Are You Making These Mistakes in Your Sales Compensation Plan?

When hiring new sales reps, your sales compensation plan is a key factor in attracting top talent. Although it might be great to have one set plan for everyone on your team, that may not always generate the best sales results.

Here are 4 mistakes that companies make in creating sales compensation plans.

1) Incentives not tied to desired results. Almost 7 in 10 sales and finance managers think their compensation plans fail to drive desired behaviors according to a study by Synygy. In addition to commissions for closed sales, consider activity incentives. For instance, if 50 cold calls per day generate five conversations that results in one sale, then provide your reps with incentives to make 50 daily cold calls or to have five meaningful conversations per day.

2) Plan is too cookie cutter. Be flexible based on the experience and track record of the candidate. If necessary, customize a sales plan for top producers. Top sales rep may need higher upside potential to feed their hunger for success. Like a race horse, let them run and run fast. Don’t let overly structured comp plans get in the way of motivating your team. And, be willing to pay a slightly higher base salary to attract top sales talent.

3) Over selling income potential. Honest numbers work. The “sky is the limit” or “earn a $6 figure income” is over played. Receive better quality candidates by painting a realistic picture of first and second year income achieved by your above average players. Look at industry comparisons to set realistic expectations.

4) Overpaying a base salary. Paying high base salaries may be a demotivator. If your average sales reps can live a comfortable life on their base salary, why will they hustle to sell? You want sales reps who are hungry to make sales, yet you don’t want them dying on the vine. If they are worried about paying their bills, they can’t focus on long term results. Provide a safety net with a base salary or draw that reflects the length of your sales cycle. The longer the sales cycle, the larger the safety net.

Keep in mind that current market conditions, industry profit margins, and other variables need to be factored into every competitive sales compensation plan.

Learn more on how to match a sales compensation plan with your next sales hire.