Why Your Company Needs a Good Sales Compensation Plan

Do you consider your sales compensation plan a key component of your business strategy? Surprisingly, not many businesses do, even though compensation plans have direct effects on hiring, retaining, and motivating workers. A good sales compensation plan is a key component of any business strategy. An excellent sales compensation plan will get the salesperson concerned about the welfare of the business since its success translates to the sales rep's personal success.

Not many businesses consider their sales territory plan a key component of their business strategy. Here are reasons why a good sales compensation plan is necessary to your team's success.

Additionally, how you compensate your sales team will have implications on your company’s bottom line. This makes an effective payment plan a critical element in the success of a business. Here is a look at why your company needs a good sales compensation plan:

  1. It influences the desired salespeople’s behavior

A good compensation plan is designed to influence salespeople to act in line with the specific business goals. Such a plan will also reward the highly productive. Does your business want to grow its client base? Your plan could be structured such that salespeople get a higher percentage of commissions for bringing in new clients. This will encourage any savvy salesperson to do more prospecting than servicing existing clients. In return, they get better pay whilst helping the company attain its goals.

  1. Enables companies to reward the right kind of behavior

A well-structured compensation plan should only reward those moving the company in the right direction. If possible, businesses should evaluate their plans regularly to make sure they are in line with changing company goals. With such a plan, the company is able to encourage better and consistent performance by its sales team. Otherwise, it’s possible for a company to waste resources by overpaying poor performance month in month out.

  1. Attract and retain top sales staff

Both new and existing workers notice how their efforts in a company are being rewarded. It’s also common for them to compare how different companies would compensate them for similar services. If your compensation model is lacking, you’ll be getting only the second-grade salespeople who can’t find a place in your competitor’s team which has better perks. 

Unfortunately, you’ll still invest in their training to help them up their sales skills. What happens when they become sales superstars? It would be detrimental to begin losing great talent (which you have helped nurture) to your competitors just because of an incomprehensive compensation plan. So, make your firm the greener pasture that any top salesperson would want to graze in by coming up with an attractive and balanced compensation model.

  1. A good sales compensation plan saves time

This is because it should be simple to implement and follow. Your salespeople don’t need to scratch their heads when figuring out what they should do to earn an incentive. This should be clearly highlighted in a compensation plan. It should also show clearly what the incentive is for each sales activity. A simple plan will also help the sales manager to easily determine if they are hitting their departmental goals or not.  So, can a salesperson explain your compensation plan? If not, it’s too complicated and could be costing your bottom line.

Final Thoughts

Any compensation plan worth its salt takes into consideration the overall company’s goal. In this case, you’ll find a good compensation plan emphasizing not only on individual sales performance but also the company and departmental sales performance. These three components should be balanced such that the business doesn’t find itself in a situation where they pay a salesperson extremely well yet they haven’t made any profits.

Similarly, the salesperson shouldn’t take home peanuts while the business is making exceptional profits. An excellent compensation plan will get the salesperson concerned about the welfare of the business since its success translates to the sales reps personal success. So, if you are wondering how your company can ensure a top-notch payment plan, make it a win-win model for both the firm and sales rep.