycheck with the company's actual profit, you stop being a "bank" for your employees and start being a partner in their success.