10 years ago
January 5, 2015

Understand The Sales Compensation Plan Before Accepting The Offer‏

Understand the offered sales compensation plan before accepting the offer, and you will have the tools you need negotiate a better salary.

Rhys Metler

sales compensation planAs a sales rep, you are a master negotiator, practiced at arriving at deals that benefit everyone involved. Yet when it comes down to negotiating a sales compensation plan at a new employer, few reps have the confidence needed to push for a better deal once an offer has been made. Understanding the sales compensation plan might be a factor, since even the best sales reps have trouble negotiating deals when the terms are not clear. Understand the offered sales compensation plan before accepting the offer, and you will have the tools you need negotiate a better salary.

Pay Attention to Base Salary

When offered a sales compensation plan which offers commissions in addition to a base salary, make sure you understand how and when you get paid commissions. Especially in industries that have long lead times where you might not receive a commission on a sale until the next quarter, you might face periods of waiting for a big commission payout with nothing in the way of salary in the meantime. A base salary amounting to 30% of total compensation is common in most fields, though this may change according to the other compensation offered in the deal, such as the generosity of the commission.

Look for Expense Reimbursement

Expense reimbursements are an important part of a sales compensation plan, but sales reps excited about a career change tend to overlook this integral plan component. Sales reps incur a number of expenses working with clients, from minor expenses such as mobile phones to major expenses such as travel and client meals. Most sales compensation plans agree to cover at least mobile phone and mileage reimbursement. Make sure that the sales compensation plan will cover the expenses you would expect to be reimbursed for, or the employer might refuse to reimburse you later.

Add Up the Frequency and Value of Bonuses

The potential for bonus payouts based on performance should be clearly outlined in any sales compensation plan. If you expect to become one of a new employer’s top sales reps, you expect to be rewarded for top performance. Carefully review the bonuses on offer and any limitations the employer wants to place, such as restricting a quarterly bonus to once per year, to make sure that your earning potential under the sales compensation plan is what you expect it to be.

Break The Sales Compensation Plan Down to Hourly Terms

In order to understand what you might be making under the offered sales compensation plan, it is helpful to put the plan into hourly terms. While this will only be a ballpark estimate for what you might make on an hourly basis, it will at least help you to benchmark what you will be making for your time compared to others in the industry. Take into account:

  • The sales you expect to make under the sales compensation plan
  • Realistic goals for the bonuses you might reach
  • The value of perks, such as car allowances, offered under the plan

Then divide the value of these parameters by the number of hours you expect to work per week. With these numbers in hand from your last sales engagement, you can also make a direct comparison between your anticipated earnings under a new sales compensation plan and your past earnings.

The decision on whether to accept, negotiate, or continue your search is up to you, but know that the employer probably will not be willing to negotiate the sales compensation plan again until after you have worked for the company for some time. When all is said and done, it’s important to remember that once you accept the offer, you will be working with the individuals who helped you negotiate this important deal. Be careful to make sure you understand the terms and are getting the offer you are worth.

Rhys Metler

Rhys is a tenacious, top performing Senior Sales Recruiter with 15+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and daughters, BBQing on a hot summer day and tropical vacations.