The job of a sales rep is tough. Sales is a field with numerous challenging tasks and demanding routines. The efforts of salespersons often go unnoticed by brands, resulting in a salesperson losing motivation for selling and talking to prospects. So, how can you uplift the spirits of your sales reps? With a commission plan, of course!
Your brand must find a way to reward your sales rep. While this can be done in many ways, an optimal commission plan is always the go-to way of keeping your sales reps happy. In this article, we will provide you some commission plan examples and how you can set them up to motivate your sales team.
Four Commission Plan Examples
1. Revenue Sharing Commission Plan
Revenue sharing is quite a flexible form of commission plan that shares profits among your sales rep based on your sales team’s total effort into the sales. It’s also called the gross profit margin plan. Basically, the more prospects your sales team can score, the higher the profit margin and the higher commissions your sales team can get.
One major benefit of having revenue sharing as your commission plan is that it motivates your sales team to do their best when they are attempting a client outreach. Since your brand and sales rep share profits and losses, it causes your sales rep to act more responsibly with prospects. Revenue sharing is primarily awarding your sales rep whenever they score prospects.
Revenue sharing also has a very egalitarian nature which ensures that each entity in your sales funnels is compensated for its efforts.
2. Flat Payout Commission Plan
A flat payout is also an option for you to consider. A flat payout or flat commission is when your brand pays a fixed commission to your sales rep every time they sell a deal. Unlike revenue sharing, where you wait till you can estimate profits and losses, a flat payout is paid immediately whenever your sales rep finishes his task.
Just like revenue sharing, flat commissions also motivate sales reps to sell your deals, as the more deals they score, the more they are paid. However, since flat payouts are awarded immediately, they have the edge over revenue sharing, especially for sales reps that want commissions urgently.
Unlike revenue sharing, flat payouts aren’t based on total profits; therefore, your sales reps don’t share the company’s losses. Still, since flat payouts are predictable and fixed, many sales reps will find the idea of a flat commission appealing.
3. Delayed Payout Commission Plan
Delayed payouts are also many times incorporated into a brand’s commission policies. Delayed payouts are typically given a long period after the deal with the client is closed. Let’s say your deal was closed three months ago; if the client stays with the brand, the sales rep gets an appropriate commission for his performance.
Even though it is clear that this commission plan will put more pressure on your sales rep to do their best and find prospects that stay with your brand for the long term, it can also be demotivating. As discussed above, many sales reps want to be paid as soon as possible. These kinds of salespersons will not find your commission plan appealing.
Though, you can make the plan appealing by paying your sales reps higher than they normally would earn.
4. Straight-line Commissions
Straight-line commissions are also widespread in sales departments. Straight-line commission plans pay a sales rep based on how much their sales quote they have sold. For instance, if your sales rep has a monthly sales quota of $10,000 and they only sell $7000 of their sales quota by the end of the month, then they will only earn 70% of their monthly sales quota.
This commission plan works best in a competitive sales environment where your sales team is motivated to sell as much as possible. However, if your sales team is content with what they are making on a 70% commission, then it’s likely that they won’t be incentivized to sell their monthly sales quotas.
A sales team is one of the biggest assets of any brand. To ensure that your sales team performs optimally both in and out of the office, you need to devise an optimal, egalitarian, and practical commission plan that can stay in motion for the long term. Keep in mind that every company’s situation is different, and therefore what works for other companies might not be applicable for your company.