What's the best sales compensation plan for your sales team?

A commission-only plan compensates sales reps solely based on the revenue they generate, making it easy to administer and motivating for high performance. To effectively use this plan, managers should consider aligning it with the right sales scenarios, such as transactional sales and low-cost products, and offer clear performance metrics. However, it's important to be mindful of potential drawbacks, including a short-term focus, increased turnover, and reduced teamwork, so managers should carefully evaluate its suitability for their specific business context and team dynamics.

?? To put it more simply, in this incentive scheme the company shifts its entrepreneurial risks to its employees. Accordingly, the employees of such a company are either people with a high risk tolerance who are absolutely sure of the popularity of the product (so why not pay a fixed share of the income?), or people who have other sources of income and are willing to be partially involved in the project.

In my experience commission only is what you want your best sales people on. It's self policing and all parties sink or swim together. Main benefit is continued motivation, as the sales rep understands and drives his/her own success and income. This is not the right plan for personalities that need guidance and drive.

According to me, The best sales compensation plan aligns with your business goals and motivates the sales team. It typically combines a competitive base salary with commission or bonuses based on sales performance. Incentives should be clear, achievable, and tied to specific KPIs. Additionally, consider offering perks like benefits or recognition programs. Regularly review and adjust the plan to maintain motivation and adapt to changing market conditions. Ultimately, a well-structured compensation plan should attract, retain, and motivate top sales talent while driving desired sales outcomes.

Only valid for full COTS consumer products: see what happened with this scheme in insurance market and check out ‘the agent theory ‘

I think a salary only plan for a sales rep is a joke.. This is an unpopular opinion, but it does give you motivation to go out there and close more deals. Having only base salary is simply too “safe”. I don’t think a high performance sales department is an only base salary department.

A salary-only program is what my former manager envisioned for the sales team because it provides stability and predictability by providing a fixed income that can reduce income fluctuations. To effectively execute this plan, I need to ensure that it aligns with roles such as consultative sales or customer service, where performance is not solely dependent on revenue generation. However, we must also be aware that it may reduce motivation and encourage complacency, so it is important to balance it with performance-based incentives and clear performance measures to recognize and reward outstanding performance.

Sounds like an order-taker, no serious sales professional would consider a Salary-Only plan as adequate compensation. Automate the sales process and get rid of the salary-only sales rep because there's no incentive for performance.

A salary-only plan for a sales team may not bring a big enough drive to achieve revenue goals because it lacks a direct financial incentive tied to individual performance and results. Without the potential for additional earnings based on sales achievements, the sales team may not have the same motivation to go above and beyond in driving revenue, resulting in potentially suboptimal sales performance and a lack of urgency to meet or exceed targets.

For Sales only a in hand salary is big NO NO. The DNA for sales guy is to earn money for himself and the company. That's the main objective for any sales person. A 60 -40 Plan with 60% fixed salary and 40% will be considered as incentive / variable. This brings in the required stability + to earn the additional 40% he/she will be enthusiastic to bring in business.

I'm considering a base plus commission plan for my sales team because it seems like a balanced approach. To effectively use this plan, I should carefully determine the right balance between the base salary and commission to motivate my team while managing the budget. It's also important to periodically review and adjust the commission structure to keep it competitive and adaptable to changing market conditions and individual performance levels. This plan is ideal for my team since we have various skill levels, competitive sales scenarios, and medium-cost products, making it a versatile option to consider.

I’ve been in sales roles of various seniority over the last 7 years, I’ve seen first hand positive and toxic work cultures regarding sales. Without a base salary it’s incredible hard to show a level of stability that can ctontinute towards improving quality of life such as securing a mortgage. If staff feel a company cares about them and their progression through career and life, they will perform better and be invested in taking your company to the next level. With that being said, sales people want the option to earn more money and to have a commission, so having an incentive and commission structure helps businesses balance between complacent and competitive/driven

We only do base + commission, I believe that reps who are motivated, make the best reps! A good base and a great OTE, will help you get to quota.. Of course training, coaching and others are obviously needed, but if you have invested time, figuring out the correct product market fit for your product/service, have a well-defined ICP and buyer persona, and your reps are taught how to prospect correctly, and qualify buyers, meetings should start converting and a good OTE plan, should make them a lot of commission. I am also a big believer in SPIFF, when meetings are low, we give SPIFF for held meetings during the week, my reps normally reach quota 85% of the time depending on the season:)

I feel like a base plus commission plan works the best for getting production and keeping good employees even through a trying economy. It allows my employees to budget for thier personal bills to be paid, so that they can come in and focus on producing, rather than stressing about covering their bills. The more desperate or stressed sales people are, customer service suffers to an extent. I have seen this be the answer for retention, production and overall workplace satisfaction

The most important part of base plus commission is the demonstration of trust, in your team and therefore in your hiring decisions. If your only means of motivation is commission then you aren't motivating your team to stick to the sales plan.

