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3 Things Your Sales Compensation Needs To Be

A well-structured compensation plan is more than a compelling bullet point on a job posting, it’s a tool that your company can use to incentivize success in areas that will maximize revenue. Here are three areas to focus on to create sales compensation packages that attract top talent.


Competitive

It is possible to find qualified candidates with below-market compensation plans, but you’ll be relying on luck and circumstance. This means a longer hiring process, which can result in an opportunity cost more substantial than adding a few bucks to the bottom line.

If you don’t know whether your compensation plan is competitive, you’ll have plenty of opportunities to collect market intelligence while conducting your search. When doing your initial interviews try to find the answers to these questions:

– What’s the average base salary and OTE (on target earnings) in your market?
– What does your competition’s commission structure look like?
– Do your competitors have a cap on earnings?

Once you have that information, you’ll have a better sense of how competitive you are.

Structured

A typical software sales compensation plan is a 50/50 split of base salary and variable earnings, with the possibility to exceed that for overachievers. The variable component may be lower for junior roles and higher for senior and enterprise roles, but the ability to double the base salary is a good rule of thumb.

It’s also critical to be clear on how and when your sales team is going to be compensated. Be ready to answer these questions, for the sake of the hiring process and your own administrative needs:

– Are targets and bonuses calculated monthly, quarterly or annually?
– How is commission handled in deals involving multiple team members?
– When are commission payouts made?

Short-term objectives have more resonance and even the best commission plan can lose some of its lustre if you don’t see a payday until the end of a 18 month sales cycle.

Results-Oriented

Sales incentivizes success in a way that few other careers do, but your compensation plan can do more than ensure your sales team can afford a Lexus. It’s a tool that can define your expectations and shape behaviour in a way that’s in line with organizational goals.

Quotas are the most obvious example of compensation driving behaviour, but they’re only the beginning. You can leverage the fact that your sales team will pursue activities with the greatest earning potential by ensuring that those activities are the ones related their role.

For example, pure hunting roles should be paid higher commission on net new business, while account management roles should be rewarded for up selling and retention. This will define roles within your sales team and ensure everyone is following the plan.

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