If you’re struggling to keep your best salespeople motivated, it might be time to take a closer look at your sales compensation plan. Many organizations are stuck using outdated programs, or have compensation plans that don’t line up with their goals and objectives. A good sales compensation plan can help with a number of things, including motivation for your sales force, teamwork, increased sales, and engagement. It can also reduce turnover.
Why A Good Sales Compensation Plan Is So Important
An effective sales compensation plan is important for several reasons. The compensation plan incentivizes your sales team members to perform to the level you desire. If everything goes as it should, the people who are the most productive will get the biggest rewards. This will be good for both the company and the sales team.
Offering a competitive sales compensation plan is a great way to attract top talent to your company. The sales field is very lucrative for top performers. The sales compensation plans should reflect that sales are the lifeline of the business.
High-performing individuals usually want to work in places where their skills and hard work are compensated well. If you are having difficulty attracting high-quality employees, you should compare your pay and benefits package to those of similar companies.
Successful sales reps and executives frequently look for opportunities to improve their situation. The days of working at one company for three or four decades and then retiring with a gold watch are long gone. The best performers will want the best terms and a good sales compensation plan can help keep them loyal.
If your company has a high rate of employee turnover in the sales department, it might be due to the sales compensation plan. You should investigate the plan to see if it is the cause of the turnover.
A well-designed sales compensation plan can help create a sense of teamwork and collaboration among salespeople. Some compensation plans are team-based, which is a good environment for collaboration and synergy. In a scenario like this, salespeople are more likely to share best practices and tips because they’re working towards the same goal. This can have a major impact on your sales department, with team members who previously didn’t do well independently generate more revenue.
A case for sales compensation plans
Oldcastle is a leading provider of infrastructure solutions. The company realized that its field sales roles were spending too much time on estimating and administrative tasks, so it outsourced those tasks to a third-party company.
After taking another look at the company’s goals, it was decided that the field team would be more productive if they focused on getting new business. Oldcastle created a new sales compensation program to better reflect current circumstances. The new plan also included a campaign to convince the sales team of its benefits. Oldcastle saw a positive return on investment within the first quarter of implementing the new sales compensation plan.
The main point of this example is that a careful sales compensation plan can not only motivate sales teams, but also increase profits. The plan can help the organization realign itself with its goals and objectives.
Quick Tips to Improve Your Sales Compensation Plan Today
You can improve your sales compensation plan by using sales performance management software. Xactly is one such tool.
Xactly Automates eliminates the need for manual tasks related to sales force compensation, ensuring that salespeople are paid correctly and on time. The software provides the ability to either create a sales compensation plan from the beginning, or manage and improve an existing one.
In addition, Xactly provides a way for departments such as sales ops, finance, and accounting to work together. This collaboration between your organization and ours helps to streamline how your organization handles compensation and commission expenses. If you use Xactly, you can expect your payments to be accurate 99.9% of the time, and you’ll save up to 30% of the time you would normally spend processing commissions.
This all-in-one solution also offers additional tools and features, including:
- Strategic sales planning
- Sales performance analytics
- Operational sales management
Sales performance management software can help you to manage sales and compensation in a more efficient way. There are several additional tips that can help you create and optimize a strong SCP.
Explore Different Types of Sales Compensation Plans
The most effective compensation plan for your business depends on the products or services you offer as well as the types of customers you are targeting, among other important factors.
You should start by learning about the different types of compensation plans. Look at each potential sales plan and consider its strong and weak points. Imagine how well it would fit in with your company’s goals and how it would work within your organization’s structure.
The most common types of sales compensation plans include:
- Salary – In this compensation plan, salespeople get a fixed salary. This model works well for account management positions where the employee isn’t bringing in new business. However, this compensation plan may not offer enough motivation to upsell to customers.
- Commission Only – As the name suggests, this compensation plan means that salespeople earn 100% of their pay via commission. This option helps to keep expenses low but can demotivate the sales force. Additionally, this structure tends to attract aggressive salespeople who may hurt your customer relationships.
- Salary Plus Commission – This compensation plan includes a fixed base salary and a commission on each sale. The commission is typically a percentage of the sale. This model offers salespeople the security of covering basic living expenses despite volatile market conditions and the occasional dip in sales. You can tailor the salary and commission mix to different sales roles for the best effect.
- Draw Against Commission – This is almost like a salary advance. Employees receive a fixed base salary at the beginning of the pay period. The employer then deducts this amount from the commission earned during the pay period and pays the employee the difference. However, if the employee’s sales go below the base salary, they owe the employer the difference. You typically see this structure where the aim is to reward top performers.
- Territory Volume – This compensation plan is based on total sales for specific territories. A percentage of the entire territory’s sales is split equally among the sales force in that territory. This option works well for team-based corporate cultures where sales teams work together well towards a shared goal.
- Tiered Commission – This is where the commission percentage increases as you achieve sales quotas. For example, the commission may be three percent for sales up to $20,000 and raises to four percent for sales between $20,001 and $45,000, and so on.
The Ideal Compensation Plan For Your Sales Organization: Examples
Are you having difficulty deciding on a compensation plan for sales representatives? Have you searched the internet looking for an answer? It couldn’t hurt to ask your competitors if they would be willing to help you out. If you’re in this situation, you may have noticed that there’s not much help available for making such an important decision.
