How to Maximize Your Sales Compensation Plan Part 1

How to Maximize Youe Saels Compensation PLan in rd letters with a speedometer in the background

All too often Sales professionals are given a comp plan and never really sit down to review their business against how they are paid. Instead, they accept a number and simply chase it when you should be looking to maximize your sales compensation plan. What we are driving towards are what are the implications of how you get paid based on

  • Revenue
  • Profit
  • Compensation Accelerators
  • Sales Pipeline

We understand high performance sales and the real question is how much money do you want to make given your current comp plan. The main variable we need to have yes on is the commission rate your company has agreed to pay you on.

One of the things we do with our private sales coaching clients is working through their comp plans along with their business plans to make sure they are acting in their own best interests to maximize it, This video is a sample of that exercise using a highly leveraged rep’s com plan as out sample.

Revenue Strategies to Maximize Your Sales Compensation

If you just get paid on revenue take every deal down you can that meets your company criteria.  Odds are most channel partner reps are not solely revenue operated but OEM teams are with Revenue being the be all and the end all.

Things to consider if you you are Paid on Revenue

  1. What is Your Hit Rate 3
  2. What is Your Average Sized Deal $100k
  3. What is the Typical Sales Cycle in Terms of Time 6 Months
  4. What Would a Game Changer Sale Look Like For You?
CriteriaSampleYour Data
What is Your Hit Rate/ Close Percentage33% 
What IS Your Average Deal$100k 
Typical Sales Cycle3 Months 
Annual Revenue Quota$1.2m 
Annual Funnel$3.6M 
What Would A Game Changer Sale look like$400k 

Simply Put You Need 12 Average Deals a Year to Hit Your Quota. In the first 90 days you need to find 9 deals right away to not be in the hole. Now’s the time to stop, look at your numbers, your sales funnel and assess where you are. I

Leveraging Profit Dollars with in You Compensation Plan 

If your only measure of success is Gross Profit then there is not a single reason in the world to look at revenue. Cash is truly king and only the cash you and the company keep matters when it comes to maximizing you sales compensation plan. If you have worked for a public company this sounds like utter madness but large portions of the world in terms of channel partners, agents and independent sales agents the only number that matters it GP Dollars. To Maximize your your compensation plan in the scenario you need to ditch all the time waters, focus on the deals, products and services you can literally take to the bank. Everything else including revenue is purely ego.

CriteriaSampleYour Data
Average Revenue (From Above)$100k 
What Is Your Average Gross Profit Percentage10% 
Average GP Dollars Per Deal$10k 
Commission Rate25% 
Average Commission$2,500 
Annual Earnings (Excluding base)$30,000 

As always there are exceptions to the rule. The real variable is what kind of gross margin percentage will you be able to sell your products and solution for. In this case, a Game changer sale might look like a 3 million dollar deal at a 5% margin That deal alone would net a $150k in margin. And for you $37,500 commission.

When Leveraging a gross Margin plan you should consider

  • Is your commission rate reduced on a low margin deal?
  • Is there a “kicker” That earns you extra points in comp if you are at or above a specific margin percentage amount?
  • What about an Accelerator for exceeding a Gross Profit Dollar Amount in a certain period?

 

Driving Adequate Pipeline

Where many newer sales people go wrong is simply put pipeline and qualified opportunities.  IF you are going to maximize your sales compensation plan then close rate/close percentage and pure pipeline of qualified opportunities matter even more than someone more senior in their role. This isn’t about making a million cold calls, or crazy metrics its about working hard and smart to put yourself in front of people who have a need, a budget and can say yes to you..

How We Can Help Maximize Your Sales Compensation Plan

We help thousands of salespeople Win More Business and Make More Sales every year using our proven Sales Opportunity Management approach. If you are ready to be one of them, here’s five ways we can help you.

The RedZone Sales Opportunity Management Application is a powerful tool that helps guide you through everything you have read here and more. It is available as an Annual and a Monthly Payment Option.

9 Week Premier Sales Coaching Program – Comes with a 1 Year Subscription to the RedZone Sales Opportunity Management Tool, 9 Weeks of Group Sales Training to help you get the most out of every deal and the 9 Months of Bi Monthly Group Sales Performance Coaching. The Program is available as a Single Payment and as an Installment Payment option.

1:1 Sales Performance Coaching – book a 30 minute call to learn about how sales performance coaching can help you reach your goals.  

The Weekly Sales Leader Newsletter – Subscribe to get actionable and useful sales training, sales coaching and business strategies delivered weekly to your in box.

The Bowties and Business Podcast – Every week we bring you interesting guests ranging from Small Business Owners to Inspirational Leaders. All of who have built and run businesses by successfully selling their products and services. Listen and Subscribe on Apple Podcasts and Spotify.

Tim Kubiak

Business Geek, Nomad, Aging Metal Head, Nerd, & Coffee Addict. plus the only big guy at Hot Yoga with 25 years of Sales and Leadership experience in organizations of all sizes.

1 thought on “How to Maximize Your Sales Compensation Plan Part 1”

  1. Pingback: Finding Your Game Changer Sale - Tim Kubiak Win a Career Making Sale

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