One of the most challenging areas for any owner managed business running a sales team is how to establish a sensible sales commission plan - one that properly rewards and effectively incentivises those involved in sales, but doesn’t ruin the business financially.
Often the concerns regarding financial impact negates the positive impact that a correctly constructed sales commission plan can have on the most important aspect of business development - sales.
Businesses that get a reputation for complex or frustrating commission plans will find it extremely difficult to recruit talent.
We have worked with many clients to establish either their first ever commission plan or overhaul and revise established ones that weren’t working.
Before calculating sales commission levels the business has to decide on its commission structure and need to answer certain key questions such as:
- When is sales commission earned?
- When is sales commission paid?
- What sales types are excluded?
- Should there be a minimum performance level?
- Should sales commission be clawed back?
- How do we split commissions?
- Is sales commission part of an employment contract?
- What happens if an employee leaves?
Commission plans need to be flexible enough to reward individuals and for the changing needs and priorities of the business.
Sales commission plans must work into the sales planning process and be prepared with a full understanding of the KPIs, targets and ratios within the business.
Its impact on business planning is fundamental and it also needs to be fed into Product/service pricing considerations.
Contact us to find out how we can help.