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Sales employee salary/commission planning

Hi, We design and manufacture exclusive automotive lighting. I require advice on the following: How to determine my sales staff rate of pay, what commissions do I offer them? How to determine my sales incentive plan? Do I pay them less for incoming enquiries converted into sales? Do I pay them a higher rate of commission on leads they generate themselves? I am also available via Skype.

Regards,

Sean

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6 answers

A really good book that helped me answer most of your questions is: How to Compensate the Sales Force by David J. Cichelli. The most important things that I learned from the book: a) Do not tie your commissions directly to sales, they should be based on a percentage of the goal that you want your sales person to achieve (this goal can change each year), b) All your sales reps should be able to make a certain amount of money regardless of the size of their accounts. It took me about 6 months to implement it for our 7 outside sales reps.

A couple of years later I implemented a totally new sales process system that eliminated the need for commissions, but this is another story I can share if your are interested.

Best regards,

Felipe R.

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Thanks Felipe.

I'll take a look at the book you have suggested and let you know if I require any further help.

Thanks again,

Sean

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Sean, it depends a couple of factors, is your product a new solution or are you competing against a developed market? Do you have a potential to do a lot of up selling or is it one solution that will satisfy the customer? Are your products relatively similiar or do you have a lot of segmentation? I know more questions to add to the ones you started with is not exactly helpful but trying to use a cookie cutter approach to a small business can lead to unintended results. Always happy to offer more tailored answers if you want tot talk.

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I'm a great believer that what gets measured gets done. The problem is that it is normally to the exclusion of all else. The best systems are the simple ones however strong management is needed to avoid the system being warped to suit the salespersons commission at the expense of the firm/customer. The problem is that most companies try to combat it with ever more and more complicated systems based on more metrics until such time as there is very little scope for your best salespeople to earn the big money, so they leave. Then the company kneejerks back to a simple system based just on sales numbers and the cycle begins again. Keep it simple and manage it closely with regular One to Ones to flush out any attempts to pervert the system.

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