Are You Paying Your Sales Force Enough?

by Paul DiModica

More than ever, the future of companies lies in the hands of their dedicated sales force.

Gone are the days when clients called you with RFP's, exploding budgets and money to burn.

Gone are the times when a salesperson could wait for the marketing department to supply leads.

It is more than just the New Year . . . it is a new sales model. Those firms which have an outbound sales model will survive; those who don't . . . will fail.

• In the past, the intellectual property of your company was your product or service.
  
  
• Today, the intellectual property is your sales distribution capability.

Many salespeople who launched their careers in the late '90s were not effectively trained. Instead of learning the correct methodology to sell senior executives in an outbound market, they launched their sales careers during the greatest market growth in the last half of the century. During this time, inbound leads were automatic, so sales training was minimal.

These salespeople became "half-cycle" salespeople who, today, are being unfairly punished. Instead of giving these sales reps sales training to help them adapt to the new transitional sales model, management teams continue to invest little or no money on sales training, subsequently cutting the success of their sales force.

If companies are seeking to grow their top line revenue this year, they need to launch new sales training programs to support the existing sales staff.

As Sharyn Katalinich once said, "The trouble with business cycles is there just aren't enough people pedaling."

If your sales force isn't pedaling, then your bike isn't moving and your tires (sales) eventually go flat!

To increase sales, increase commissions!

Today, many commission plans still use older business models that penalize aggressive salespeople who bring in new business. The terms "Farmer" and "Hunter" are used frequently in sales management discussions to describe the sales practice of house account salespeople and outbound salespeople. Most sales compensation plans provide equally for both. However, management teams should reward Hunters with larger commissions due to their ability to create higher sales success.

The key element in growing top line revenue is managing proactively the lifetime value of a client. By looking at annual service, support, training, add-on sales, and maintenance fees, then carrying the gross revenue forward three to five years, you can calculate this easily.

When comparing this forecasted revenue over multiple years, your smallest client cost should be your sales cost.

So, why are so many firms hesitating to raise commissions?

Many times, it is just a belief by an executive that there should be a maximum ceiling on sales compensation and in fact, there should be. But many times comp plans actually limit new business growth. In today's economy where firms seek to extend the longevity of client relationships beyond five years, paying higher commissions to salespeople who have the skill sets to break new accounts is just good business.

If your firm is seeking to raise corporate revenue immediately, start paying your sales force higher commissions for new business immediately. It is the easiest way to grow your top line revenue, increase your sales staff retention, and turn Farmers into Hunters.

Pay salespeople (Hunters) who hunt for business from new prospects more than other salespeople in your company. They are the lifeblood of current and future revenue.

So what should you pay your salespeople?

It depends on what you sell and what your business costs of goods or gross margins are.

Many firms pay between 8% and 14% of the assigned sales quota (target) in total compensation to their salespeople including salary, commissions and bonuses.

The key to the right sales compensation is to have business metrics tied to financial incentives (salary, bonus, commissions) and action steps you want your sales team to perform.

• Do you pay bonuses on how many cold calls your account managers make per week?
  
  
• Do you pay higher commissions to your account managers based on how many sales to new prospects they make (versus sales to existing customers)?
  
  
• Do you pay higher commissions to account managers who sell vice presidents (and above) instead of account managers who sell middle-level managers?

All of these are sales compensation options for you to pay your salespeople more money and to induce performance changing sales habits so they sell more.

Pay your sales team more money the right way . . . and increase your corporate revenue.

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