One CEO made sales reps part owners in the company instead of paying them commissions or salaries.
John Strelitz, president of paper broker Streco Fibres, in Virginia Beach, Va., keeps paper out of landfills by buying, for example, scrap magazine stock and selling it to the gift-wrap market. Strelitz's best deal, though, is one he made for two promising salespeople.
In 1991, looking to diversify quickly a few years after starting Streco, Strelitz spun off a second company, Pyramid Paper Products. He gave Robert Hortman and John McMinamin, two young guns with vital industry contacts, a 20% stake each in Pyramid (which warehouses and processes paper in Hot Springs, Ark.) in lieu of commissions or big salaries. The two, then 33 and 38, drove sales but also got more responsibility than they could shake a tree at.
"Being part owners made them smarter about purchasing, collection, the quality of accounts, and cash flow," claims Strelitz. "They act like partners."
Last year Streco hit $2 million in sales, and Pyramid $8 million -- together a 10-fold increase in Strelitz's revenues since 1991. The sales stars got healthy raises, and one day their equity should be valuable. "They're learning every day how to be businesspeople. That's a long-term deal," says Strelitz.