4 Tips For Designing a Winning Sales Compensation Plan

Do you want your business to skyrocket to success this year? Begin by investing in the right sales talent. So far, we’ve established that sales reps have a key influence on a business’ bottom line. What’s more, any sales superstar knows their worth in such enterprises and will settle for nothing less than companies whose commission structures compensate them for what they are worth.

This is why you should design a commission structure that draws sales superstars to your company and keeps them there. When they excel in selling, your company registers good growth. Use the following 4 tips for designing a winning sales commission structure. 

1. Design a Tiered Commission Structure 

If your business growth will skyrocket, then your compensation structure should encourage sales reps not to just meet but, most importantly, exceed their goals. This is where a tiered commission structure comes in. It pushes your salespeople to go for the highest prize, and with this mentality, they can easily supersede the set threshold.   

2. Adopt a 90/10 Commission Ratio 

In as much as you’d want to cushion your sales reps against low sales months by offering a high retainer and low commission rates, talented salespeople don’t buy this philosophy. You’ll realize that most top performers are attracted to compensation plans with high commission potential. That’s why some will even go for pure commission offers. 

Basically, a good salesperson is one who is confident about their skills and won’t worry about a volatile sales environment. They believe in their ability to sell even in tough months. That’s why they would prefer a plan where they earn 90% of their salary from sales commission.  

3. Encourage Teamwork 

A major challenge in managing sales teams is how to effectively incentivize individual performance without risking team spirit. Harmony and solidarity in sales teams are both important aspects of ensuring long-term business success. So, even as you encourage sales reps to close as many individual deals as they can, you need to find a way to instill the value of teamwork.  

One way is by having a reward for sales teams or departments that meet their departmental targets. This way, each salesperson will appreciate that their individual contribution matters, but the collective value of all members is greater. It also helps the team learn to support one another whether in closing deals, handling difficult clients, and so forth. This collaboration is not always easy to achieve, but it’s not impossible either. And above all, you need it for sustainable growth of the business.  

4. Nurture a Sense of Ownership  

When your staff feels a sense of ownership, they are likely to be personally invested in the business. Now, some businesses are comfortable giving stock options for their sales staff, but others are not. In this case, you can design your commission structure to accommodate every employee. Wondering whether this can work? See our previous postdiscussing how Fishbowl implemented a commission structure for all their employees and the exceptional growth the company experienced as a result.  

Conclusion  

Any winning commission plan should attract sales people with excellent selling abilities. Such salespeople don’t just focus on closing deals but also invest in the long-term success of the business. Consider a tiered compensation structure that puts more emphasis on commissions. But, don’t forget to design it in a way that fosters teamwork and has a sense of belonging.