Revised Commission Schedule

We calculate daily the sales statistics for the store and for individual salespeople, to include the gross income (GI), gross profit (GP), adjusted profit (ADJP), net profit (NP) and commission for each sale. Salespeople are paid commissions that are calculated based on the profit made on each sale. The stats and commissions are calculated by the Accounting Department as follows.

GROSS INCOME FOR THE STORE’S STAT

Gross income is the total amount of all sales made, not including sales tax. Gross Income is also figured separately for each salesperson from their own sales, for wholesale sales and for repair sales. Any shipping paid by customers is included only in the store’s gross income.

GROSS PROFIT FOR THE STORE’S STAT

Gross profit is the amount of the sale minus the actual cost of the item.

ADJUSTED COST

On some items there is an “adjusted cost” which is higher than the actual cost. This cost shows what the store would have to pay to replace that item, if it was bought from a dealer. The salesperson does not get commission on the amount between the actual cost and the adjusted cost. Generally, the buyer has already been paid a commission on this amount. So the salesperson’s commission is based on the higher of actual or adjusted cost.

ADJUSTED PROFIT FOR THE STORE’S STAT

Adjusted profit for the store’s stat and for Retail Sales stat as a department is the gross profit minus any adjusted cost in the items sold, minus payment type fees and minus any shipping paid by the customers.

PAYMENT TYPE FEES

Payment type fees are a percentage that is subtracted from every retail sale, and typically run between 2% and 3% of the Gross Income. This average is calculated by dividing the total merchant fees that are paid to the various credit card processors and financing companies by our total revenue. This percentage is calculated at the end of the calendar year and used for the entire following calendar year to calculate net profit on retail sales. Payment type fees are not subtracted from Wholesale sales.

ADJUSTED PROFIT FOR THE SALESPERSON

Adjusted profit for the salesperson is the amount of the sale, not including sales tax or shipping, minus the higher of actual or adjusted cost of the item, minus payment type fees. All commissions are based on this adjusted profit.

For example:

• $1,077.50
• – 77.50
• – 500.00
• – 32.33
• $ 467.67

• total invoice amount from the sale
• sales tax
• cost of goods sold
• finance fees
• adjusted profit for figuring the commission

NET PROFIT FOR THE SALESPERSON

Net profit for the salesperson is the amount of the sale, minus the higher of actual or adjusted cost of the item, minus payment type fees, minus the amount of commission received for the sale. This is the salesperson’s gross profit stat.

For example:

• $1,077.50
• – 77.50
• – 500.00
• – 32.33
• – 32.74
• $ 434.93

• total invoice amount from the sale
• sales tax
• cost of goods sold
• finance fees
• commission paid on this sale
• net profit for salesperson’s stat

COMMISSION SCHEDULE

MINIMUM

For each item there is a cost and a set amount called the “minimum.” Minimum is the lowest amount a salesperson can sell an item for and get a full commission. Salespeople can sell for more than the minimum and get a larger commission, or if approved by the Sales Manager, can sell the item under the minimum and get a smaller commission.

All items rung up in one transaction (sold to one customer on the same day, even if rung up on more than one invoice) are combined together to determine whether the sale is at, under or over minimum. If the total selling prices of all items sold is less than the total of all those items’ minimum prices combined, then the entire transaction is considered under minimum and the lower commission will be paid on all items.

The exception is if one of the items is a spiff item that is pre-approved by Inventory to be sold for a lower price than minimum but at a higher commission than normal. In that case that item is considered separately and all other items in the transaction are combined to determine whether the sale is at, under or over minimum.

AT-MINIMUM SALES

If the item is sold at the minimum amount, the salesperson gets 5.6% of the adjusted profit.

For example:

• $1,077.50
• – 77.50
• – 500.00
• – 32.32
• $ 467.07

• total invoice amount from the sale ($1,000 is minimum)
• sales tax
• cost of goods sold
• finance fees
• is the adjusted profit for figuring the commission

x _.056 = $26.16 commission paid on this sale.

OVER-MINIMUM SALES

If the salesperson sells the item for an amount over the minimum, the commission is 24% of the amount over minimum after first subtracting payment type fees, plus the usual 5.6% of the amount between minimum and the higher of adjusted or actual cost.

For example:

• $1,293.00
• – 93.00
• – 1,000.00
• – 38.79
• $ 161.21
• x .24 = $38.69

• total invoice amount from the sale ($1,000 is min.)
• sales tax
• minimum
• finance fees
• is the amount over minimum for commission on this sale
• commission %
• is the over minimum commission on this sale

Then:

• $1,000.00
• – 500.00
• $ 500.00 x .056 = $28.00

• minimum
• cost of goods sold
• is the amount of profit to be paid at 5.6%
• commission %
• is the minimum commission on this sale

Total commission for this sale is $38.69 + $28.00 = $66.69.

UNDER MINIMUM SALES

If a salesperson sells the item for less than minimum with advance approval from the Sales Manager, the commission paid is 2.4% of the adjusted profit. If advance approval is not obtained then no commission will be paid on under-minimum sales.