A base plus bonus plan combines a fixed salary with performance-based bonuses for sales reps. To effectively implement this plan, managers should start by defining clear and attainable performance criteria for the bonus component, aligning it with specific business objectives. It's crucial to communicate the bonus structure transparently to the sales team and regularly review it to make necessary adjustments, especially in complex sales scenarios or teams with diverse roles, to maintain motivation and fairness.

A plan which works fairly in most teams is performance linked which rewards high performers and motivates everyone to try and go to the next level. It also helps have a transparent incentive plan which is released at the start of the cycle and sales teams can plan their activities accordingly.

A base salary plus bonus has a tendency to provide for the best of both sides of the coin for attracting and retaining quality talent . It balances the advantage of budget and forecasting with added incentive for driving right behaviors and over achieving performance .

In Base plus bonus plan a majority of your income tends to be your Base rate. Bonus sometimes seem to be out of range. The income is usually sold as the bonus potential which is almost never guaranteed.

When making this decision, the plan should scale with the sales numbers. If the structure is built to maintain profitability throughout the plan then it should not cap the incentive. Many organizations will change their incentive plan because the sales team is making too much money. If the plan is built well, that should be celebrated. The leadership should encourage the sales team to make as much money as possible since it should mean the organizations goals are coming along with it. Build a plan that incentivizes the right behaviors while maintaining profitability for the organization and then drive the heck out of it!

As far as I can tell, base plus commission plan is more popular than the rest of them, and wok well. Although I have never worked as sales man, I heard and saw how they are motivated and rewarded by their achievement and stayed in their companies with such rewarding plan.

Focus on the behaviour you want to drive and design accordingly. One of my clients moved from base + commission to base + bonus (based on 3 quotas) when their market changed. They needed to sell to an entirely different set of customers, and the old commission scheme wasn't pushing the sales reps to take time and risk prospecting in a completely new industry. With the quota, a sizeable amount of incentive was dedicated to selling even a small quantity to these new customers (driving behaviour to focus on the new industry) while maintaining the existing customers happy was also possible through the largest portion of the quota. It worked and over time the company gained market share in the new industry, ensuring its survival.

In my experience, only coming from a highly technical sales environment. Your best sales engineers and the most difficult to recruit, are also typically engineers and won’t be interested in joining without a good base salary. A top up commission base is also a problem as contract can take years to become an order. So a bonus scheme that encourages competition, rewards positive results and allows advancement is preferable, however it is difficult to implement correctly.

Choosing the best sales compensation plan involves several key steps. Firstly, managers should define their sales objectives, analyze relevant data, and consider factors like market conditions and sales roles. Next, it's important to take into account sales reps' preferences, set clear rules, and gather feedback during testing and refinement. Finally, transparent communication and strong support during implementation will ensure the chosen plan aligns with business goals and motivates the sales team effectively.

I created an acronym that I titled SAFE as a benchmark check to review commission plans to make sure they are: Simple, Attainable, Fair, and Effective. Simple: Easy to understand by sales team. Attainable: Goals can be achieved in territory. Fair: Plan is viewed as a win-win by reps and leaders. Effective: Sales reps are inspired to give their all. Never allow managers to create an unfair commission plan because of their own insecurity and envy of how much money salespeople are making. If there is a lack of respect for your sales reps and what they earn, you have a leadership problem, not a commission issue. The final plan should be in the best interest of all internal and external organizational stakeholders.

There's no universal formula for sales commission plans; they must align with a company's core objectives, whether focused on value, volume, or a combination. For instance, distinguishing between retail and distribution channels is crucial, each requiring specific commission structures. To ensure a logical formula, include a base salary and a performance matrix, weighting factors like sales quality, target attainment, collection ratio (if applicable), and distribution route coverage. Bonus performance indicators, capped for overachievers, should also be considered. These criteria can be adjusted based on industry nuances, emphasizing the absence of a one-size-fits-all standard.

The best plans are simple and easy to measure. Complicated plans do more harm than good. Simple plans that focus on a minimal set of objectives win the day.

As you consider your plans, don’t forget the commissions or bonuses related to renewing customers. When sales reps have a role in maintaining business, the entire relationship improves.

In implementing the salary plan, following factors should be considered: - length of the sales cycle: usually bonuses are determined on an annual base. This is is some way un synchronized with sales cycles longer than one year - external factors: in complex projects, revenues (usually taken as base of commissions/bonuses) may be postponed or even canceled in the delivery phase of the project well after the sale phase has ended and for factors independent from the seller (e.g. the budget for year x of the project has been cut leading to descoping)