7 years ago
February 21, 2017

A Guide to Setting Up Your Sales Compensation Plan Today

Let’s look at how you can set up a winning sales compensation plan today.

Claire McConnachie Recruiter
Claire McConnachie

Sales compensation is key to your company’s success. Your sales compensation plan can either be a powerful, motivational tool or it can be a cause of conflict and dissatisfaction. No doubt about it, you want your sales compensation plan to motivate your sales reps, encourage them to become top producers, and ultimately boost your bottom line. Let’s look at how you can set up a winning sales compensation plan today.

Reward Your Top Sales Reps

The first thing you need to do is make sure your superstars are recognized. They’re the ones who not only bring in the most revenue, but they also motivate and inspire your sales reps who are still learning the ropes. To make sure your top sales reps are adequately rewarded, consider boosting your commissions over a certain dollar amount. 

For example, you could offer a commission of 5% per dollar for all sales up to $100,000 and then offer 7% for sales over $150,000 per month. You could even add another tier to this formula, perhaps offering 10% for sales over $200,000 in one month. A sales compensation plan like this really rewards your top producers and inspires the others to work harder.

Include Sales Contests in Your Sales Compensation Plan

Resist the temptation to spend your entire compensation budget on commissions because periodic sales contents go a long way toward boosting the morale of your sales reps. Sales contests don’t have to be very expensive, but they should give sales reps recognition and something out of the ordinary. Here are some ideas for sales contest prizes:

  • Gift certificates to favorite stores
  • Movie tickets
  • Restaurant gift cards
  • Passes to amusement parks
  • Tickets to sports events

Sales reps typically stay longer with companies that sponsor sales contests on a regular basis because they feel valued in their jobs and enthusiastic about their work.

Strike the Right Balance Between New Customer Contracts and Existing Customer Renewals

Your sales compensation plan can have a big effect on the way your sales reps spend their time. If you generously reward new customer contracts but you’re stingy with existing customer renewals, they’ll spend most or all of their time seeking new customers. This might be just the model your business needs, but if you count on existing customer renewals for a significant portion of your income, you’ll be in trouble.

Carefully consider the balance you want between new customer contracts and existing customer renewals, and structure your sales compensation plan in a way that encourages sales reps to help you meet your goals. If you want them to focus evenly on the two categories, offer identical compensation for both. If you want them to focus more on existing customers than new customers, weight your commissions in that direction.

When your sales compensation plan rewards your top producers, includes regular sales contests, and strikes the right balance between new customer contracts and existing customer renewals, your company will thrive, and you will be able to retain your very best sales reps.

Claire McConnachie Recruiter

Claire McConnachie

Claire has 4+ years of experience in sales and recruitment. As a Director of Client Services, her main objective is to connect great people to great companies by building strong relationships with both top clients and candidates in the sales industry. She specializes in sales roles of all seniority levels for both enterprise and start-up clients North American wide. When Claire isn't networking with top talent, she enjoys being outdoors, traveling and spending time with friends & family.