The right sales compensation plan can play a vital role in motivating reps to succeed. Recently, we
teamed up with OpenView and RingLead on the definitive webinar on inside sales compensation. One of the most exciting parts of the webinar was the lively Q&A session.
Inspired by that Q&A session, here are some of the most frequently asked questions about sales compensation, complete with actionable answers from leading experts.
How often should you be paying out commissions?
CeCe Bazar: When it comes to their bonus, the most important way to pay out your reps is on a monthly basis. Many organization pay out quarterly or annually, and that’s great if you have huge enterprise deals, and you’re talking to more seasoned sales reps. However, if you’re talking about the BDR/SDR profile, paying out monthly is a great way to keep them engaged, hungry and knowing that there is a light at the end of the tunnel. Keeping them as motivated as possible will only work to your favor.
Howard Brown: It’s helpful to consistently involve competitions or spiffs in your sales process. Inside sales reps tend to be competitive by nature. So allowing them to compete with their peers can motivate them to peak performance.
How often and when should you re-evaluate commission?
CeCe Bazar: If you change your comp plan too frequently you can run into problems. If your team doesn’t know what’s expected of them, they can’t hit their goals. Therefore commission re-evaluation should be done on on an annual basis. Tie it to your sales team’s annual review.
Howard Brown: Commission should change with the market. When demand for inside sales reps is high, as it is now, you might encounter heavier turnover rates. So if you start encountering too much turnover, you may need to reevaluate commission more frequently in order to make sure your comp plans can sufficiently incentive your A-players to stay on.
John Kosturos: If something is not working for you, you need to change it. That should be your indication, not timing. If you’re able to analyze your data, and your sales reps hit their activity levels, then your compensation plan is working.
What do you need to know in order to target your ideal accounts?
John Kosturos: To identify your ideal accounts, look for customers that:
- Respond well to marketing
- Require the least amount of activities to move through the different sales stages
- Have the highest conversion rates from leads to opportunities
- Have the largest average opportunity value
- Have the highest lifetime value
For B2B sales, it’s also important to know what software your leads are using, such as Salesforce, Marketo, and other marketing automation and CRM platforms. Other criteria might be industry, size, number of employees, revenue, etc.
If you offer free products, how do you structure a comp plan to get revenue?
John Kosturos: You can pay more if a sales rep schedules a demo for a paid-for product, however, for SDRs, it’s their job to generate leads, and if those leads have proven a model that will convert in time, then you can put a dollar amount on each one of them.
Howard Brown: Conduct a cohort analysis against your profile buyer and determine what it takes to turn them into a revenue generating customer. You should not punish a BDR/SDR for doing their job effectively in getting people in the funnel, even if it’s for a free product.
How do you create a sales compensation plan for millennials?
CeCe Bazar: Across many startup portfolios, the millennial profile has become the key player on sales teams. With zero to two years of experience, they are often fresh out of school coming in with the blank slate, therefore, they are an ideal profile because they don’t have many bad habits in need of breaking.
Great compensation plans for millennials comes down to two things: simplicity and structure. Since they are likely new to the workforce, they don’t typically know about compensation plan options or details, so keep it simple for them. Tell them exactly what it is that is expected of them, and clearly lay out the details with structure. Structure is ultimately what’s going to give you the competitive advantage on your team.
How can managers coach reps to meet the goals in their comp plans?
Howard Brown: The golden rule: compensating reps on performance requires visibility into all activities and the efficiency of those activities. Always give reps visibility into their own activities against those goals. This will incentivize them on a daily basis. We’ve always known that the number of sales conversations reps have greatly impacts their quota attainment, but today’s top performing teams are also measuring call-to-meeting ratios, call-to-opportunity ratios and call-to-revenue ratios.
For more sales compensation secrets from top experts, download our eBook How to Build a Powerful Sales Compensation Plan.