The BIG QUESTION Executives Need to Ask When Developing a Sales Compensation Plan

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Are you paying sales commissions unnecessarily? You may be…if you have a traditional sales compensation plan. In this episode of the Sales Management Minute, learn the BIG QUESTION to ask to develop an effective sales compensation plan.

When I talk with business executives about why they pay dollars to sales people above and beyond the salary, they often say they pay it “because the sellers sold something.” Sure, this approach aligns with the age-old expression…

“You’re only as good as your LAST sale!”

Yet, that’s shortsighted. That expression, if it is to align with true business objectives, should be

“You’re only as good as your NEXT sale!”

We’re always looking to the future which is why we look at forecasts. Ever try to sell a business? Yesterday’s revenue is nice, but it’s what the future holds that drives your value. Wall Street looks at performance, but looks more heavily at what’s coming next.

When developing a sales compensation plan, the BIG QUESTION to ask is…

“By paying an upside (commission, bonus, etc.) to a seller, how does that investment help us get more of the sales we want in the future?”

Sure, we all want more revenue, but we can’t impact it. We can, however, impact the sales behaviors and activities that lead to revenue. The sales compensation plan should be structured to drive those behaviors. Ever wonder why your sellers have huge peaks and valleys in their performance levels, your sales compensation may be the root cause of that dynamic.

See you next time on the Sales Management Minute.

Lee B. Salz is a leading sales management strategist specializing in helping companies build scalable, high-performance sales organizations through hiring the right salespeople, effectively onboarding them, and aligning their sales activities with business objectives through process, metrics and compensation. He is the Founder and CEO of Sales Architects, Business Expert Webinars and The Revenue Accelerator. Lee has authored several books including award-winning,  best-seller “Hire Right, Higher Profits.” He is a results-driven sales management consultant and a passionate, dynamic speaker . Lee can be reached at lsalz@SalesArchitects.net or 763.416.4321.