3 Steps to Creating the Best Sales Compensation Plan

December 2, 2014 Justin Proctor

3 Steps to Creating the Best Sales Compensation PlanNo two companies will compensate their employees the same way. The compensation plan will be unique for each business, and a lot of thought and planning will have to go into choosing the right options for your team. There are salaries, commission, bonuses, and incentives to consider.

When creating your compensation plan, it's important to remember that many of the best sales people will base their decision to work for a company based on its compensation features. If you're not competitive in your offerings, you could be losing valuable assets. Additionally, many reps believe that their compensation plans are based directly on what their managers believe they are worth. If you have a poor compensation plan, your employees may feel insulted, believing that their skills and hard work are not appreciated, which can lower team morale.

A great compensation plan, on the other hand, can make employees feel motivated and eager to work harder in order to attain the bonuses and incentives you've promised. However, you must decide on a plan that has your company's future and financials in mind. You can't promise your reps the world if you won't be able to pay your bills after you've paid them.

As you can see, the compensation plan you decide on will have to be created delicately in order to ensure financial responsibility on your end, but with features that make your employees happier and more motivated to work hard. To make the process easier, here are three steps to creating the best sales compensation plan at your company.

1. Analyze Your Sales Goals

When creating your sales compensation plan, you'll need to decide what you want and expect to achieve. Do you want to attract new clients? Do you want to increase sales? Knowing exactly what it is you want to achieve will help you properly compensate your employees based on the results you get for the goals you've set. For example, if you want your team to focus on getting new clients, consider compensating them with a monetary bonus or other incentive once they've brought in a new customer. If high sales numbers are your concern, then you can consider paying your employees commission to get them motivated to bring more money in or provide a bonus if they bring in x amount of dollars over their quota.

2. Examine Your Sales Department

When it comes to compensation plans, you get what you put in. If you are going to compensate your employees poorly, you likely won't be able to expect them to stay around for the long term. Is a high turnover rate acceptable for you or are you looking to keep reps around for a long time in order to build strong, lasting relationships with clients? Are you looking for low-level employees or trying to get the best in the business? Once you realize what you expect from your sales department, you'll be better able to decide how to compensate them in order to meet your company goals.

3. Be Realistic

Of course, you want to be able to pay your employees top dollar to keep them happy and motivated. You want to be competitive in your offerings. However, you must be realistic. If you're a start-up company, this might not be feasible. You may not be able to keep all your sales reps on high salaries and still be profitable. If this is the case, you may need to create a compensation plan that is based on quota or revenue achievement, so you only pay for results.

There are several options and variations when it comes to creating your compensation plan. What you create will need to be based on your sales goals, your expectations related to your sales department, and the financial feasibility of your offerings. Your own company needs and your employees' needs must be carefully considered.

How to Make Sales Compensation Work For Your Company


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