How do companies attract and hang on to top talent? The answer is simple: they offer the right compensation. It’s not a coincidence that many businesses that are struggling to increase sales are not offering their salespeople attractive compensation packages.
Sales teams are one of a business’s most valuable assets. They need to be treated accordingly, and sales compensation consulting is a big part of that.
Importance Of Sales Compensation
Sales compensation refers to the combination of a base salary, commission and other incentives that drive a sales organization’s performance. A sales compensation consulting plan should be tailored to sales representatives according to their role in the sales cycle, seniority and other factors. Every business needs one to get the most out of its salespeople, but crafting the right approach can be tricky.
Naturally, salary is an important consideration. The average annual income for sales representatives selling services, including commissions, is $63,070, according to figures from the U.S. Department of Labor’s Bureau of Labor Statistics in 2016, while the average income for salespeople in wholesale and manufacturing ranged from $68,410 to $92,910 (1). Of course, lots of factors go into this, such as sales type, the product involved and experience levels.
The average percentage of commission varies widely according to the industry. Car salesmen might earn a commission of between 20 and 25 percent on the profit of the sale, whereas advertising sales reps sometimes get as much as 50 percent. Make sure what you’re offering is in line with industry averages.
Keep Sales Teams Happy
When the compensation plan is right, top performers will be more likely to stay at your company than seek greener pastures. A good compensation plan is also incredibly helpful for recruitment, and the best ones will attract top talent to your organization. Incentive programs and other motivational tools don’t have to hurt your bottom line; many incentives can be mutually beneficial.
Encourage Sales Team To Reach Their Full Potential
Setting objectives and providing incentives that motivate workers to reach them is a tried-and-true formula for getting the most out of salespeople. A well-rounded compensation package helps salespeople see how their achievements are tied to their rewards, inspiring them to go further so everyone wins.
What Are The Components Of A Sales Compensation Consulting Plan?
Put simply, a sales compensation plan will set objectives, measure performance, encourage employees and maximize sales. Here is a closer look at the key components.
Clear And Simple Plan
A good sales compensation consulting plan will be clear and easy to understand so employees know exactly what to expect and when. How can you tell if it’s straightforward enough? A salesperson should be able to know immediately: “If I do x, I will earn $y.” It doesn’t get any simpler than that!
Include the objectives, the timeline for paying out incentives, potential draws, when payouts will be made, and at what point a sale will be recognized. You should make sure it answers any questions your salespeople might have. Be sure to discuss it openly with all members of the team.
The most common sales compensation plan offers a base salary plus commission. This gives salespeople a predictable amount of income they can depend on, plus motivation to work harder and take home more money. The commission may be straight or tiered.
Getting the right balance between salary and incentives will help make the plan less risky for all parties involved, and this is one aspect that sales compensation consultants can help with. However, companies using any type of commission will need to have a proper metric in place to measure performance so commissions can be fairly distributed.
Reward Your Employees
A sales compensation plan should offer valuable rewards that will motivate workers. It is a good idea to structure some early rewards into the plan, as employees who feel appreciated will work harder.
It is also important to clarify any possibilities for promotion to encourage salespeople to strive for more. Forty-two percent of firms do not set up career paths for their salespeople—don’t be one of them!
Don’t fall into the trap of thinking that outlining the compensation is all that goes into such a plan. A good sales compensation plan will also address the issues salespeople may be struggling with and provide solutions to help them overcome obstacles, preventing them from reaching their targets.
Keep in mind that your sales compensation plan is not a one-and-done proposition. It may need to be adapted as your company’s priorities and needs shift. However, you do not want to restructure the plan too frequently, as employees might become discouraged by the lack of predictability. Experts suggest changing the plan no more than once per year.
Reach Out To Experienced Sales Compensation Consulting Experts
The importance of getting sales compensation right cannot be overstated. If you need help motivating your sales team to reach their fullest potential, reach out to the experienced consulting experts at RCG Workgroup to find out how their sales compensation consulting can help.