The idea that salespeople should be self-motived and driven by pure commission opportunities is appealing to some employers but is simply not realistic.
The best performing salespeople have a street value and the strongest companies will pay competitive packages to get that best talent. Top talent knows what they are worth. If you manage to hire a salesperson for a lower compensation, than anyone else will accept, do you really think you’re getting a deal?
If you pay peanuts, you get monkeys!
Assuming you’re prepared to pay competitive rates you still need to design a compensation plan that will support your company’s sales goals. Reward the wrong activity and you won’t get the results you want.
So, how to pay a sales force is a critical decision for any company, especially when it comes to the commissions. If you provide salespeople with the wrong incentives, it will hurt your company’s bottom line in the long run.
So, you want the best motivated salespeople to grow your business? What works? As with everything, the simple solution is the best.
There are three major components to a salary package:
- Base Salary
- Commissions
- Benefits
Base Salary
This is the guaranteed amount the salesperson earns whether they sell anything or not. Obviously, it is in the company’s interest to keep this component as low as possible. The reality, however is that salespeople, like any business resource have a street price. Any salesperson worth their salt knows their industry and what your competitors are paying. If you want the best salespeople, with experience in your industry, salaries will have to be competitive – simple.
Sometimes a creative approach can minimize long term costs. For example, a salesperson could start on a relatively high base salary for the first 6 months but drops in stages during months 6 through 12. This supports the salesperson income while building a sales pipeline. The long-term focus is still on earning commissions. But, any creative package still needs to be competitive within your industry or you will lose talent.
Commissions
Commissions must be designed to be a simple as possible. Some companies try to put in place overly detailed programs that reply on complex formulas to minimize commissions.
This can save money in the short-term but salespeople quickly figure out they can’t win and will leave.
The best commission plan allows a salesperson to quickly figure out, in their head, how much they will earn from a deal. Having a easy to understand performance/reward program also allows salespeople to get that quick endorphin hit from closing a deal. They will strive to win again and again when the rewards are obvious.
If salespeople are left dazed and angry on pay day when they realize commissions evaporated, because of fine print, they will stop closing and start looking for another employer.
If prices are negotiable, by the salesperson, then commission plans absolutely must reflect a lower commissions rate if prices are discounted. This will incentivize the salesperson to sell at the highest possible price. Again, the relationship between selling price and commissions should be straightforward and very simple to calculate.
Benefits
Benefits tend to be industry specific but can go a long way to attracting and keeping the best talent.
- Company Car
- Apple Notebook
- iPhone
- President’s Club Rewards
- Extra holidays
- Perk programs
- Private healthcare
- Remote working option
The quality and the range of benefits can be extremely attractive to potential hires. Perks can also act a ‘golden handcuffs’ to keep your best salespeople from being poached by competitors.
Overall, packages must be competitive or you won’t attract (or keep) the best salespeople. Get the right balance between reward and performance and everyone wins!