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Laura Garcia 01.05.2022 9 min read

What is the current state of sales compensation?

No company can thrive without an efficient sales team because sales teams turn leads into your paying customers. To scale your business, you need to have a talented sales team in your organization.

While every sales leader is on the quest to build a strong sales team, we're not unaware of facts like The Great Resignation. As the US Department of Labor has reported, nearly 4 million professionals have quit their job in June 2021 alone. As we all know, attrition can have a profound impact on a business. Gartner reports that each departing employee costs almost $19K.

 

A Sales Compensation plan can be a gamechanger

In such scenarios, a strong sales compensation plan keeps salespeople motivated not just to stick to their job but also to excel in their performance. Adopting a pay-by-commission model can help sales leaders tackle their team's attrition problem.

So, now that you're convinced to embrace a sales compensation plan for your sales team, you might wonder what the average sales compensation plan organizations work with is? Because you can’t pay too much and erode the profitability of your company. Neither can you pay too little because it can be inadequate to motivate your people.

Honestly, there is no typical number or percentage that you can fix as a sales commission. That's because each business is different, and a sales compensation plan depends mainly on the nature of the industry, the sales professional’s experience, business strategy, and so on. For example, a company with a generous base pay may have a starting incentive plan of just 5%. In contrast, businesses that require the sales rep to have in-depth technical knowledge may offer a 40-50% commission.

Some of the factors that influence sales compensation are:

  • The complexity of the sales cycle
  • The difficulty level of the sale
  • The typical time taken to close a deal
  • The demands of the role
  • How proactive should the sales rep be in the given role

These are just a few factors. Depending on the nature of the business, more factors may become relevant.

Importance of sales compensation

An intelligent sales compensation can be a game-changer when attracting top talent. In a report, 43% of sales reps were quoted as saying that they would be willing to leave their organization for just a 10% salary increase.

Another study highlighted that 56% of employees who have left jobs mentioned that low pay had been one of the motivating factors.

A strategic sales compensation plan can be game-changing in both the above scenarios.

 

Structuring your sales compensation plan

There are two suggestions to structure your sales compensation plan.

1. Base Salary plus commission or bonus

In this plan, your employees earn a fixed salary and an incentive based on their performances. While each company has its preferences, a report mentioned that 48.8% of businesses offered a base salary plus commission, while 25.6% offered a base plus bonus.

2. Straight commission

A straight commission is an incentive that an employee earns after making a sale. The above report stated that 11.6% of surveyed companies adopted this model to incentivize their employees.

 

Key Takeaway

Implementing a sales compensation plan can significantly impact productivity and revenue generation. Know that 90% of top-performing companies utilize incentive programs to reward their sales associates. There can be up to a 44% increase in productivity among employees when a sales compensation program is successfully implemented.

Implementing an incentive-based pay model may seem to be a lot of work. But with commission tracking software, you can easily manage a complex incentive-based sales plan. Blitz is the best software for tracking sales that have helped numerous businesses implement a successful sales compensation program. Have you tried it yet?