Specific Guidelines on How Much You should Pay Your Sales Reps

One of the toughest decisions any business owner has to make is how to compensate their sales force well and still remain profitable. On one hand, you don’t want to pay less and discourage your staff which can actually affect their performance negatively. On the other hand, you don’t want to pay too much to stifle the growth of your venture. So, how do you determine how much to pay your salesperson?

To help you come up with a payment structure that strikes the right balance between the welfare of your business and that of your sales rep, we share some of the best practices in the market so far.

Essentially, a popular sales compensation plan in the market today adopts a 50% salary and 50% commission. This model has given rise to salaries of about $60K for junior positions and $200K for most experienced salespeople in top paying industries. But, before you can arrive at your decision, here are some factors you need to keep in mind:

1. Type of industry

Industries perform differently depending on prevailing market forces. Such forces may include demand, supply, and general business environment. It, therefore, goes without saying that some industries have huge returns on investment as compared to others, and can afford to pay more. For example, a software development company is likely to pay a higher base salary and commissions than a general merchant dealer. This is because the former has a lower cost of sales ratio compared to the latter.

2. Brand visibility

Brands that have been around for a while have somewhat carved a niche for themselves. Selling their products is therefore not as hard as introducing a new brand to the market. If your company is relatively new to a market popular with established strong brands, be prepared to pay more for top salespeople.  This is because it will take the sales representative a lot of effort to convince clients to ditch brands that they have already tried and tested for your supposedly better but untried products. 

3. Availability of skilled talent

Some businesses such as pharmaceutical and medical equipment companies require highly trained sales staff for them to effectively penetrate new markets. While these professionals are generally well compensated, in areas where such talents are rare, employers are likely to pay more in order to protect their best salespeople from being poached by competitors. On the flip side, regions with an excess of skilled professionals have individuals who are willing to work for lesser pay. Even though this doesn’t mean that you’ll pay salespeople peanuts, you may still get top sales reps at lower salaries than in regions where competitors have to scramble for few talented people.

4. Level of expertise and experience

Besides academic qualifications, you need to consider how long a professional has worked in a specific industry. However, experience should not be looked at broadly especially where sales professionals have worked in multiple industries. Only the years worked in your industry should count when it comes to salary compensation based on experience.

Moreover, you need to tie this experience to their performance in the field. This is because years in themselves count very little if there is nothing to show. Basically, if a salesperson is able to demonstrate that they have a rich network of clients in your industry coupled with a track record of an outstanding performance, then you can consider them for higher pay. This is how top-tier sales professionals go for top dollar positions.  

Conclusion

Keeping business operating costs at manageable levels is important for any company that intends to remain profitable. This doesn’t mean that you starve your sales force with meager pay. For you to arrive at a reasonable pay, begin by determining the level of experience and talent of each salesperson. With this in mind, you can establish a pay structure that accommodates junior, mid-level, and top-tier sales reps in your organization.