Chapter 2: Incentives Drive Behavior

This section is for 1099 contractors, freelancers, and sole prop sales professionals. This section is not for salaried workers.

Before we get deep into the details, lets uncover a few things. One thing you need to be aware of is the percentage of the revenue should go to customer acquisition which means

Base

When deciding how to pay a base, it should be based in the length of the sales process. The longer the sales process and the larger the deal, the more base needs to be paid to retain the sales professional. Here is the math behind this.

If your predictable customer acquisition illustrates a 8 week closing process from discovery to payment collection. Then the sales professional should have a retainer to stay committed to the deal since they will have some kind of compensation to mitgate risk of failure and or to pay bills and not stress.

Bases can range but we tend stay within the range of 500-2000 based on skills, location, and expectations. If you come across a rockstar, over pay them they are worth 4 sales people put together.

Creating a compensation plan for a sales representative is an important task for any company, as it sets out the expectations for how the sales representative will be paid and can serve as a motivator for them to achieve their sales goals. Here is a step-by-step guide to creating a compensation plan for a sales representative:

1. Determine your company’s overall sales strategy: Before creating a compensation plan, it is important to consider your company’s overall sales strategy. This includes the types of products or services being sold, the target market, and the desired sales volume.
2. Set sales goals: Once you have a clear understanding of your company’s sales strategy, you can set specific, measurable, achievable, relevant, and time-bound (SMART) sales goals for the sales representative. These goals should be challenging, but achievable with effort.
3. Determine the mix of base salary and commission: The next step is to decide on the mix of base salary and commission for the sales representative. A base salary provides a steady income and can be helpful for sales representatives who are just starting out or who have a slower sales cycle. Commission, on the other hand, provides an incentive for the sales representative to sell more and can be a powerful motivator. The right mix will depend on your company’s specific needs and the sales representative’s experience level.
4. Establish the commission structure: If you decide to include a commission component in the compensation plan, you will need to establish the commission structure. This should include the percentage of the sale that will be paid out as commission, any caps or limits on the amount of commission that can be earned, and the sales goals that must be met in order to earn commission.
5. Consider additional incentives: In addition to base salary and commission, you may also want to consider including additional incentives in the compensation plan. These can include bonuses for reaching certain sales milestones, rewards for top performers, or other perks such as additional vacation time or training opportunities.
6. Communicate the plan clearly: Once the compensation plan has been developed, it is important to communicate it clearly to the sales representative. This should include a detailed explanation of the commission structure, any caps or limits on the amount of commission that can be earned, and any additional incentives that are included in the plan.

By following these steps, you can create a compensation plan that is fair, motivating, and effective in helping your sales representative achieve their sales goals.

If you have come this far, why not get excited for more?