If you’re just at the beginning of your journey in business and you’re going to have help from salespeople, developing an effective compensation plan is important. If you’re having trouble retaining staff, you may want to re-visit your compensation plan so that you can improve it.
Your compensation plan should incentivise people to work hard and it should reward them for a job well done. And if possible, there should be additional incentives and bonuses for when people go above and beyond the call of duty. If you have more than one sales rep you may also want to foster some healthy competition in your workplace with some sales contests, too. The good thing about sales salary is that it’s an income-generating expense. Unlike operations costs, the more you spend, the more you’ll make — provided you have an effectively created plan, of course.
Naturally, you’ll want to be cautious about the corporate culture you shape so that it’s not an ‘every salesperson for themselves’ atmosphere where the team is also cohesive and tight and mentors one another. It’s not an easy feat to accommodate all of the above elements. Read on for some areas to consider:
How are your competitors paying their people? A new company may not be able to pay out as much out of the gate as established companies in the same area but knowing what your competition is doing could help you create something at least comparable. This could be important if you want to win good salespeople over and if you want to keep the ones you’ve got. You should regularly review how you are paying people to ensure that your plan suits your needs and the needs of your staff.
What About Commission Only Plans?
Commission only plans have some pros for new businesses and there are some big cons, to this sort of plan, too. As a company paying commission only , you’ll only pay for results so that sounds like a good thing for you, especially if there’s limited cash flow in the early days. But the downside of this way of paying your staff is is that it can be difficult to retain people as it can be tough for salespeople to perform when they don’t have a base salary to count on. You could be putting your people under pressure and many can’t perform very well if they are too “hungry” to focus on work. It could even create a slimy salesperson mentality that results in low customer retention and high product return rates.
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What About a Recoverable Draw?
A recoverable draw is something that some companies implement so that they can help new staff with something guaranteed but where they will recover that draw from future commissions. There is the risk from potential that someone will leave the company before you recover that draw but the basic salary is something that can help your sales people find their footing. It should be enough to live on but perhaps low enough that the salesperson won’t be so comfortable on it that they won’t be willing to strive to reach their goals. Some companies only guarantee a base salary for a specified amount of time, giving a salesperson time to build their income before moving to a commission only position.
Tracking a salesperson’s success is important for them and for your business. It can come from your order management system but could also come down to additional things, too, such as logging their deals in your CRM software (so that you can easily plan and track what’s happening) and in incenting in other areas, too, like customer retention, margin %, mix of products and services sold, etcetera.
When you invest in a salesperson you may want to put contracts in place. You may want to implement non-compete clauses, too (depending on your area and the legalities. Do your research), so that people can’t jump ship and try to take their customers with them.
You may also want to set up regular meetings where you review a new rep’s pipeline, their customer retention rate, and other elements so that you can be sure you are developing talent, developing business, and connecting with your people in a way that can benefit the professional and the company, too.
A winning sales plan needs to be a win-win — for you and for your staff. Implementing ongoing performance and salary reviews can be a big help for you both.