Sales compensation plans should be designed to motivate the sales organization to focus on the behaviors that produce results. Hire the most expensive people you can afford.
Are you paying your team NOT to sell. In 25 years of working with sales teams and organizations of all size and shapes I have seen 1,000’s of sales compensation plans. Most are horrible and pay sales teams and individuals NOT TO SELL. Sales force Compensation is not rocket science and should not take an accounting degree or an advanced set of Excel skills to process.
Here are the five most common mistakes companies make when building their Sales Compensation plan;
1. Inadequate mix of salary and commission.
2. Not willing to pay enough for great talent.
3. Complex plans that don’t motivate the individuals on the team.
4. Lack of focus on the behaviors and activities that produce results
5. Limited understanding of Sales Person Return on Investment and Sales Longevity
When sales force compensation programs are developed with the right incentives, the right focus, the right mix of salary and commission, the A players show up, the B players step up, and the C players terminate themselves.
Factors to consider when building a Sales Compensation plan;
- Sales Cycle
- Average sale
- New sales vs. current clients
- Behaviors necessary to grow revenue
- Competition compensation plans
- Sales role – i.e. hunter, farmer, account manager, key accounts, ect.
- Difficulty and complexity of sales
- Gross margin
- Net margin
- Working remotely
- Self managed
- Entrepreneurial tendencies
- Sales leadership capabilities
- Market percentage, market growth, market size
- Business and market maturity
- Business problems solved
- Salesperson and sales leader personal motivation
The overall average pay for a sales person in the U.S is over $80K. Based on your market and your location and the list above your Sales Force Compensation Plan should be exciting and motivating for each individual on the team. The days of just adding a higher percentage of commission or a higher salary, or spiffs to the sales compensation plan died several years ago. We have seen a complete shift in individual motivation. 5 years ago 78% of the sales teams we worked with were motivated externally. Which means they wanted more money. Today we see the exact number, 78% of the sales teams we work with are motivated by intrinsically. Which means more money is not the answer.