Sales Compensation Plan: Things To Know Before Hiring A Consultant

Sales Compensation Plan: Things to Know Before Hiring A Consultant!

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According to research by salesforce, an average sales organization loses about 25% of its team every year. To combat this turnover and drive business growth, many companies are turning to well-designed sales compensation strategies.

However, creating an effective sales compensation plan can be daunting without the right expertise and resources. That’s where outsourcing to a consultant can help. Let’s explore the key insights you need to know before hiring a consultant.

What is a Sales Compensation?

Before diving into the details, let’s clarify what a sales compensation plan is. Compensation remains one of the most significant motivators for employees, especially in sales roles.

Imagine you have a sales team that earns a fixed monthly salary. How do you keep them motivated to go the extra mile? A sales compensation plan is the answer. It’s a strategic framework that combines a base salary with performance-based incentives, such as commissions and bonuses, to keep your team engaged and aligned with business goals.
 
An effective plan ensures your team stays productive and motivated while driving company growth. However, designing the right plan requires balance. If the plan is too complex, it may confuse your team and divert focus from their targets. If it’s too simple, you might not fully leverage your team’s potential. For small businesses, where every sale matters, finding the right mix is essential.
 

Types of Sales Compensation Plans:

There are various types of sales compensation plans, each designed to address specific business needs and sales strategies. Here’s a quick overview:
  • Salary + Commission: A fixed base salary paired with performance-based commissions.
  • Fixed-Percentage Based Commission: A set percentage of each sale, regardless of the total sales volume.
  • Tiered Commission: A structure where higher sales volumes unlock increased commission rates. 
  • Bonus Plan: Incentives provided for achieving specific targets or milestones. 
  • Territory Volume: Compensation based on the total sales achieved in a specific territory.
  • Set Rate Commission: A predetermined rate per product or service sold.
  • Relative Commission: Earnings based on individual performance relative to overall team or company performance.
Choosing the right plan depends on your business goals, sales structure, and team dynamics.

Why is a Sales Compensation Plan Important for a Small Business?

Running a small business means walking on a tightrope – balancing budgets, managing resources, and maximizing productivity. Here are the reasons why a sales compensation plan is important to small businesses:

  • Aligns sales with business goals.
  • Creates structure within the team. 
  • Motivates the team and increases productivity. 
  • A clear sales compensation plan can attract and retain top sales talents. 
  • It helps the business to budget effectively.

Things to Know Before Hiring a Consultant

If creating a sales compensation plan feels overwhelming, partnering with a consultancy firm, like PeopleWorX, can be the best move. Consultants can help tailor a plan that aligns with your business needs and goals.

Based on our experience with clients, here are a few pointers to consider before hiring a consultant:

 

    • Know Your Business Goals: Your business might have different goals than the other company down the street. Keeping your goals clear and knowing what you want to achieve is essential.
    • Get the Sales Details Ready: How many employees do you have? What are the different sales roles that they play? Current compensation for each salesperson? Do you have any issues that you want to address? Keep these details handy.
    • Fix on a Budget: Work on the budget you are willing to invest in this project.
    • Find the HR Consultant: Once you have the basics ready, now search for a consultant who could align with your business needs. Know their expertise in the small business area and their experience in designing sales compensation plans for companies in your industry. Be transparent about your expectations and understand the services they offer. Keep the communication clear between both parties. .
    • Share Business Details: Once you find the right consultant, share your business details and set the expectations right from the start.

At PeopleWorX, we have partnered with thousands of businesses to design effective sales compensation plans that align with their business goals and drive results. Our experts are specialized in working with small businesses ensuring your plan aligns with your business goals and industry standards.

Ready to create a sales compensation plan for your team? Give us a call today and learn more about our services and how we can help you succeed!

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