Post paid activations are the same thing as contract activations. It is what many of us are used to when we think about activating and getting a cell phone. It will require you to sign a 1 year or a 2 year contract upfront. You are locked in to a given carrier during this time, and if you cancel before your contract is up, you will be hit with an early termination charge that ranges from $175-$250 per line.
In this type of activation, you can expect anywhere from $75-$250 per activation. This pertains only to “new” activations or “port” activations. A port activation is an activation where you switch carrier the customer’s carrier from one to another. By switching carriers, it is considered a new activation. New activations are the core of your business, and this is where you will make your money. New activations are what you will need to strive for in this business.
The carrier owned stores that you see out in your neighborhood typically target about $200-$250 in profit per activation they sell. Many of the authorized dealers like ourselves usually are much more price competitive, and we typically target anywhere between $75 -$150 in profit per activation.
Normally, a small dealer will do about 15-50 activations per month, while the busy stores can easily get 50 or more activations each month. The level of profit does depend on four factors that will be discussed in further detail a bit later. But for your reference, the four factors that change the commission amount are:
Price plan you contract the customer at
Price of phone that you sell to your customer
Contract period (1 or 2 Years)
Any features added to the contract
In addition, each carrier will set a different commission amount for a new activation. This will be a critical factor in determining your profit as well. And in many cases, the commission amounts are tiered, meaning that a certain number of activation, for example 15 activations or more will yield you a higher commission amount.
It is also worth noting again that the commission amounts listed above is only for new contract activation or port activation. If you merely extend a customer’s contract, your commission will be much less, as talked about in the next section. Lastly, in this business you will need volume to succeed. So be ready make many sales, at least 15-50 new activation sales, each month to succeed as a wireless dealer.
Below is an example of a commission matrix that the Master Dealer will provide you with. These are the actual figures at the time of writing in the year 2008, and you can expect to make this much doing business with a given carrier. Please understand that all carriers do not provide commissions at the same levels, so be sure to shop around and compare commission structures between carriers.
As you can see above there is a pretty large commission difference between 1 year and 2 year contract plans. In addition, Family Plans have great commissions, but keep in mind that only the first two lines get the commission. Any lines added from that point on, you get paid on the “Added Lines” portion. This master dealer does require a minimum number of activation and it ranges from 15-20 activations per month. Without that number, you will not get paid the Spiff portion. It is easy to see that dealers scramble to hit at least the minimum required at the end of the month to obtain the Spiff.
Upgrades (Contract Extensions)
Upgrades or contract extensions are another way of making some money in the cellular phone business. Upgrade happens when a customer has a given carrier, and they want to extend their contracts for another 2 years in exchange for a new phone on the same carrier.
Upgrades are usually 2 year contract extensions with the same carrier, and a customer often times becomes eligible for an upgrade 2 months prior to the contract end date. Please take caution that carriers will not pay you a commission for a one year upgrade to their dealers. And for that reason, you are unable to offer one year contract extension deals to your customers.
The profit margin on an upgrade is usually much less than a new activation. You can expect to make somewhere between $30-$100 per upgrade activation.
Upgrades are usually a pretty difficult sale for us authorized dealers, and we are always better off offering our customers to port their numbers to another carrier instead. Should the customer insist on an upgrade, you must understand and acknowledge that the commission amount will not be as high as a contract activation. You will then need to choose between making a low profit margin or to increase your profit by up selling to your customer. Many authorized dealers upgrade their customers by adding in internet, text message, or BlackBerry features to compensate for the lower profit margin.
Upgrades will not be a big money maker in your business, but you must provide your customers with great deals and great service doing upgrades to earn your word-of-mouth referrals.