How To Set Up A Sales Commission Plan
How to Set Up a Sales Commission Plan
Setting up an appropriate commission plan for your sales force is an excellent way to keep them motivated to make sales. This in turn keeps your business in line with making its revenue goals. As a small-business owner, you must remember that a commission plan is an incentive tool to motivate your sales staff. Keeping that in mind, you must make a commission’s plan that has realistic and obtainable goals.
Step 1
Decide on the compensation mix, which is how much of your sale's team compensation you plan to pay as a base salary and how much you plan to pay as commission. For example, a compensation mix can be 70 percent base salary and 30 percent commission. The key here is to determine whether sales people play a crucial role in moving goods and services in your industry. If the answer is yes, then rewarding sales with a large commission figure makes sense. If, on the other hand, products tend to sell themselves in your industry and your salespeople are largely in a client servicing role, a higher proportion of salary compensation makes more sense.
Step 2
Determine when commissions are paid. You can pay out commissions earned any way you choose. For example, you can pay according to the regular paydays or once a month. Choose an option that best suits the needs of your business.
Step 3
Calculate your average monthly sales. This is the first step in determining the levels at which you might set sales quota levels. Add up your company's total monthly sales and divide that number by 12 to obtain a monthly average.
Step 4
Determine the average sales per employee. To calculate this number, divide your monthly sales average by the number of employees.
Step 5
Determine realistic and obtainable sales goals. Offering a commission on sales will not motivate your staff unless the sales goals are obtainable. Begin setting the sales goals slightly above the average sales. If necessary, take differences in territory and existing customer
Setting up an appropriate commission plan for your sales force is an excellent way to keep them motivated to make sales. This in turn keeps your business in line with making its revenue goals. As a small-business owner, you must remember that a commission plan is an incentive tool to motivate your sales staff. Keeping that in mind, you must make a commission’s plan that has realistic and obtainable goals.
Step 1
Decide on the compensation mix, which is how much of your sale's team compensation you plan to pay as a base salary and how much you plan to pay as commission. For example, a compensation mix can be 70 percent base salary and 30 percent commission. The key here is to determine whether sales people play a crucial role in moving goods and services in your industry. If the answer is yes, then rewarding sales with a large commission figure makes sense. If, on the other hand, products tend to sell themselves in your industry and your salespeople are largely in a client servicing role, a higher proportion of salary compensation makes more sense.
Step 2
Determine when commissions are paid. You can pay out commissions earned any way you choose. For example, you can pay according to the regular paydays or once a month. Choose an option that best suits the needs of your business.
Step 3
Calculate your average monthly sales. This is the first step in determining the levels at which you might set sales quota levels. Add up your company's total monthly sales and divide that number by 12 to obtain a monthly average.
Step 4
Determine the average sales per employee. To calculate this number, divide your monthly sales average by the number of employees.
Step 5
Determine realistic and obtainable sales goals. Offering a commission on sales will not motivate your staff unless the sales goals are obtainable. Begin setting the sales goals slightly above the average sales. If necessary, take differences in territory and existing customer