Just had a question I have been pondering. It is about sales team members. I have researched this topic pretty extensively and everyone has a different viewpoint and they all make sense.
Allows the sales team members to set their own salary which is based on how many sales they make. It seemed like most sales people preferred this method.
Base Pay based:
They get paid on a per hour basis. Sales staff said on multiple forums that they do not like this method as it ruins motivation. Allows the buisness to better control margins.
I see the point for both sides. I like commissioned base sales, however I feel when the salesperson thinks only about GBs money they don't treat the customer correctly at all times.
This was just a topic that I got interested in and did a bit of research on. I got most of these conclusions based on what people said on in response to a few blog posts I found via google.
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10-04-2013, 09:36 PM #1Member
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- Aug 2013
Sales Team: Base Pay vs Commision Based
10-18-2013, 12:32 AM #2Senior Member
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- Oct 2010
- Washington State
I've seen a mixed plan too - you get a minimum salary, and if you meet or exceed your quota you get a bonus. Commission sales always smacks of used car salesman to me, but on the other hand, I understand that if sales is your thing, you should be compensated for bringing in business.
For the security industry its a tough call - you want your sales people to be focused on what the client really needs as opposed to the "up sell," but in a really competitive marked I would want a go-getter and compensate him or her accordingly.
Last edited by Condo Guard; 10-18-2013 at 12:34 AM.
10-19-2013, 08:27 PM #3
There are literally dozens of different compensation models for sales people, many you won't know about. There are a number of books on this subject over on Amazon and I recommend you peruse one or two of them just to get a feel for some of the ideas that might work for you. Search on phrases like "sales force compensation", for instance.
That being said, an important consideration is what's customary in your area. In other words, how are the sales people being paid by your competitors? Doesn't mean you have to imitate them, but it's something you'd want to know about for a number of reasons.
Straight commission, straight salary, salary-plus-commission, salary-plus-performance-bonus, salary-plus-residuals, etc. all have upsides and downsides. As a general rule, when it's "salary-plus (something)", you want compensation to be weighted toward the "something" and not the salary. In other words, the inducement to high performance is the "something" that the salesman can earn that exceeds his salary, sometimes by quite a lot.
When compensation is weighted more toward the salary, there are two downsides: The performance inducement is devalued, but more important, it makes it difficult to scale up the sales force as you grow because of the added salaries that aren't dependent on corresponding sales numbers. You have to "front" these salaries before you start seeing sales coming in, so the more exorbitant that the salary is, the less able you are to hire sales people.
Among all of the variants, then, I'd suggest "salary-plus (something)", with the "something" being sufficiently substantial to really incentivize performance and the salary being "sufficient" (a man has to have a clean shirt to wear!) but not "comfortable". I know these are subjective terms, but you can probably draw at least a fuzzy line between them. Maybe $2500 a month is "sufficient" but $3500 would be "too comfortable". It's a matter of cost of living and other factors unique to your area - and lots of decisions we make in business are "best guesses", so don't be surprised by that. You might find you need to adjust the number one way or another a bit after you've worked with it...so be it.
I like salary-plus-residuals because residuals encourage ethical sales methods. Clients who aren't sold in an ethical manner - for instance, if they're sold something they don't need, or if the salesman makes false promises, implies an improper guarantee, or even if they're unduly pressured to buy - those clients don't usually renew their contracts, and that means a loss of residuals for the salesman. Salary-plus-residuals makes a man think down the road, and to be more interested in delivering a client who will be satisfied based on the correlation between what the salesman sold him, and the service that he actually receives. In other words, residuals encourage honesty and consideration on the part of your sales team.
Oh, yes - I almost forgot. Salary-plus-residuals also promotes longevity in the sales force. The longer they work for you, the more residuals they receive as their client list grows - and you won't mind this at all because your income will obviously be rising proportionately since they're both tied to the same number (billings).
Last edited by SecTrainer; 10-19-2013 at 08:45 PM.A man who will not lie to his wife has no regard for her feelings. - Anon.
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10-19-2013, 10:47 PM #4Member
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- Aug 2013
10-21-2013, 04:02 PM #5Senior Member
- Join Date
- May 2011
"Base Pay based:
They get paid on a per hour basis. Sales staff said on multiple forums that they do not like this method as it ruins motivation. Allows the buisness to better control margins."
I think "margins" are normally a percentage thing in accounting, so when you go to base from commission your 'margin' will begin to vary based on what your hourly guy produces.