For example:

• $862.00
• – 62.00
• – 500.00
• – 25.86
• $274.14 x .024 = $6.58

• total invoice amount from the sale ($1,000 min.)
• sales tax
• cost of goods sold
• finance fees
• is adjusted profit for figuring the commission
• commission %
• is the commission paid on this sale

PAYMENT TYPE FEES CANNOT MAKE A SALE GO UNDER MINIMUM

If a salesperson sells an item at the minimum of $250, and the customer pays with a Visa card, the payment type fee doesn’t make that an “under minimum” sale. The commission will still be paid as a minimum price sale. However, payment type fees can wipe out all the over-minimum profit in a sale, and cause that sale to be paid as if it had been sold at minimum.

VIP AND VIP REFERRAL GIFT CARDS

These gift cards are not subtracted from the amount of the sale in order to calculate commission. The gift card amount is not subtracted from either the GI or the GP when “statting” the sale.

FOR ALL GIFT CARDS EXCEPT VIP AND VIP REFERRAL

To calculate the commission, the amount of the gift card is subtracted from the amount of the sale; if the results are under the minimum selling price then the 3% under minimum commission applies. If the sale is still over minimum after subtracting the gift card then the full commission applies. The gift card amount is not subtracted from either the GI or the GP when “statting” the sale; it is only subtracted to determine whether or not the commission will be 2.4% or 5.6%.

ITEMS SOLD FOR LESS THAN 10% PROFIT

The Sales Manager must approve any item to be sold for less than 10% profit. There is no commission paid to the salesperson on any sale with less than 10% profit unless it is an already designated spiff item. Spiff items can be sold for anything over 5% and still receive the spiff commission. To calculate 10% profit, divide the cost of the item by 90%. That is what it has to be sold for in order to make 10% profit. For the salesperson’s stat, it must be 10% profit (using the higher of actual or adjusted cost) to earn any commission. Payment type fees are subtracted from the profit before determining if it is 10% or more.

WHOLESALE SALES

For wholesale sales, whether on the retail side or wholesale side, count the actual GI and GP for all sales other than scrap sold to Mystic Coin. For Mystic sales, count the same amount of GI as there is GP in the sale, if any. If there is no GP, then don’t count any GI either.

MINIMUM ON ALL NEW WATCHES

Minimum on all new watches is 15% – 20% off list. 20% only applies to watch lines for which we are authorized dealers and we buy at 50% off of retail. Watch lines for which we pay 45% off of retail have a minimum of 15% off. It does not apply to any preowned watches, Rolex, or any other new watches that we get from another dealer. There are a few exceptions to this rule, for example a hot/limited edition/discontinued watch that we can sell for more than 20% off list, warrants setting a higher minimum. Inventory will post the higher minimum on the tag.

MINIMUMS FOR ALL SPECIAL ORDERS AND MEMOS

Minimums for all special orders and memos are determined by Inventory, and follow the standard markup guidelines. Minimum is not just determined by what the item was sold for.

REPAIRS AND COSTS/ADJUSTED COSTS

If the labor on the repair was done by Nam, or anyone outside the store that we pay for repairs, it is a cost and is subtracted from repairs gross income to get the net profit. If the labor was performed by an employee of LHFJ, the labor has an actual cost of $0, and an adjusted cost, which is the amount the store will pay that person through payroll for that amount of labor. Repair department always gets the stat for the labor on any repair; the salesperson does not get that stat or any commission for that part of the sale. The salesperson may get a stat and commission on any parts used in a repair that are part of a sale that they made. For example, if a salesperson sells a loose diamond and the diamond gets set in a solitaire ring, the stat and commission for the solitaire ring goes to the salesperson, and the stat for the labor of setting the diamond goes to Repair. Labor must be broken out separately on the invoice. If it isn’t, the entire amount for labor and parts will go to Repair stat.

FOR CUSTOM WORK

For custom work both Repair and the salesperson will split the stat for the finished piece, which includes labor and materials. Labor is not broken out separately.

SPECIALS

Specials are selected by Inventory as items the company is willing to make less profit on in order to move them out of inventory. Just because an item has been in our inventory for over a year does not make it a special item. These items are marked with a special minimum, which is generally, but not always, approximately 10% profit. The commission is the same as for any other sale: if the item is sold for minimum the commission is 5.6% of the net profit; if the item is sold for more than minimum the commission is 24% on the amount over minimum. Specials may not be sold for less than the marked minimum without written approval from the Sales Manager. In this case, the sale is under minimum and commission is figured at 2.4% of the adjusted profit.

EMPLOYMENT STATUS AND COMMISSIONS

Salespeople must be currently employed when the sale is final in order to be eligible for commission on that item. If a salesperson leaves employment or is terminated, he or she is not entitled to commission on any sales that are not yet final, even those that have a deposit on them or are on layaway. Commissions are paid once the sale is final and you must be currently employed to receive any kind of compensation including commission on any sale.

If a salesperson or buyer is currently on a retraining program, then commissions may be reduced concurrently. See Employees Training and Corrections for details.