Sales commissions are the lifeblood of any sales-based business. This simple incentive can make the difference between a motivated and unmotivated sales team.
But what’s the best strategy for tracking and managing sales commissions going in 2021? And what can your company do to drive even more value out of your sales process?
Sales Commission: 3 Basic Rules to Follow
Sales commission is compensation your salespeople receive for making a sale. Simply put, it’s an incentive for them to sell your products and services. It’s not complicated either—offer competitive commission, attract better talent.
So, what can you do to simplify managing your sales commission process? Here are a few tips:
Don’t use salary caps. Commission motivates your salespeople. Implementing salary or commission caps disincentivizes going above and beyond once the cap is hit.
Avoid moving the goal post. Stay consistent with the commission structure you use. Adjusting it can confuse your sales teams and invalidate any targets and goals they were working towards.
Simple is always better. You shouldn’t need a degree to understand a sales commission structure. Keep your structure simple: if X is sold, receive $Y. Avoid variable-based percentage structures and other unnecessary rules.
Which Sales Commission Structure Is Best?
Sales doesn’t have to be a complicated process if your company has the right structure in place. It’s no secret that there are many options available to businesses. Choosing the right one is the real challenge.
Here are the most popular options:
Straight Commission Plan. This plan means your sales reps only earn income from the sales they make. No sales means no income, meaning your salespeople are hyper-focused on selling.
Base Salary + Commission. This is another popular option that provides your salespeople with a base salary and a set commission rate. It provides a safety net for your teams should they have a down month.
Tiered Commission. Want to encourage sales goals? A tiered commission plan rewards more sales with higher commission levels. This is a great option for driven sales teams that are motivated by a milestone-based approach.
Revenue & Gross Margin Models. These two models are similar, but different in one key way. The revenue model pays commission on the sale price itself, while the gross margin approach accounts for expenses before calculating commission.
Commission Draw. This model is a hybrid of the commission-only and base pay structures. Sales reps earn commissions and receive a draw payment based on a set rate—the only difference is agents must pay back their draw deficit. This structure ensures consistent pay for new agents as they ramp up and grow into their role.
Base Rate Only. The base rate only pays sales reps an hourly rate and no commissions. This option isn’t common in sales anymore since it discourages selling more.
Sales Commission Tracking: What Options Do You Have?
Regardless of what model you choose, your agents will need a way to track the sales and commissions they earn. And while many companies may turn to spreadsheets, this isn’t a flexible or scalable solution. It also creates a headache for your payroll departments each pay cycle.
The three most popular ways to track sales commissions include:
Specialized sales commission tracking software
Smaller sales teams may see manual tracking and spreadsheets as the best place to start. But it’s hard to beat the simplicity, visual dashboards, and time savings offered by sales commission tracking software.
Sales commission tracking software lets you customize the solution to your specific use case, it’s easy to configure and onboard your teams, provides real-time reporting, and a centralized dashboard for sales reps and managers.
Blitz: Sales Commission Tracking Made Easy
Give your sales teams the tools they need to stay agile in the competitive digital landscape. Blitz is an all-in-one sales suite that simplifies the entire sales process. From tracking to weekly and monthly goals, Blitz improves sales visibility across the organization.
Are you interested in seeing how Blitz can transform your sales process? Book a demo with one of our sales specialists today and see why sales teams love using Blitz.