Sales people are a critical function / capability in any business. Unlike most staff members, sales people are often accustomed to a incentive based performance which many new entrepreneurs or business owners may not be familiar with.

This article will:

  • Help you understand the different pay structures work
  • How to remunerate a sales team
  • Discuss examples of different types of renumeration structures
  • How to work out which payment structure suits your team
  • What to do when paying more doesn’t work
  • What to do when you don’t have any money
  • Top mistakes of business owners when compensating sales people

Typical Sales payment structures

In sales roles a variety of different payment structures can be found. The most common of which include:

  • Commission Only: where no base salary is paid at all, and the salesperson is paid a portion of every sale transaction
  • Base + Commission: this is where there is a fixed and commission component to a person’s remuneration
  • Base + Performance Element: this is where a sales person is remunerated on a specific function (this maybe setting an appointment) or a KPI metric
  • Trail Commissions: in a business where a customers loyalty or long term nature is rewarded it can be advantageous to for a sales person to be given a slice of the revenue.
  • Sales for equity: depending on the nature of your organisation it is possible for some organisations to offer equity in lieu (instead) of upfront other sorts of payment. Typically this requires the sales person to have an additional source of income however this may work well if you are working with consultants.
  • Internships with no payment: it is quite common that some keen individuals who are looking for experience (especially in their first type of role) may be willing to work for free in a role selling or marketing again for experience or to break into an industry.

Benefits / issues with payment structures

 

Payment Type Positive Negative
Commission Only+ strong incentive on performance

+ great for cash strapped start ups

+ highly scalable

+ minimal upfront costs

+ only pay for results, not for effort

+ lack of control with staff, as they will often only work when they want to

+ quality can be difficult to find good people

+ attracts beginners, which are often put off when they don’t see results immediately

Base + Commissions+ ensures consistent focus on building your business

+ incentivises performance

+ provides control over output

+ easier to attract talent

+ requires cash to be paid out before sales results

+ can support lazy salespeople if not managed correctly

Base + Performance Element+ ensures consistent focus on building your business

+ incentivises performance

+ provides control over output

+ easier to attract talent

+ requires cash to be paid out before sales results

+ can support lazy salespeople if not managed correctly

Trail Commissions+ can be used to make a sales package a lot more attractive financially

+ rewards loyalty and long term results

+

+ often used in conjunction with other type of commission payment as well

+ can eat in to the longer term profitability of your product

+ if this builds up to a very large component for the income for the sales person, this can disincentivize short term performance

Sales for Equity+ no money upfront, so cash resources can be used to grow business

+ fosters long term buy in for your sales staff

+ highly scalable

+ if company grows significantly, you will end up paying a premium for sales

+ may end up with sales people owning a significant portion of your start up

Internships for experience+ no money upfront, so cash resources can be used to grow business

+ Large labour pools

+ some states prevent unpaid internships

+ can be difficult to attract

+ appeals to inexperienced people

 

Ratings For Each Renumeration Type

Cash flow Control Incentive to performRewarding Long Term Buy inOverall
Commission Only1011036
Base + Commissions210645.5
Base + Performance Element210434.8
Trail Commissions718106.5
Sales for Equity1015106.5
Internships for experience10 1324

 

How to work out which option suits you best?

When it comes to growing a company, you will need to work out what your business can accomodate, and what model of renumeration will work for you set up.

If you are short on funds, and are bootstrapping the no money upfront strategies such as Commission Only, Sales For Equity, and Insternships for experience may suit you very well.

 

High commissions will attract talent, and often very high quality candidates. Remember when you are hiring you are competing against a large pool of company. Software companies (salesforce etc) pay base packages between $150k  upwards, and then pay lucrative commissions on top) .

 

Because of this, good sales people are often attracted into these industries, and can make attracting and keeping good talent challenging.

 

When are salespeople not appropriate:

If your business is focused on selling things to corporate organisations you will often find that the sales cycle is typically longer than selling to small businesses or to consumers. Typically you will find in this scenario few sales people will be willing to go the hard yards without some sort of base payment simply as they will not have the financial resources to support themselves.

 

If you have a business which sells a low value product, again paying commission only is unlikely to bear fruit, as paying someone $10 per sale is not very motivating regardless of how many deals you are making.

 

Sales people, especially good ones are often motivated by being at the top of a leader board, and you should not underestimate the need or benefit of a sales person fighting to being on the top of the leaderboard. It can be both highly motivating and contentious when the sales person is struggling.

 

What to do when you don’t have any money but need sales people:

Lots of business face the predicament that they need sales people but don’t have the resources to hire them due to their size. This can be challenging, so it is important to look at other ways to help attract great people.

 

Motivators of sales people:

  • Earning potential Flexibility
  • Able to work from home
  • Autonomy
  • Wanting to start their own business but not knowing how
  • Career Progression

Sales people need management and are not perfect humans who simply will come on and not need to be motivated. They will go out and face rejection every day. So will often need to be encouraged, supported and managed in appropriate ways.

