How Should You Compensate Your Sales Team?

By April 27, 2018 February 7th, 2019 Uncategorized

When it comes to sales compensation, a lot of direct sales team leaders get weak in the knees.

Why? Because it’s a difficult equation to balance. If you pay your employees too little, you won’t be able to retain them. Who wants to stick around when they could make more money elsewhere?

If you pay them too much, they won’t be motivated to perform. If they’re happy with their pay after making 5 sales, where’s the drive to go out and push for 10? A good sales rep is hungry… and that should be encouraged. You don’t want to overfeed them for underperforming.

So where’s that magic compensation number? The one that keeps your employees happy to work for you but motivates them to keep pushing for more wins every month?

Well…

There is no magic number.

Sorry. That would be too easy.

If you are planning to attract sales talent to your direct sales firm by learning what your competitors pay and offer just a little more to edge them out… you might get some good talent. And then lose them when a competitor tries to do the same thing to you.

People aren’t loyal to a number.

There are a lot of sales compensation plans floating around out there. And there are plenty of magic formulas for nabbing your next top performing sales rep. But the real fact of the matter is that, no matter what compensation plan you offer, you need to build value in your workplace that exists independent from the numbers.

So if there’s no sweet spot for salary, how do you go about choosing a motivating compensation plan?

Do your research.

First step: know your industry. Know what your competitors pay, why they pay the way they do, how it’s working out for them. Scope out similar industries and see if their model makes sense for what you do. Ask direct sales reps in your industry what they’re getting paid and how happy they are with their sales compensation plan.

Remember, you’re not getting this information to edge out your competitors, so there’s no need to make this a clandestine operation.

The fact is, running a direct sales firm requires a lot of good community and relationship building. Leading an effective team doesn’t happen in a bubble.

Get out there and get connected with a local network. When deciding on a compensation plan it’s important to know your industry, your local market, and even issues like cost of living in your area. (The fact is, a competitive compensation plan in Iowa may not pay the rent in San Francisco.)

Only when you have the relevant information in hand can you consider the elements of direct sales compensation.

Reward reps who do more.

There are 3 potential elements to any sort of sales compensation plan.

  • Base salary
  • Commission
  • Daily/Weekly Incentives

In certain industries, where consistency is valued more than high-yield performance, plans may skew more toward base salary, with lower commission percentages.

In an industry where you’re counting on sales reps to drive growth, it makes sense to skew more toward most of their pay coming from commission.

For a sales rep, success in direct sales is all about driving to achieve more. You want your direct sales agents to be motivated- and you want to reward them for being hungry.

Commission & Monthly Bonus Structures

If you have a good commission/bonus structure, your top performers and high-yield drivers will always be motivated to get out there and make more sales… because they always want to make more money! It’s a natural inclination, and a good one for both you and the individual members of your team.

So how do you develop a good commission scheme and bonus structure in your direct sales compensation plan? Always be asking yourself this question:

Am I rewarding the reps who do more?

In a fair bonus structure, you’re setting the standard for what numbers are unacceptable, which are okay, and which are worth being rewarded. You want the plan itself to encourage reps to get out there and close more deals.

Here’s how to do it:

  • Set a low-end target goal that everyone can hit. It should be the minimum accepted number, a number just above the average median performance.
  • Set a high-end target. This is the “unicorn number.” It shouldn’t be an impossible number… but it should be at the higher end of possible. Something that should be a challenge to hit and a bigger challenge to surpass. (Don’t be afraid to raise that number based on your top performer if they push past it! They’re setting the tone for great growth on your team!)
  • Now, set a sliding scale of bonuses between those numbers. There should always be a next level goal that feels attainable for your reps to push for.

Daily/Weekly Incentives

You should augment monthly income with daily and weekly incentives. These are great for short-term motivational boosts when you’re encouraging your team to hit a small, time-sensitive goal or a big month-end push.

Commissions and bonuses are great. They keep reps motivated to do more, consistently. But it’s also their primary source of income, which means that their eyes are set toward the month’s end. They may need another small incentive to help them see a reward for the short-term challenge.

Daily/weekly incentives don’t have to be high dollar value. Actually, having a short-term incentive be too lucrative can backfire in a few ways. You don’t want your team to lose sight of their monthly goals for the sake of the small, short-term goals.

Instead, offer small incentives and contests for pushing for a small goal. Free lunch, for example, or a coffee gift card. Something with real value that enhances the spirit of pushing toward that short-term goal.

Regardless of your incentives, be sure to continue to reward your team for providing results. A great company culture with good training, combined with a fair and rewarding compensation plan, is a great way to build value in your organization when it comes to attracting and retaining top direct sales talent.

So- are you ready to take direct sales by storm? Solcomm wants to talk to you. We partner with new direct sales firms and support them to succeed in their communities. Learn how to become a Solcomm Subdealer!

Christian

Author Christian

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