Is your commission scheme competitive enough?
Did you know that sales people are more attracted to a solid basic salary than a top commission plan? 19 in 20 sales people look at the basic salary is the most vital part of the package. 6 in 10 looks at the commission plan as the most important part, which is still a very healthy chunk of the talent pool.
Combine an attractive basic salary with an industry-leading commission plan then you will attract more people to work for your business.
Let’s investigate the commission plan further and the different types that your business could offer. Whether you’re a water treatment, environmental or engineering firm – these ideas will give you options to think about if you are struggling to entice sales people to work for you.
Why should we give commission to sales people?
The values and drivers of a sales person are often different to those who work in engineering or technical positions.
- Sales people are hunters who are always looking out for the next big project.
- They must be able to communicate effectively with C-level, owners, directors and managers from a variety of departments.
- Sales professionals should have a variety of personal skills that often contradict each other.
- Empathic but bordering on arrogant
- Technically astute, but also commercial experts
- Be able to strike a chord with the most in-your-face owners, as well as the cool and calm finance director.
- Tenacious and persistent… but patient and relaxed.
In a role that requires the ability to speak to many different people, it’s no wonder that sales people get commission. And as a sales person myself, I often wonder why some sales people have it much better than others when we are all doing a similar job.
Where do I start with coming up with a commission scheme?
In an ideal world, you would also work with sales reps and finance together in one room. How many times have you seen directors announcing at their annual kick-off a new commission scheme… where you had NO IDEA it was coming!
Engage your sales team. Tell them you want to put together a competitive commission plan whilst also allowing the business to grow and remain profitable.
The business needs profits to reinvest, so that you remain competitive, so that the sales team have innovative solutions to sell. It’s a self-fulfilling cycle.
Whether you do this via a survey, meetings or away days – I strongly recommend coming up with a plan together.
Should it be fixed, or a percentage?
This purely depends on the type of solution that you’d sell. I would recommend a percentage-based commission plan because it is scalable. For transactional-type solutions, a fixed bonus is suitable. But anything that requires lengthy sales cycles – go for a percentage of some sort.
How much should I give away to the sales team?
No sale is made without the support of the rest of the business. Marketing, technical, engineering, project management etc… all are a vital cog. Often, the cog in the middle of it all is sales.
Start with the business first. How much does the business need to make? 25%? 50%? After everything is paid out – all commissions, bonuses, overheads – everything! How much does your business need from every £1 that is sold? Your Financial Director should have this info. And if they don’t… you need a new Financial Director.
Then, break down how that profit should be split up. Agree it with everyone. Should the sales person get most of it or should it be split among everyone – even if contributions are not equal? Work out the contributions based on skill and time and adjust your rates accordingly.
What about over-performers?
Absolutely focus on high-performers, and reward those going above-and-beyond. Recognition could come in various types e.g. commission, holidays, vouchers… but always recognise the top performers.
You could give commission out after sales people have covered costs. OR, give a low rate until they start getting closer to target. Then a fantastic kicker when they’ve achieved target.
The more sales you make, the more profitable you should be – so don’t feel ungrateful that the sales person is getting a big fat pay cheque. If it wasn’t for them, you wouldn’t have your profit.
When should sales people get paid?
Again, this should be agreed with the sales team before you implement it. Either when the business has the money… or when the client signs on the dotted line.
I would recommend as soon as the sale is made – and then reward the finance team when they’ve managed to bring the money in.
What else do I need to know?
KEEP IT SIMPLE. If you make a complicated commission scheme with rules and regulations that are more focused on clawing money back rather than rewarding it – then go back to the drawing board. Try to summarise your commission plan in 1 or 2 sentences.
DON’T CAP COMMISSIONS. This is a guaranteed way to annoy your top performers, which you’d rather keep. Don’t begrudge them the money as the value of your business will be rising.
IT’S NOT ALL ABOUT COMMISSION. Think of other ways that you can incentivise your team. Maybe it’s a family holiday? Or they would love a day at the races? Tailor your incentives to individual goals.
What to do next…
Share this with whoever you think needs to read it.
As a candidate – are you happy with what you are getting paid? Do you want to discuss it confidentially with me? Even if you’re happy where you are, I’d love to connect to sales people in the water treatment sector.
Are you losing talent to your competitors? If you’re a director and you’d like to review your commission scheme (perhaps you’d like to remain competitive… or you’ve lost a couple of your team because you’re not paying enough?) … then feel free to consult with me. Having placed 100’s of people in the water treatment sector, I’ve got plenty of information I’d like to share.
Call me on 07912 490 546 or email me at [email protected] and let’s talk.
*data and information sourced on www.glassdoor.com