<img height="1" width="1" src="https://www.facebook.com/tr?id=273182729555467&amp;ev=PageView&amp;noscript=1">

How to Change a Crappy Sales Compensation Plan to a Better One

by Dave Kurlan

1 minute read

    Nearly every company gets to the point where they must realign territories, accounts or roles.  While doing that is always challenging, perhaps the biggest issue is how salespeople will respond to the impact this change has on their total compensation.  That problem is the biggest reason why it is so important to create an effective compensation plan.

    Let's take John, who is being paid a $75,000 base salary and earns commissions of 10% on the revenue generated in the territory.  If the territory generates $1 million in sales, John gets $100,000 in commissions and his total compensation is $175,000.  It's also important to note that John spends most of his time on 20 great accounts and has little time leftover for the other accounts in the territory and he no longer prospects for new business.  The company has decided to split the territory, hoping that a new salesperson will hunt for new business and John will have time to do the same.  As part of this change, John will lose 10 accounts, worth $500,000 in revenue, to the new salesperson and initially, his total comp will be reduced by $50,000!  John will not be a happy camper.  How could this have been avoided?

    First, this is simply an example - one example - and not the only way to create a sales compensation plan.  However, this example will illustrate the most important component to be changed.

    For the sake of argument, let's assume that the following compensation plan was given to John when he started selling at this company.  To make it simple, let's retain John's $75,000 base salary but explain that the salary pays him to manage and service his existing and future accounts. In addition to his base salary, he will earn 20% on the gross profit of new business (first year) he generates with new customers and 20% of the gross profit on the growth of his existing customers.  So if he has $1 million in existing business and grows it by 20% to $1.2 million, and the company's gross profit is 30%,  his commission on existing customers is $12,000.

    Later, if you decide to take accounts away or reduce the size of the territory, it has a far less significant impact on earnings.

    Dave Kurlan

    Dave Kurlan

    Dave Kurlan es un orador de alto nivel, autor de best-sellers, presentador de programas de radio, emprendedor exitoso y pionero de la industria de desarrollo de ventas.

    Dave es el fundador y CEO de Objective Management Group, Inc. (OMG), la empresa líder en evaluaciones de candidatos de ventas y evaluaciones de fuerza de ventas, donde obtuvo el reconocimiento a “la mejor herramienta de evaluación de ventas para 2011-2015”.

    También es CEO de Kurlan & Associates, Inc., una firma de consultoría internacional especializada en desarrollo de fuerza de ventas, y nominada en tres ocasiones al Inc 5000.

    Ha escrito dos libros, incluido el best seller Baseline Selling: Cómo convertirse en vendedor superestrella mediante el uso de lo que ya sabe sobre el juego de béisbol.

    Contribuyó con muchos otros autores como Stepping Stones, Deepak Chopra y Jack Canfield.

    Su popular blog Entendiendo la Fuerza de Ventas, fue nombrado el Blog de Ventas y Mercadotecnia más importante para 2011-2015 y fue incluido en el salón de la fama de ventas y mercadotecnia en 2012. También fue nombrado entre los 50 más influyentes en ventas por 4 años seguidos.

    Dave Kurlan is a top-rated speaker, best selling author, radio show host, successful entrepreneur and sales development industry pioneer.

    Dave is the founder and CEO of Objective Management Group, Inc. (OMG), the leader in sales candidate assessments and sales force evaluations, and named the Top Sales Assessment Tool for 2011-2015.

    He is also CEO of Kurlan & Associates, Inc., an international consulting firm specializing in sales force development, and named three times to the Inc 5000.

    He has written two books, including the best-seller Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball.

    He contributed with many others authors, including Stepping Stones, with co-authors Deepak Chopra and Jack Canfield.

    His popular Blog, Understanding the Sales Force, was named the Top Sales & Marketing Blog for 2011-2015, and he was inducted into the Sales & Marketing Hall of Fame in 2012. Dave has also been named to the Top 50 Sales Influencers for 2012-2015.

     
      su_rightside_webinarOct29
      Exponential Organization Master Business Course

      Popular Posts