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How To Compensate Your Sales Team

Screen Shot 2015-09-10 at 2.42.15 PMFiguring out the best compensation plan for your company can be really tricky. If you don’t compensate your team well enough, you risk high turnover. If you pay too much, your sales budget will be too high and your profit margins will decrease; it’s definitely a fine balance, and one that can be difficult to achieve.

The goal is to keep your salespeople motivated and encouraged, but what does that look like in reality? How do you begin to figure out the most effective way to compensate them? And how do you strike a balance between happy sales people and low sales costs?

The good news is that finding the right balance will benefit both your business and your sales team. On the business side of things, your bottom line is positively affected if your sales team is happy. Along with this, if you build a reputation for compensating your employees fairly, you increase your chances of retaining and attracting top sales talent. Overall, everyone benefits from a compensation plan that is well-thought-out.

There’s No One-Size Fits All Plan

Every business is different, just as all sales teams are diverse. Depending on your products and services offered, your compensation incentives will vary. Some companies only pay commission based on sales while others pay solely based on margin. Still, others create plans based on a bit of both.

There is one common thread that every successful compensation plan shares: it’s well aligned with your company’s overarching goals. In short, your sales compensation shouldn’t just be a tactical focus for your organization, but a strategic one as well.

4 Tips for Creating the Best Compensation Plan

  • Know your team. Inbound lead qualifiers need different compensation plans than outbound prospectors. The greater your awareness of your team’s talents and your company goals, the finer tuned your compensation plan can be.
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  • Create a trial period. Use a discretionary bonus, stipend or flat bonus for the first 2-3 months—try this in place of a commission plan at first. See how it works and adjust as necessary after the trial period is over. Keep in mind that you want to have a reasonable ramp up for new team members.
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  • Do your homework. By compiling data before you put together a plan, you avoid guesswork. Ask trusted connections, organizations you look to for best practices and a variety of online resources—from there you’ll have a much more comprehensive idea of what might work for you.
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  • Be firm but fair. Set realistic sales goals. If the goals are too easy, your sales costs will be too high and you’ll end up having to jack up comp plans, creating chaos within your team. If your goals are too high and unrealistic, neither you nor your sales team will be happy; no one wins.

Fine-Tune Your Plan and Ask for Feedback

Once you have your new compensation plan in place, get feedback. Ask people with experience managing sales staff what they think. Whether it’s a mentor or a fellow entrepreneur, ask them to poke holes through the plan. You’ll also want to reach out for feedback from your sales team about any changes they’d recommend.

Remember, you want everyone to be happy and to work hard, so have an open mind when receiving the feedback—these individuals might raise points you never considered. Motivated salespeople can make or break your company, so be sure to include them in the process.

To learn more, download part 4 of The “Triple Guide” On Building an Epic, Scalable Sales Team.

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