A good commission plan can incentivize your sales reps to be engaged and achieve their sales goals month after month. A lacklustre commission plan can do little to nothing to move the needle and motivate your sales team to achieve.

The issue is a great commission plan is somewhat subjective. What encourages one team of reps may not necessarily have the same effect on others. The strength of a commission plan depends on the type of sales you are doing, the industry, your customers, and many other factors. Therefore, creating a commission plan should be done on a case by case basis, taking into account the factors that will impact your sales reps and your organization.

1. What Makes Sense for Your Company?

All companies are structured differently. If you are in a start-up phase, then offering a commission plan that is more bonus heavy with a smaller base salary provides you with the financial flexibility you need, and it allows your sales reps to make more money as their performance improves.

2. It’s About Finding the Middle Ground

Finding the middle ground – a place where your sales team can be properly compensated without taxing company resources and the ability to grow – is the sweet spot where you should direct your aim.

“As most CEOs have discovered at some point, sales compensation is very often a delicate balancing act. Pay too little, and you will never be able to recruit (or retain) the kind of game-changing sales talent that fuels growth. Pay too much, however, and you will struggle to scale your sales organization as that growth occurs,” says Devon McDonald from OpenView Labs.

“The key, of course, is to find the middle ground — the point at which every employee who makes up your sales organization feels fully motivated to deliver results that fuel smart growth,” she adds.

Tips to Create a Commission Plan

Keep these tips in mind when developing your compensation plan:

• Avoid getting too complicated: Keep it simple.
• Stick to what works: What are other companies doing? Have they been successful? If it ain’t broke, don’t fix it.
• Tie compensation to your business goals: Know what you want to achieve and use this as a key factor when developing your compensation plan.
• Build in some flexibility: Having flexibility in your compensation budget allows you to make adjustments on the fly to incent sales reps in new ways and boost motivation.

More Advice About Compensation Plans

5 Tips to Create a Sales Incentive Program that Works

4 Types of Sales Commission Plans

Top 4 Ways to Structure Your Sales Compensation Plan

5 Common Misconceptions about Sales Compensation

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