Published on Sep 8, 2017
Then you’ll want to ensure your sales organization has a well-designed incentive and bonus program.
Regardless of whether your sales team is large or small, local or global, sales reps that are incentivized will work harder to achieve the goals set by your organization.
“When I look back on the various strategies I used to grow
our sales force from zero to several hundred people, I realize
that one of the biggest lessons I’ve learned involves the power
of a compensation plan to motivate salespeople not only to sell
more but to act in ways that support a start-up’s evolving business
model and overall strategy. Whether you’re a CEO or a VP of
sales, the sales compensation plan is probably the most powerful
tool you have.” – HubSpot Chief Revenue Officer,
Mark Roberge, in The Sales Acceleration Formula
The key to finding the right blend of commission, bonuses and incentives for your organization’s sales compensation plan is understanding the different options available and what motivates your reps the most.
Below are some of the most common sales compensation plans with our thoughts on why some aspects work (the good) and why some aspects fail (the bad).
The good: Straight salary is the annual base salary sales rep can depend on. It is also easier to budget, since it’s consistent.
The bad: The sales rep’s salary is not impacted by their sales performance. That means sales reps are not necessarily incentivized to sell or work harder and may become complacent in their sales role.
The good: With this option, there is no base salary for sales reps. Individual sales reps earn a percentage of each sale they close. This option may attract top-performing sales reps who are confident in their ability to sell and make a good income.
The bad: Because reps are depending entirely on their ability to sell, this structure can lead to high turnover rates and sales rep burnout from stress.
Salary Plus Bonus
The good: Your sales reps receive a base salary along with an added bonus for achieving or exceeding predetermined sales goals. Bonuses are provided to sales reps at specific intervals.
The bad: Sales reps sometimes become disheartened if it takes too long to reach a sales goal. If not handled correctly, this can lead to high turnover.
Salary Plus Commission
The good: Salary plus commission sales compensation plans are the most popular option in sales organizations. Sales reps receive a lower annual base salary along with commission to make up their total compensation. Their commission is earned based on the number of sales the individual sales rep closes, resulting i n increased productivity and motivation to achieve sales goals.
The bad: This compensation plan can make it more difficult to budget, since sales vary. In addition, lower base salary can be viewed as a negative comment on reps’ worth, especially if the rep is having difficulty making sales.
The good: In this option, sometimes sales reps don’t receive a base salary, sometimes not, depending on the organization. The sales reps’ rate of commission, however, can go up and down depending on factors like product sold, contract terms, new business vs. existing, etc.
The bad: This compensation plan can make it difficult for both reps and the organization to budget.
Incentive Variety Makes the Sales World Go Round
On average, there is a 30% annual sales force turnover. So, while it’s important to note that total compensation is a significant factor in recruiting and retaining sales reps, incentive programs that award sales reps for their achievements inspire loyalty and job satisfaction. Some effective incentive programs are as follows (and mixing and matching is often useful):
Designing the right sales compensation and incentive plan will infuse your sales organization with the confidence and motivation it needs to exceed sales goals. Curious as to whether your sales compensation and incentive plan needs adjusting?
Revecent can complete an analysis of your current sale compensation and incentive plan to identify areas of opportunity for accelerated sales growth and sales force empowerment. Request a consult now.
Revecent is a national sales recruiting and sales enablement consulting firm. We help technology and professional service companies recruit and optimize sales talent to accelerate growth. Contact us today to see how we can help your organization’s sales team exceed expectations.
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