How to develop a strategic sales compensation plan

How to develop a strategic sales compensation plan

A sales compensation plan is the most crucial driver of success in any sales operation. Therefore, you have to develop it strategically to promote the right sales and evoke the desired practices from your sales representatives.

Though a perfect plan will look different for every organisation, you will need to follow these necessary steps and best practices to create a unique, strategic sales compensation plan:

Establish a business objective

A perfect sales compensation plan should be strategically aligned with the objectives of the organisation. Thus, you must first identify your business objectives before setting up a sales compensation management system. You will need to work with the executive stakeholders to identify the strategic goals of your business. This cooperation will help you create a compensation plan that emphasises measuring and incentivising performance to support the organisation’s objectives.

Identify the roles of sales

With the right business strategy in place, it’s time to perfect your sales force. Point out the sales roles that you will add to the commission plans. Each sales role in your organisation will require a specific compensation plan.

Current customer-focused sales roles include accounting managers, customer success managers, sales development representatives who focus on prospecting and account executives who focus on sales acquisition. Within these roles, you can develop senior and junior positions to fairly compensate your employees.

Define and align your sales objectives

There are many goals you might want to achieve. For example, when defining your sales objectives, you may need to expand the market share by a certain amount, introduce new products or increase revenue by a specific amount. You must, therefore, identify all your sales objectives so you can produce the right incentives to aid those initiatives and ensure your compensation plan succeeds.

Your sales goals should also be closely affiliated with your specified business goals. By tactically aligning your sales and business objectives, you can make sure your salesforce is impelling success at an organisational level.

Determine the pay structure

Aligning your sales and business goals can also help you drill down into the particular structure of the compensation plan. To do this, you have to determine the pay mix, target pay and upside potential for every sales role.

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