SALES COMMISSION can be a tricky practice to dial in, especially in screen-printing shops. But I get it. Most print shops haven’t created sales commission plans before. If you’re looking at hiring new sales talent or trying to motivate current team members to go out and sell, it’s probably a good time to dial in sales compensation.
Here are a few key items to keep in mind as you sculpt your sales compensation plans:
1. How much should you pay?
This is different for every shop. To understand how much to pay a salesperson, you should complete an analysis to figure out what amount of revenue he needs to bring in and then base the commission percentages off that.
Commission always should be tied to quota, or how much the salesperson needs to sell. Paying on every dollar he sells (or every dollar of profit) isn’t the worst strategy, but I want the team always to be thinking about its monthly number and be motivated to close that amount each time.
Either way, there should be a base salary/hourly component and a variable commission based payment as well. I see a 60/40 (salary/commission) or 70/30 (salary/commission) as most common in our industry.
2. Commission should be tied to the role and the behaviors you’re trying to motivate.
A great example that I’ve seen work in screen-printing shops is this: We have an inside sales person/account manager/order taker that might have the chops to go out and sell and we’d like to motivate him to do so. Why not incentivize those behaviors by paying a higher commission percentage for bringing in net new opportunities? I’ve seen this work very well in many shops. I’ve also seen this not work well as the salesperson might neglect current customers to focus on new sales/commissions.
It’s important to note that the best performing sales organizations I’ve seen in shops have specialized roles. For example, outbound salespeople focus 100% of their time on closing new clients and then transition the relationship over to the inside team/account managers. Account managers focus 100% of their time on supporting and driving revenue from their current customers. I’ve seen this separation of duties have a huge impact on revenue.
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3. Metrics matter.
I’ve talked about quota. Simply put, a salesperson’s quota is either the amount of profit or revenue he needs to bring in during a time period (usually monthly.) It should be clear to the company and the employee what these numbers are. We live in a cyclical business and have seasons where more sales happen. Quota should follow this. You heavily should track both input and outcome metrics. Input metrics include calls, emails, in-person visits or LinkedIn messages. Outcomes are meetings held, new jobs quoted, deals closed, revenue brought in, etc.
The beautiful thing about sales is that it’s a numbers game. Typically, the more activities or inputs, the more sales you get. This takes a diligent approach, however. You must live in the data, communicate it well, and work with the team on a weekly basis to track performance and drive behaviors.
4. Communication is key.
Like everything in dealing with people and teams, communication is very important with compensation. For strong salespeople, compensation is one of the most vital parts of their work. Solid communication around the plans, changes to the plans, timeframe, KPIs tied to them, etc. are all super-critical.
You also should regularly evaluate the effectiveness of the compensation structure. Are the behaviors you want to drive improving? Is the plan fair for the team member and for the company? You should be monitoring this on a quarterly basis and making changes if needed.
Earlier in my career, I was interviewing for a head of sales role and, toward the end of the hiring process as we were talking compensation, the CEO said, “I’ll promise you right now that we will mess up this comp plan. Either it’s going to be too rich for us, or it’s going to be too rich for you. But I’ll also promise you that we will make it right.” This stuck with me, and I’ve repeated it to many salespeople that I hired along the way. As you build out these compensation plans for new or existing team members, I think it’s a good message to keep in mind.