Sales Compensation and Commissions: Which Plan to Choose. Part One

Sales Commission

There are no hard and fast rules when it comes to which model of sales compensation is the right for an organisation. The commissions and benefits offered to your sales stars will depend on the products and services you provide, your target market, the length of the sales cycle and the overall sales plan.

By knowing the pros and cons of different sales commission plans, however, you have the best chance of using the best bits, ignoring the wrong models and getting it right. This will then give you the best opportunity to so keep your top sales performers engaged, motivated and making more sales! In part one of this two-part post, we consider 3 popular approaches to commissions and rewarding salespeople.

1. Low Commission and High Salary

Inside sales roles typically offer a higher base salary and lower commissions. Those sales execs who don’t mind making cold calls and need a guaranteed paycheck will be happy with this plan. The reliability offered by a regular paycheck, benefits from company training, and a structured office environment can be a big winner for many salespoeple looking to play it safe.

2. Retail vs. Wholesale

Retail companies typically pay based on retail or wholesale sales, offering a lower percentage commission on retail sales or a higher percentage on wholesale revenues.

Some companies offer sales commissions based on company net profits. Be careful here because, if the organisation’s operations aren’t efficient, the net can be lower. Ops is out of your control so don’t get sucked into a situation you cannot influence! Look for options such as being compensated based on the gross value of your sales and getting commissions based on the efforts of the whole team delivering the product.

3. Payment for Individual Sales or Territory Volume

If you are a salesperson focused on direct relationship with a customer and individual transactions (e.g. account management approaches), getting paid a commission for individual sales is a very good option. Look for a low base and the highest possible commission.

Territory wide sales works well if you’re stong at building networks and teams and you can excel at getting others to participate in the process. Remember: a protected territory keeps other salespeople in your company from taking your customers and prospects but, conversely, stops you from retaining customers who move out of your territory or selling to customers’ out-of-territory branches.