Your company is only as strong as your sales team, and if you want to be able to attract the best sales talent, part of the equation is offering an attractive sales compensation plan. This is an incredibly competitive industry and if you want your company to stand out from the crowd, you’ve got to be able to offer them a strong incentive.

The first step is seeing what your competitors are offering their talent. If you are going in blind, chances are you’re going to fall short. While every company is different, it is vital to understand your local and national market. Even if a compensation plan seems a little high, just remember that if you’ve got the best talent working for you, your company is going to grow and be more profitable.

Let’s take a look at the three major components of a sales compensation plan.

1. The Base Salary

This is the one area of sales compensation that there is little agreement on. On the one hand you’ve got to offer an attractive base salary that will appeal to your sales team, but you don’t want to encourage laziness by making it too good. Look at the base rates your competitors are offering and decide where you want to set yours. Remember, it’s ok to go a little lower on the base if you’re offering more attractive incentives for performance.

2. Commission

Few companies can come to an agreement on the ideal sales compensation for commission. There are numerous factors that are going to go into your decision such as your own bottom line for your profit margin. Remember, truly talented sales people are very goal oriented and if you make it very attractive for them to sell your products, it’s only natural that they’re going to try harder. You may even want to consider a stair-step compensation program that increases the amount of commission once certain levels are achieved.

3. Bonuses

All employees like bonuses and it’s a great way to cover your own best interests and profit margin, while encouraging your employees to sell more. This is where you’ll most likely want to tailor each compensation plan for each employee. When they first start, make the goals a little easier to achieve, but still have it require some effort. As they improve, you can set the bar higher. If you have an attractive bonus plan, this will often allow you to offer a lower base salary.

It is vital to set goals in your sales compensation plan that are actually achievable, especially for the first few tiers. While it’s perfectly fine to make the higher levels only available for the most aggressive and talented sales staff, you do want to make it possible for the majority of your employees to be rewarded for their performance. If you set the bar too high, it can actually have the reverse effect and end up scaring sales people away from your organization.

Once you develop a sales compensation strategy, you may need to make a few tweaks as you go. Just remember that you’ll want to avoid changing too much or individualizing too many aspects of the plan. Ideally, your changes should be company-wide to avoid  fostering discontent among your most tenured sales staff. If you make it fair and lucrative for your staff, you’ll avoid retention problems and encourage better performance at the same time.