Your Sales Compensation Plans Are More Effective Than Words
Sales commission is not about income. It is all about social engineering. No matter what you may say, your sales compensation structure and plan will help you communicate to your salesperson the goals you have for them. You can tell them that you are focusing on client retention and that it is as important as acquiring new clients. You can ask them to focus on client retention and pay a lower commission for adding on sales. They’ll be more inclined to abandon existing clients and go after new customers.
Salespeople who are good at selling learn quickly. They will be driven by money and will look at the compensation plan to determine what they should focus on. Be careful not to let your salespeople focus on the wrong things.
This is another crucial aspect. Be careful not to make your plan too complicated and lead to bad habits. You will see sales rise if you offer sales bonuses at the end of each month, quarter, or year. You will not achieve steady sales flow if you have compensation plans at the end.
Salary, Draw and Base Commissions
The most challenging aspect of hiring salespeople is how to pay them. This question has three parts. The first is about the business type you have, the second is about how much revenue you make, and the third is about what your competitors are doing. Your competition does not necessarily include other businesses in your industry. It could also include all companies looking for similar salespeople.
You will likely be paid a salary if you work in a high-stakes business that requires a lot of technical knowledge and long sales cycles. If it takes you a long time to close a sale, it is more challenging to attract high-tech salespeople. These salespeople can be very different from others. While they might value a base salary, they may not be as likely to be as money-focused. This is not always true, but it is something to consider.
Other types of salespeople are money-focused and will need to be able to make a good income. The market will determine your income level. You can choose the market’s level of compensation by looking at local job boards online. This includes everything from Craigslist to Jobbing.com and any other sites where ads are posted.
Once you know what the total compensation in your area and the geographic market look like, you can create a plan to help your salespeople make good money. They also need to be hungry. A temporary or small base will usually force them to act aggressively. You should remove them from their small base as soon as possible. They won’t help your company if they feel comfortable with it. Your salespeople should never feel uncomfortable.
Use compensation to get rid of bad salespeople.
You must not only motivate your sales team but also make sure you eliminate the bad apples as quickly as possible. Unless you are in a long-term sales cycle, you must be able to lose weight fast. There are many bad salespeople out there who will happily take you to any base they can and let you ride it for as long as possible.
Again, keep the base small and the commission structure large. If sales aren’t being made, you should have a cut-off point. If you have a lower-ticket item that is easily turnable, give your salespeople enough time. Then, make sure your comp plan reduces base. Or, just let them go. You should let them go if they’re not producing. Your company will be destroyed faster than a plane hitting your side.
Pay the top salespeople well by giving them great commissions. Make sure that your comp plan clearly explains what they should do. Then, use your plan to quickly eliminate bad salespeople. Your project will help you to get the best return for you and your team.
Scott Schreiber, a retired businessman, has more than 30 years of experience in successful turnaround projects, Mergers and Acquisitions, Venture Capital work, and senior sales and marketing leadership. Scott’s current mission consists of helping entrepreneurs and small business owners learn how to grow, compete and succeed in today’s economy.
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