Sales Compensation Planning

It takes time to get it right. From sales leaders to executives, everyone must be focused on exceeding the end of year sales quotas and budgets — alas, it is mid-September and October will be quickly on top of you. Over the next few weeks I will be discussing the components that all companies must begin to work on during the 2010 budgetary and business/sales planning process.

The first step in overall business planning is to have the management team determine what percentages of overall revenue will come from net new clients vs. existing clients by product/service or practice area. Once that exercise is completed, then all budgets, marketing plans and sales compensation planning can begin.

The sales management process in developing sales compensation can be complex, yet the goal must always be to create a program that is simple to understand and administer.

The ultimate concept in sales force compensation is to ensure that the salesperson’s and sales management’s plans are in alignment with each other and, most importantly, in alignment with the objectives or goals of the organization.

You can take a free sales compensation assessment on Acumen’s Website. It will help you judge the effectiveness of your existing sales compensation plan. Once that process is completed, the sales management process must begin: Determining acceptable levels of cost of sales; determining a QTD objective; an accelerated or ramp plan based upon sales or margin, or both? Will there be special bonuses for reaching certain objectives? Perhaps a team bonus plan? What sales contests will you run (see my earlier post for ideas).

For more sales compensation, ideas, go here. Depending upon your needs as a sales leader, that link will also provide you access to 22 other articles on sales management we have published.

On our Website and in our store we have a DVD and a book, “Building Sales Compensation Plans that Work!” My recommendation is to start early, work through various scenarios and, most importantly, look for the holes. Looking for the holes means, once you have narrowed down your plan, go and test it, present it to others and let fresh eyes try to find the weak spots in it.

Strategic sales management must focus on increasing the sales performance of your team. Hiring will help and training is a must, but a well thought out sales compensation plan will add the right fuel to mixture.