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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.
Writers Resource Box
| Paul DiModica is the author of the best-selling
books: Value Forward Selling, Value Forward Marketing, and Sales Management Power Strategies.
He is founder of Value Forward Group and addresses
thousands of executives each year on the subjects
of sales, marketing and strategy, including
executives and staff of Wells Fargo, Lanier Corporate, Adobe, IBM, Tyco/American Dynamics, Navitaire and many others. His content-rich
workshops and strategy sessions on leadership, sales, management
and marketing bring about immediate changes
and long-term results. For more information, visit http://www.valueforward.com |
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