SPOTLIGHT Managing Your Sales Force BUSINESS Without knowing the particulars of each company’s situation, we can only say that, generally speaking, a combination of base salary plus commission seems to work best for most firms. Obviously, like the rest of us, salespeople have overhead and bills to pay. Even a highly successful sales professional working on an all-commission compensation program would probably need some spool up time to generate meaningful sales volume when they’re new. In the best of times, few things are more important than the ability to generate a steady flow of profitable business at a rea- sonable cost. When business is soſt, this usually translates into more dogs fighting over fewer bones. During periods of economic slowdown, it’s imperative that your close rates are higher and your price integrity is preserved, despite a more competitive and sometimes even predatory business landscape. Did you know that, in some companies, the chief sales execu- tive makes more money than the president/CEO? This certainly suggests something about the importance of good salespeople! You get what you pay for! So, what else do we need to consider? Sales and Business Cycles When evaluating which sales force compensation system makes the most sense for your firm, you’ll want to give due consider- ation to what is being sold and, especially, how long the sales and business cycles are. In this context, “sales cycle” refers to the expected time between when a lead is generated (subsequently becomes qualified and turns into a prospect) and when it can ultimately be closed. Then, there is the “business cycle,” which essentially in- cludes how long it takes to complete the sales cycle and how long it takes to start the job, complete the work and get paid. As employer, you need to be evaluating how much cash you are laying out and how long it will take for you to recover sales- related expenses and make a profit. Of course, this is why em- ployers oſten prefer to pay only for performance by installing an all-commission compensation plan for their sales force. Sometimes, salespeople also pay their own expenses, but this is uncommon, except for in the case of independent manufac- turers’ representatives’ sales agencies. It’s not unusual for some companies to install a regressive compensation plan for new or rookie salespeople. This means a base salary is offered during an initial training and indoctrina- tion period, when the new salesperson can’t be in the field. As time moves on, that base salary is systematically diminished, 12 SAFE & VAULT TECHNOLOGY | May/June 2022 with a material shiſt toward greater income dependence upon commissions earned from closing sales. Insurance companies, investment firms and some others oſten employ this model. A common method of dealing with the potential drawbacks of an all-commission plan is to contrive a hybrid compensa- tion model that uses a draw system. This approach has been around forever. Since commissions are oſten paid monthly, you can advance weekly payments (aka partial advances) against earned commissions or anticipated commissions, thus providing cash flow to the salesperson. Application of such a system is much easier aſter a salesperson has become established because future commission earnings and timing become more predictable. If you employ such a draw method, it’s recommended that you not advance more than 50% to 60% of anticipated commis- sions. You don’t want to get too far out in front of what you will owe in commissions. It is important to have your salespeople eagerly anticipating their monthly commission check. Nonethe- less, don’t be surprised if some really good salespeople prefer an all-commission compensation plan, presuming the commission system is realistic and compensatory. Although not employed oſten, some sales forces are compensated at time of payment rather than time of sale. How to Enhance the Performance of Your Sales Force We should probably mention that any of the three basic com- pensation approaches can be enhanced by including incentive bonuses. In addition to direct compensation, your sales force can usually also be motivated by simple promotional incentives such as sales contests and placement listing results in appropri- ate high-visibility office areas. Awards and status badges such as Salesperson of the Month, Top Producer, Top Gun, Sales Prevention Leader (just kidding) and other visible symbols of success can offer prestige and cov- eted intramural bragging rights, which can be effective tools for invoking friendly competition. The only thing worse than being in last place is for everyone to know about it! But don’t make it a destructive process, and be sure to recognize that all territories are not necessarily capable of yielding the same results. Also, be sure to pay attention to the quantity, quality and distribution of company-provided leads to your salespeople. It’s absolutely imperative that the sales manager knows what’s in the funnel/pipeline! www.savta.org
