How Comp Plans Impact Revenue Growth (Part 2)By The Sales Cooke
“I don’t understand why my manager doesn’t do something about the salespeople who don’t give a crap and why I don’t get a raise for carrying this team?“ ~ A real conversation from this past week
Sales compensation can be a tricky issue. Depending upon the selling cycle, the selling process, the product, margins, sell price, etc., there are many ways to compensate salespeople. The bottom line is that your compensation program must:
- Reward the behaviors that you expect of your growth team. (This was discussed in detail in Part 1)
- Be financially advantageous for both parties. Compensation can be a sensitive issue when members of the growth team start to make a significant amount of money. There are times where a highly trained professional can make as much, or more, than the managers or directors in the firm. Some of these income issues are tied to risk and reward (which we will discuss later) and some of these issues result from the compensation program is connected to revenues. Either way, if it is a profitable program, it is a good program, period.
The compensation for the members of the growth team cannot be capped because of the fears that salaried employees at any level may make less than them. The compensation model must be profitable for the firm and must reward the desired behaviors–ideally revenue growth and customer retention. If a high performer is making a lot of money–great! It means that in a properly structured compensation model, the company is really benefiting from these activities, as well.
The range for what constitutes appropriate compensation is dependent upon revenues, profitability and the selling cycle itself. However, in most cases, the broad range runs between 3-15% of gross revenues. Most compensation models run between 5-10% of gross revenues. Whatever the model, the compensation program requires profitability to the firm and a virtually unlimited opportunity for the productive professional.
- Be balanced toward who is taking on the most risk. (This will be discussed in detail in Part 3)
- Provide the education, development, resource and management support necessary to facilitate growth. (This will be discussed in detail in Part 4)
Dave Cooke has recently launched his program the Sustainable Revenue Formula™ (SuRF), which provides businesses a comprehensive formula for effective and sustainable revenue growth. If you are interested in obtaining a copy of the white paper, “Revolutionizing the Future for Today’s Business”, please contact me: email@example.com.