 

  • What to do when paying more doesn’t work

As you sales team become more effective you will need to become more masterful in the management of high performance sales people which relate to more intrinsic needs and wants of people. Outlind are some of the key things you can use to help increase the motiviation of sales people, which don’t csot any money:

 

  1. Recognition – its is widely reported most people do not feel important or recognised at work. In a sales environment, there are heaps of opportunity to recognise people, and if you are to motivate your team you need to be able to tap into this valuable tool. Most sales environments will feature a very prominent white board or tv screen which highlights the sales performance of each person. This can be great in helping to celebrate different features of key events through a persons career:
    1. First sale at a company
    2. Biggest sale value at a company
    3. Each sale made during the month
    4. Giving people the chance to talk about the Win of the Day, Win of the Week
    5. Sharing stories about customer wins

 

  1. Measure and monitor – what gets measured gets managed is a key focus when it comes to working with a sales team. Depending on your sales cycle length the best metrics to publically track will vary. Whilst tracking your call count and results is important, understanding that sales is a function of activity and then skill. With low activity, a high skill requirement is needed. But with high volume the requirements for skills are much lower because it is likely “easier” prospects will be more likely to be found.
  2. Experiences (Winners Breakfast / trips etc) – whilst money is a key motivator, research has shown that beyond $80k, money becomes less and less effective at creating higher performance. Building in other wins, or bonus prizes around specific performance is a great way to motivate a team of people. Depending on the nature of the business, competition should be encouraged and enable each sales person to “compete” against another. One effective strategy I have found is to hold a winner breakfast whereby if a certain metric is met (either weekly or otherwise) then those members are treated to a winners breakfast. This is relatively low cost to the business (just coffees and breakfast) but attending the breakfast can become a big deal for sales team members, as missing out is as much a motivator as attending.
  3. Training: there are lots of very affordable training resources and events which can help motivate, and provide a high number of new ideas, and fresh perspectives. By being proactive to support this, and even contributing towards training programmes will put you many steps ahead many employers. It is likely that much of this training will not only benefit your company, but also the sales person individually. Being generous like this will demonstrate your commitment to the sales person, and their future. This creates a culture of support and encouragement.
  4. Helping them achieve their goals – working in sales is an exciting, high paced and fun environment. However it can be easy to get stuck in sales with little career progression. Sales people will often have ambitions to develop their own company and so helping them, encouraging them to set up a business alongside their sales performance can be a great way to help create buy in, and provide them with the opportunity to build something of their own and provide an avenue which rewards entrepreneurial thinking. Similarly by providing them an opportunity and platform to talk about things they are interested in will ensure they remain motivated. It is rare for people to actually encourage let alone support and continually encourage them to take on and build that opportunity.

 

 

  • What to do when you don’t have any money

 

Building a sales team in a scare resource environment can be a daunting task. Adopting the following approach will help you scale your company with limited resources and allow you to attract great people:

  1. Look at your current product offering, and start to think about how can you create a high ticket item which you can build sales commission into.
  2. Most sales people would be in the top 20% by earning $2500 per week. If you can find a way to help them create an income like that, then you will be able to attract strong sales talent who are willing to go the miles in your organisation. You need to ensure your product allows you to pay a sales person per week (depending on the sales volume you can expect)
  3. Advertise for a commission only sales person through a low cost channel (Gumtree, or local classifieds). Advertise the earning potential strongly as this will attract the attention of high performers.
  4. Hire people quickly. Focus on those who demonstrate their proactiveness (e.g. by calling you, rather than just sending through a application). With Commission only work expect that there is a high attrition rate, and I would suggest you focus on interviewing in groups (ideally bringing 2 – 3 people together).
  5. Provide people with a script, but discuss in the interview how the remuneration is structured because we want to attract the best. We pay the best, because we want the best. Make them responsible for sourcing their own leads if you do not have a list of good prospects.
  6. As they come on board, get them into action quickly. Allow them access to the founder and other members of the team so they can quickly get access to senior people for them to understand who and what the company is about.
  7. Set regular meetings (2 – 3 x week initial, then 1 – 2 once they are moving) to discuss their progress and support them in learning about how to sell your products and services.
  8. As leads and enquries are generated be sure to support and become actively involved. This will ensure that they stay on track, and provide them with an opportunity to think through the best strategies for them.
  • The importance of culture

People will put up with a company with a great culture but the money is average. They will never leave a company with great money and a great culture.

 

 

  • Top mistakes of business owners when compensating sales people

 

  1. Pay commissions on time: If a sales person is going to work hard, withholding payment and making it difficult to get money from you is the #1 thing to avoid. This is the fastest way for them to create disunion within a team, and to demotivate staff
  2. Be generous, and create a culture of success.
  3. Treat sales people like important people. Yes they can have big egos, but that is good. Seeking out rejection is a challenging job, but their willingness to go out there and to spruke your company is the secret to your success.