Are you exploring potential sales commission structures to compensate and incentivize your employees? If so, you have many options to investigate. Commissions are more complex than most realize, offering flexibility based on the nature of your company and the product or service it provides.
In this blog, we'll provide the basics of the most commonly used sales commission plans. Straight Commissions Here's the most straightforward plan. In it, your company pays for sales commissions and nothing more. What your employees take home depends on how much they sell. It's an easy-to-understand plan that even a rudimentary tool for reporting commission payments can record. Territory Volume Commissions With this plan, geographic locations come into play. You might have a team that works in one defined area for sales. If the entire group collectively meets the sales volume goals over a specified period, they split the commission. Tiered Commissions With a tiered commission, your employees can earn more if they exceed sales goals. Generally, you'll set a rate for one revenue bracket. For example, you might offer five percent up to a total of $100,000 in sales. If your employee exceeds that, they move into the next bracket, which could be seven percent on sales up to $200,000. Revenue Commissions This option is standard for organizations with larger goals than just total profit. Salespeople earn a specific percentage of the revenue. For example, someone working in auto sales might make three percent on the total sales price of a vehicle. Gross Margin Commissions If you choose to use this plan, it pays to have a tool for reporting commission payments. It's more complicated, as it takes expenses into account. Here, your employee would earn a specific percentage on the gross margin alone. Say, for example, that they sell a $150,000 vehicle that costs $100,000 to make. They would only earn commission on the gross margin of $50,000. Residual Commissions Residual commissions are typical for companies that deal with ongoing accounts. You see it often for insurance or SaaS products. Employees earn a commission each month as long as the account continues to remain open. Base Salary Plus Commission If your business experiences high and low sales periods, this plan could be beneficial. In addition to the set commission rates, you provide a base salary. In many cases, the base pay would only cover a portion of an employee's income, such as 60 percent. Which Commission Plan is Right for Your Company? There's no single right choice in the commission structure. Every business is different. Consider how these options align with your operations and choose one that benefits your business and your sales team. Read a similar article about loan commission management here at this page.
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Incentives are commonly used to encourage people to achieve their full potential, and you have likely been receiving them since you were a young child getting rewards for doing well at school. For adults, incentives work the same way. People sometimes need a tangible reminder that their hard work is appreciated. Adding more sales incentives to your business plan offers these benefits for raising your bottom line.
Revive Lagging Motivation Over time, it is common for experienced sales reps to suddenly experience a drop off in their motivation. When this happens, throwing in a new incentive or altering the targets can jumpstart their interest in pushing themselves harder. Sales incentive software allows employees and upper level management teams to see how they are progressing towards their goals. Watching as they get closer encourages them to keep working harder. Reduce Turnover Rates The majority of sales reps who leave their current job for another one report that they do so because they feel unappreciated. Incentives show that your company cares about them going the extra mile. Even better, a sales rep can look up their stats using your company’s sales incentive software to remind themselves that they are working for a business that rewards people who achieve their goals. Recruit Top Talent The current workforce shortage is forcing companies to think outside of the box to attract the best sales reps in the industry. In addition to their commission rates, you can expect to hear prospective employees asking about the incentive plans that your company offers. Being able to provide them with a clear plan lets them see the benefits of choosing to work for your business. As needs change, companies must adapt to stay ahead of their competition. Sale incentive software makes it easier to see which members of a team are hitting their goals. Being able to track incentive plan data with a few quick clicks increases your ability to see which changes work so that you can continue to implement strategies that further drive your company’s profits. Read a similar article about sales motivation ideas here at this page. |
AuthorEmily Clarke writes about business software and services like commission tracking platforms, softwares etc. Archives
March 2022
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