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Sales Strategy
Oct 15, 2018 | Canadian Professional Sales Association lock

Devising the right sales compensation structure for your sales team is a delicate balance of competing priorities and demands. Since there are a wide range of sales compensation structures at your disposal, as a sales manager it is imperative that you need to take a variety of factors into consideration if you want to ensure that your sales compensation structure is strategic. Here are four things to consider when structuring your sales compensation plan for success.

Consideration One: What are your business goals?

At the end of the day, for both your company AND your employees, everything comes down to the bottom line. Businesses of different sizes will have different requirements but you’ll still want to ensure that the sales compensation structure supports your corporation’s goals overall; therefore maximising growth and profit. And while they might be competitive and love the thrill of the sale, the reality is your reps got into a sales career largely because they want to maximise their income.

In order to make sure that you create a win/win situation, it’s important that you take time to delve into your business goals over the next three to five years. Different corporate goals will require different compensation structures, so consider what you really want to achieve.

  • Are you a start-up trying to carve out your place in the market? Then perhaps a profit margin sales compensation plan will be best for your team.
  • Has your business stagnated and there’s a real necessity to drive new business? A salary plus commission structure with added bonuses for securing new business may be effective as it will support reps through the lean times but encourage them to drive the new sales you need.
  • Or perhaps your goal is to launch new products or expand into new territories? Then you might need to structure your sales compensation plan so that reps earn higher rates of commissions in the first few months of expansion when closing may be particularly tough.

Before you start tinkering around with sales compensation structures, make sure you know exactly what your business goals and targets are -- and that everyone in senior management is on the same page.

Consideration Two: What Behaviours Do You Want to See More of?

Once you have ascertained exactly what your goals are, now you can consider what behaviours from your sales reps will help your team meet their targets. Choosing a commission only based plan will drive more aggressive selling behaviours than a salary plus commission structure. A shared commission plan such as territory volume will bolster teamwork and may be effective in supporting weaker salespeople to greater sales. You might also want to consider having smaller incentives and bonuses for actions other than closing deals such as completing a high volume of cold calls, getting referrals, securing meetings with hot prospects, or upselling etc. This is a particularly useful strategy to encourage overall positive sales behaviours rather than sales reps pushing through bum deals at the end of the month to make quota.

Consideration Three: What other incentives can you offer?

While it was mentioned above that reps are for the most part money-orientated, that doesn’t mean it’s their sole motivation. If you aren’t able to offer top-dollar or high-rates of commission, you can still make a compelling offer to great sales reps by offering other incentives, perks and growth opportunities through training.

Consideration Four: What Unique Challenges and Circumstances Are Your Reps Facing?

One final thing to consider (and that can make all the difference in making your sales compensation structure truly strategic) is the unique challenges and circumstances your team are facing. Don’t be afraid to be flexible in your approach. You may need to offer a rather different sales compensation plan to your selling star than you would to a low-performing member of the team.

A plan that changes with experience can be useful. Reps just starting out and who are learning the ropes may benefit from a larger base salary and a lower rate of commission at first. Then with more experience and selling potential, you can decrease the base salary and increase commission rates to keep them motivated. Shared commission structures may be appropriate if your sales reps take a team-based approach where some employees are responsible for prospecting and research and then a specialist closer comes in to seal the deal. 

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