If you want to recruit the best of the best and then keep them, your job as a business leader is to provide the incentives to stay. Recruiting, hiring, and retaining top sales talent requires a competitive sales compensation plan.
If you missed it, check out this post on what NOT to do for your sales compensation packages!
But when it comes to establishing a solid plan, it’s all about balance: Pay too little and top salespeople won’t even look at your organization. But pay too much and salespeople could potentially become complacent. And as a result, you’ll have trouble scaling your sales organization as growth occurs.
So how do you successfully navigate your way around this delicate balancing act? Here are a few of our ideas.
Six Key Elements of Competitive Compensation Plans
Here are the guiding factors for a competitive sales compensation plan.
1. Empower Both Parties
A great compensation plan is a compromise; you want to design your plan in a way that links compensation to individual sales performance and to at least one of the following two elements:
- Departmental sales performance.
- Overall company sales performance.
The reason is that you want to motivate them by rewarding them financially based on business results because that’s what generates revenue.
Example: You might structure your sales compensation plan so that 70% of a salesperson’s bonus is tied to their individual performance, while the remaining 30% is linked to the overall team’s sales growth as it affects the business. This way, they stay motivated both personally and as part of the bigger picture.
2. Develop Good Sales Habits
If there are certain sales habits you like and want to see your sales team repeat, reward them financially! There’s no better way to reinforce good habits and routines than with incentives.
Example: If you want your team to focus on upselling, you could offer an additional 5% commission on any deal where they successfully increase the value by at least 20% through upsells or add-ons.
3. Deliver Quickly
This is a crucial factor. If you want to incentivize good sales practices, you need to do your part and deliver those incentives in a timely manner.
Rewarded behaviors are more likely to be repeated if they’re rewarded quickly and consistently.
Example: Instead of waiting until the end of the quarter, consider paying out commissions monthly. If a salesperson closes a big deal in the first week, they’ll see the reward in their next paycheck – keeping them motivated.
4. Be Clear
Make sure everyone is on board by creating a plan that’s not only easy to understand, but also to administer.
If salespeople understand their potential incentives and how to earn them, they’ll do all the work. A plan riddled with too much detail and conflicting points could harm your organization. It can result in poor time management by sales leaders.
Example: A simple, clear plan might look like this: “For every $100K in revenue generated, you earn a 10% commission. Exceed $500K in a quarter, and your commission increases to 12%.” No fine print, no confusion.
5. Align Metrics with Business Goals
Sales compensation plans are not a one-size-fits-all approach, and what works for one company may not be appropriate for another. Take time to analyze and define your business goals and then tailor a plan based on your company’s unique business model.
Example: If your company prioritizes multi-year contracts, you could structure bonuses to reward salespeople more for securing long-term deals rather than just chasing one-off transactions.
6. Transparency Is Key
Take the time to meet with your sales team and be open about the process to finding a plan that works for everyone. Go over some of the sales behaviors and habits that you’re looking for and get their feedback on the plan by going through pros and cons together.
Example: Host a quarterly sales meeting where you break down how the compensation plan works, walk through examples, and take questions. This ensures buy-in from your team and prevents misunderstandings.
360 Consulting Can Help You Build a Solid Sales Compensation Plan
When it comes to developing a competitive compensation plan, it takes time and expertise to nail down the best route for your company and sales team.
We can help you tap into the strengths of your sales representatives – another eye on the situation is often helpful! – and put your business on a long-term track of growth and success. The sales compensation plan is at the bottom of how committed and hard-working your reps are – and therefore how much your revenue will grow.
Take the first step towards breaking sales records and schedule your FREE consultation today!