We get a lot of potential customers asking us if 20% is the average amount people pay in sales rep commissions.
We’ve been mostly unable to answer until now.
We’ve been collecting data on sales compensation plans and salaries in various industries since 2003. Time to Hire has completed a lot of campaigns, over 30,000. -> We collect data by asking our clients for an estimate of what an average and a top-performing salesperson could make at their organization. clients will provide us with additional information that we do not require, such as their specific sales representative commission percentage or base pay amount. While a small number of our clients give a lot of information, it’s enough for us to create helpful sales compensation plan examples for other businesses.
You should create a plan that is individual to your business, but examples of successful plans from other businesses can help you brainstorm.
Merchant Services (Outside Sales)
Lease commissions range from $125-$450.
You could earn up to $200 in bonuses for each account, plus up to 75% back in residuals.
Agents are paid a one-time $200 bonus and a monthly residual of 30% for each activation.
The starting commission rate is 40%, but it could be increased to 60% if the sales rep meets certain quotas. Rate increases to 45% after the first 5 accounts. After 200 accounts, expect $100k in yearly earnings.
If you sell six to eight locations per month, you can make $100,000 per year plus residuals. Two sales per week averages $1500-2000 plus 50% residuals.
50% signing bonus plus 15-25% lifetime residuals. Vesting reps can sell residuals for 30x value.
You will receive a 4300 upfront bonus and 20% commission for every closed account.
Lifetime residuals. 25-40% residuals for the lifecycle of the customer. 30x buyout options twice yearly. 401k after 90 days. Medical, dental, and vision after 90 days. Life and AD&D insurance. Includes iPad.
The base salary will be $32,000 with a 3% commission on all sales.
As an independent contractor, you’ll receive 20% commissions on gross revenue for 2 years. There is a cap of $20,000 per client. The commission rate will grow to 25% if you register 50+ businesses.
Cable Internet Door to Door
100% commission (duh), and $130-$140 per contract
AT&T’s average sale is $162, while DirecTV’s is up to $250.
100% commission and 4 tiers. The price is $137 per contract for up to 22 sales per month, $148 per contract for up to 32 sales per month, $160 per contract for up to 42 sales per month, and $171 per contract for 52 or more sales per month. You will receive a $500 sign-up bonus after making 15 sales in the first 30 days. Health benefits after 90 days.
Roofing and Storm Restoration
In the roofing restoration business, 10% of the total sale seems to be the standard.
10% of the total contract. Incentives and bonuses after $250,000 in sales.
Sales rep receives 50% of profit after costs. If an invoice is $20,000 and the material and office cost is $14,000, the remaining profit would be $6,000 and the representative would make $3,000.
The average commission for a job is 50% of $800-$2000, which is paid upon turn-in. 4-week paid training.
Paid Housing, $10k per year on average. 7 weeks of paid training at $375/week. Gas allowance, $75/week. Paid cell hot spot, $140/month.
10% of the gross sale. 401k and medical insurance.
10/50/50 Split. 10% of the total cost and 50% of the profit goes to the roofing sales rep.
7.5% of the total price of the roof.
12-15% of the overall claim.
6% commission until proven, then 10%.
4% of the initial contract signed.
40% net income paid on all completed claims.
Commissions range from 3-10% depending on experience.
10% commission on first $800k in sales. 11% until 1m and 12% over 1m in sales.
The amount of experience an in-home sales rep has is directly correlated to how much of the job they can do. Canvassing reps make $20 per inspection.
Home Improvement (Windows, Doors, Bath, Kitchens)
The average sale made by our company is worth $14,000. If our sales representatives earn a commission of 10%, they would make an annual salary of $100,000 to $200,000. 100% commission.
$400 a week for 4 weeks of training. Then 100% Commission – 7% commission on provided leads. 9% commission on leads self-generated. Health Insurance and Simple IRA. (Basement Solutions)
The base salary is $25,000 with commissions that range from 6% to 12%. The commission is based on how much the person selling the product makes. Benefits after 90 days. (Shower Door Installations)
A 50% commission is offered to veteran representatives, while non-experienced representatives are offered a 35% commission with $300 in weekly training pay. (Windows, Siding, Gutters)
You will earn a base salary of $35,000 to $54,000 per year, plus 2% commission once you have made enough sales to cover your expenses. (Bath Remodeling)
The base salary is $300 per week plus a 5% commission of all sales generated. (Windows, Roofing, Siding, Doors)
8% commission of the total contract sold. The estimator is responsible for their own gas and transportation. (Patios)
Two options. Depending on the situation, you would either make $400 a week as base pay plus 7% commission on the job total, or 100% commission and 10% commission on the job total.
THE PROBLEM: YOUR BUSINESS ISN’T GROWING AS FAST AS IT SHOULD!
Your sales have stagnated or decreased, and you can’t figure out why. Discover what’s holding you back from achieving predictable sales growth in your business.
If you want to grow your business, you need a proven plan and framework. That’s what you get with the 2X Your Sales Discovery Session.
Want to learn about a formula for Predictable Growth that will put your business on a 90-day path to 2X Your Sales?