November 16th, 2015
Sales Compensation Planning for 2016
It takes time to get it right. As sales leaders or executives everyone must be focused on exceeding the end of year sales quota’s and budgets-but alas- it is mid-November and December will be quickly on top of you. Over the next few weeks I will be discussing the components that all companies must begin to work on during the 2016 budgetary and business/sales planning process. Initially the first step in overall business planning is to have the management team determine what per cent ages of overall revenue will come from net new client’s vs existing clients by product/service or Practice area. Once that exercise is completed then all budgets, marketing plans and sales compensation planning can begin. This is because based upon where your planned revenue is coming from, every aspect of marketing and sales could be impacted. HINT: Business Planning is not just spreadsheet budgets but departmental planning with objectives and tactics designed to exceed goals.
The sales management process in developing sales compensation can be complex, yet the goal must always to create a program that is simple to understand and administrate. The ultimate concept in sales force compensation is to ensure that the salesperson’s and sales management’s plans are in alignment with each other and most importantly, in alignment with the objectives or goals of the organization.
This key point is why I always state that compensation planning is strategic not tactical. This is a short YouTube video that will help better understand what we mean by setting your goals.
Once that step is taken, you can take a free sales compensation “assessment” on Acumen’s website. It will help you judge the effectiveness of your existing sales compensation plan. www.AcumenManagement.com Now that you have taken that action the sales management process must begin:
- Determining acceptable levels of Cost of Sales,
- Determining a QTD objective?
- Should you use an accelerated or ramp plan based upon sales or margin or both?
- Will there be special bonuses for reaching certain objectives such as add X number of Net New Customers.
- Perhaps you may consider creating team bonus plan based upon exceeding a revenue/margin quarterly goal?
- What sales contests will you run? These should be consider for COS and stimulation. (see earlier blogs for ideas) www.YourSalesManagementGuru.com
- Depending upon your needs as a sales leader, that blog link will also provide you access to a large number of other blogs on sales management. On our website, in our store we have a series of On-Line Video training courses specifically on sales compensation and other topics of interest to any sales manager or you might consider our book on “Building Sales Compensation Plans that Work!”
My recommendation is to start early, work through various scenarios and most importantly Look For the Holes.
Looking for the holes means, once you have narrowed down your plan, test it, present it to others and let fresh eyes try to find the weak spots in your plan. In my book we discuss creating a compensation committee and how to roll out the plan to your team. Then you must practice your presentation. Strategic sales management must focus on increasing the sales performance of your team, hiring will help, training is a must, but a well thought out sales compensation plan will add the right fuel to mixture. If you have questions on your sales compensation plan, send me an email: Ken@AcumenMgmt.com
Ken Thoreson “operationalizes” sales management systems and processes that pull revenue out of the doldrums into the fresh zone. During the past 17 years, our consulting, advisory, and platform services have illuminated, motivated, and rejuvenated the sales efforts for organizations throughout the world.
He was recently ranked for the third year in a row by Top Sales World magazine as one of the Top 50 Sales & Marketing Influencers for 2015.
Ken has written 5 books, his latest book is: SLAMMED! for First Time Sales Managers, Ken provides Keynotes, consulting services and products designed to improve business performance. Need more sales management resources? Check out his Sales Management Tool Kit or the Acumen Project and his new Ignite Your Sales Team online video training program for sales leaders.