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Create a Monetarily Motivating Sales Force

by Matt Berkley

Every entrepreneur whose business deals heavily in sales—whether it’s tracking down new leads or fostering existing ones—knows that his or her success hinges entirely on the sales force. Your sales force is the company’s lifeblood. And as a business owner, how you decide to structure the compensation package for your salespeople should take serious rank in your business plan.

Here are a few tips to get you started:

Be Consistent With Your Objectives. If your goal is to grow business by signing new clients, then higher percentage commissions should be directed at account acquisitions. On the other hand, if you’re in more of a “maintenance” mode, you’ll need a bigger base salary and use bonuses on specific targets more so than commission. This might sound elementary, but the problems most companies run into with compensation are plans that run opposite to what the business is trying to accomplish strategically. One of the biggest mistakes, says Tom Reilly, owner of Tom Reilly Training, is establishing a compensation plan that doesn’t reinforce the company’s objectives or direction.

Establish A Reasonable Base. If your product/service has a very long sales cycle, which could take time for a new employee to harvest, have a reasonable base. You have to make it a livable income for the months they’re not making the commission, and you have to give them a chance to build a pipeline, explains Sam Black, president of Sam Black Consulting. Yes, Black admits, a new staffer might be a drain on the bottom line for a few months, but if you’re making an investment in an employee you need to make that commitment. She warns, “If you do it half measure, you’ll have unhappy employees and higher turnover. Then you’re back to square one.”

Know Your Sales Force. According to Pete Brown of Gateway Sales Development, the hardest piece of structuring a solid compensation plan is first deciphering what motivates your sales force. And surprising as it sounds, money might not be the deciding factor. Ken Stark, president/owner of Stark and Associates, Inc. says that an exciting compensation program that’s going to motivate people won’t be based only on money. The big problem, Stark explains, is when managers automatically make the assumption that all sales people are motivated to make more money and they find that their programs are ineffective because they’re at a disconnect.

No Team Rewards. One monumental error that far too many business owners make is incorporating the idea of team incentives. “These tend to reward mediocre performers,” Reilly explains. The concept is wrong on so many levels. “It’s a disproportionate advantage. Mediocre performers benefit more than the higher achievers who are dragging them along.”

Look Beyond Your industry. For compensation rates, that is. Another blunder Reilly points out is failing to realize that competition for good salespeople isn’t limited to your specific industry. It’s any company that hires salespeople. “Your competition is every company out there in every type of business,” he notes, “because salespeople will leave an industry.”

Mix It Up. When Stark advises his clients in the areas of commissions and incentives, he encourages them to structure a multi-tiered program that is set up not only as a salary plus commission, but also includes shorter-term incentives built in that allow flexibility for programs that a salesperson might be promoting over one or two quarters.

Don’t Put A Limit On Success. Structuring a percentage payment is a tricky balance, says Ron Tanner, president of Accelerate Marketing, but stifling your best earners by limiting their income is never a good policy. “They can’t be capped,” Tanner asserts. “If you want sales people to respond, you have to give them the opportunity to take ownership and really develop the business for you and become a partner with you rather than someone who simply takes orders.”

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