how to boost revenue with a more strategic sales compensation plan
TRANSCRIPT
How to Boost Revenue with a More Strategic
Sales Compensation Plan
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CEOs and company owners are likely to answer:
Just the way I pay my
sales team?
Five percent times whatever sales reps sell?
A number times a rate?
A necessary evil.
What Is Sales Compensation?
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It’s the way you communicate your strategic vision to your
sales team.
“Whether you're a CEO or a VP of Sales, the sales compensation plan is probably the most powerful tool in your tool chest.”
Mark Roberge, HubSpot’s Chief Revenue Officer, Sales Products The Sales Acceleration Formula Using Data, Technology and Inbound Selling to go from $0 to $100 Million
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Nope.
The 3 Most Impactful Sales Performance Levers…
…are all encompassed in your sales compensation plan*
1. Sales Strategy and Planning
2. Quota and Goal Setting
3. Sales Compensation Design
4. Deal/ Pipeline Management
5. Sales Training
* Based on a 2013 Mercer survey
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Sales Compensation Is Also Tied to Some Compelling Financial Facts
14.5% of your annual revenue is spent on sales compensation, making it your second largest variable expense.
When plans are designed and administered poorly (using spreadsheets), commission calculation errors average between 3 and 8%.
Companies involved in compensation lawsuits may be liable for up to triple damages, attorney fees, and negative brand exposure.
Done right, sales compensation can drive a 92% overall team attainment of quota.1
1 Sources: Sales Compensation and Performance Management, CSO, 2013; Lead-to-Win 2012, Peter Ostrow, Aberdeen Group
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When compensation plan changes are proposed, sales reps
are often left wondering:
And Yet, the Connection Between Sales Compensation and Company Goals
Isn’t Always Clear to Sales Teams
What’s being taken away?
What do they want me to sell
now?
Why are we doing this?
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Does Your Organization Have a Sales Compensation Problem?
Signs of a faulty sales compensation plan design:
• Sales rep recruitment and retention issues
• Complaints from the sales department
• Revenue below plan
• Selling unprofitable products
• High expenses
• Top reps are not the highest paid
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Are You Paying for Performance?
Some companies are overpaying reps who have learned how to game the system...
This graph illustrates sales commissions and attainment from an actual company. If you look at the 100% attainment marker, you’ll see one rep is earning about $90K, while another can’t reach$20K—yet both brought in the same sales.
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How’s Your Quota Attainment Distribution?
A typical sales team has many reps below quota, a few reps above quota, and no one close to actual quota. These companies will not make their sales goals for the year. Ideally, you should have 50 to 70% of your reps at goal or above.
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So When Is It Time to Update Your Plans?
• Products are different
• Territories have changed
• Go-to-market strategy has evolved
• Current market conditions are different
• Job roles becoming more specialized
• Not driving right behavior
• Target Total Compensation is not competitive
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How Your Business Stage Affects Your Sales Compensation Plan Design
Is your company approaching a key inflection point?
Read about organizational changes that demand compensation plan adjustments.
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Strategy Aligning Compensation with Your
Company Goals
Determine the key items you want sales to deliver on for 2016. For example:
• Customer retention
• New products and services
• New customer acquisition
• Further penetration of market
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Required – quota, goal or expectation – aligned with strategy. Common examples:
• Revenue dollar
• Profit dollar
• New customer
• Units
Getting Your Quota Right
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Need more detailed information on how to create sales quotas?
Start here.
Focus Incentives to Drive Results
The right formula with the right amount of incentive helps sales reps stay focused.
I get it, sell these!
What am I supposed to sell
now?
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• Commissions vs. bonuses
• Thresholds and caps (starting point / end point)
Want the details? Download "How to Structure Sales Reps Earnings to Drive Your Business"
Formula Types and Rates
Flat For low priorities
Stepped For emphasis
Ramped Progressive For aggressive growth
Ramped Regressive For avoiding overselling
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Communicate Plan Documentation
Required in writing and signed by each rep
• Focuses your reps’ attention
• Goals and earnings opportunity
• Policies and procedures
View a sample plan
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Reward Earnings and Performance
• Reports – Payout, commission details, performance
• Ranking
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Questions?
Contact Teanna: [email protected]
Best Practice tools, tips, and blogs: www.cornerstonesoftware.com
Answer 10 questions for a sales compensation plan evaluation: www.cornerstonesoftware.com/GradeMyPlan
Cornerstone Software, Inc. is the developer of Sales Motivator®, a web-based,
self-service software solution that lets small- and medium-sized businesses design,
administer and communicate great sales compensation plans.
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