Over the past few months, I've talked to many sales leaders and business owners about compensation for their sales teams and one main finding has emerged: the pandemic has revealed the gaps and flaws in the compensation structure for salespeople in B2B.
The drastic changes in market conditions have shown that many SMBs base part of their sales force compensation on factors that are not related to performance, but rather to activities. These activities often have no correlation with performance and results.
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Companies wishing to establish a recurring revenue business model are looking to ensure the stability and profitability of their organization.
However, before doing so, it is important to be aware of the impact that this realignment will have internally, particularly on the structure of the sales team and the compensation plan. It is also necessary to acquire the right technology to support such a reorientation.
Though quite a few sales compensation models exist, the three most commonly used ones are:
An informed leader will consider industry, growth, and risk as factors which will influence which model they choose.
As with sales representatives, the compensation plan of a Sales VP is subject to several criteria. A mixture of the following factors are important to create a profitable and motivating compensation plan:
When and why is it appropriate to modify a sales compensation plan? A yearly review of your employees’ motivation level and an analysis of your turnover should provide a clear response to this question.
Here’s 4 important things to consider before modifying your compensation plan:
A sales compensation plan must be carefully rolled out after an elaborate analysis and evaluation of your market reality, your company objectives and most importantly what motivates your sales team.
Let’s look at the different factors to consider.