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On Building A Sales Organization – 3 August 26, 2013

Posted by David Dirks in Sales Compensation.
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If all else goes well, compensation is usually the part that falls off the map.  The majority of small business owners that I’ve seen over many years try to find a way to pay the least they can.  They create so-called sales compensation plans that seemingly have a “path to make a lot of money” as one small businessman told me once.  The math is usually some blown up algorithm that has no relationship to the time it takes to really sell the product or service.  It assumes that the “sky is the limit” and that the product or service is so beloved that it will fly off the shelves.  Reality meets fantasy and no one wins.

As I said in the beginning of this series on the subject of sales compensation:

Willing to create a sales compensation plan that truly rewards people for their efforts but doesn’t leave them wondering how they are going to eat while they ramp up & beyond.  Whether you hire experienced or entry-level sale people, be prepared to compensate them within the range of what is at least the standard for you industry.  Going cheap on the compensation plan equals  consistently high turnover.  At best, you’ll be a good place for someone to get some training and experience before they go off and find a real sales organization to make a living off of.

Years of sales compensation planning provides me with several takeaways:

  • A great compensation plan rewards sales behaviors that lead to tangible improvements towards meeting or exceeding specific objectives.
  • A one-size-fits-all sales compensation plan does not exist.  The best plans are customized to your specific industry and needs.
  • Spend some time looking at how compensation plans both are similar and where they vary.  This is time well spent.  What you will learn will save you time and headaches.
  • Stress-test your compensation plan first before finalizing it.  Do the math and run some realistic scenarios through it to ensure it rewards the behaviors that you want to reward.
  • All data that is used for calculating compensation must be verifiable.
  • Make sure your compensation plan cannot be manipulated.  If there is a weakness in your plan that could favor the pockets of your sales force with little benefit to your business – sales people will find it pretty quickly.
  • Base your plan on realistic sales income scenarios.  I love the way most multi-level marketing (MLM) programs can develop multiple scenarios that look and sound like you to can make $5000 a month in extra income by only do X, Y or Z.
  • Sales compensation plans should be reviewed at once per year at a minimum or whenever major changes in your business (changes in product pricing, profitability, competitive changes, etc.) make it necessary to adjust your plans.

Overall:  Avoid the extremes:  paying too little or paying too much for little real results.  When in doubt, hire a sales compensation expert to help you craft a plan that fits your business needs.

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