Sales is a very competitive field. Everyone has a strong desire to take risks and earn large sums of money. The reward in question here is a sales commission. When you raise the stakes and consistently reward your team’s efforts, motivation will follow.
In this article, we share sales leaders’ insights on how they prepare a sales commission plan to keep their team morale high.
What exactly is a sales commission?
A sales compensation is the amount of money paid to someone based on the number of sales they make. Most salespeople are paid in two parts: a fixed component and a variable component. Typically, this variable pay is the commission per sale.
The commission is entirely based on performance and how much of their targets they can meet. The higher a salesperson’s commission for that payment period, the more deals they close.
It should be noted that the commission rate varies depending on the industry and type of employment. Full-time salespeople, for example, earn commissions in addition to their monthly salary (variable pay). As a result, their commission percentage may be lower. Agents and brokers, on the other hand, only make money through commissions.
Why do we need to select the best Sales Commission Structure?
Improved sales talent retention:
Sales turnover is fairly common. In fact, 45% of your sales team may be looking for new opportunities in the next three months. Losing such a large portion of your sales talent can put a halt to your goals and slow down ongoing deals.
Finding and onboarding new talent is difficult, and it is not a profitable bet for your company in absence of an efficient sales compensation software. It can cost you between 150 and 200% of the total cost of each employee. The competition in sales roles across industries is fierce, and every company wants to hire the best salespeople. The difference in commissions is a game changer here. The only way to reduce turnover is to pay according to industry standards. This ensures that your top performers remain on your team in the long run.
Increased sales productivity:
Commissions incentivize salespeople to sell more. Each closed deal increases their pay, and the salespeople gradually align their personal goals—a new car or a new home—with the company’s goals.
Commission structures also promote healthy competition among team members. As a result, your sales teams will continue to be motivated and productive. Higher commissions reward the salesperson’s accountability and motivate them to meet, if not exceed, their targets.
Improve payroll management:
If salespeople were paid a flat rate, an overachiever and an underperformer would be paid the same. However, commissions ensure that payment follows results. This assists a company in balancing revenue versus spending on employee compensation. Salespeople can increase their variable pay on a consistent basis, and they rely on it more than their base pay.
Variable pay can take the form of incentives or commissions, depending on the business. However, the terms are used interchangeably despite the fact that they are not synonymous.
Commissions are entirely ad hoc. The model and rate you select produce results only within a specific time frame. As your company, products, and teams evolve, so should your compensation plans.
Finding the best commission plan takes a lot of trial and error. So, go ahead and figure out what works best for your teams. Compensation plans with various components of incentives and commissions—quarterly, ad Hoc target-based, and overachievement incentives—help keep the team motivated, in our experience. Your team’s productivity will skyrocket as long as the compensation plan is simple to understand and the targets are well tracked.
If you are looking for a tool which will help you to determine the activities regarding the sales activities, Elevate HQ is exactly what can help you with the Sales commission structure template. Check out the website now.
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