Do You Need A Sales Compensation Plan?

By Author: William King
Total Articles: 365
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Sales Compensation Plan, or in simple words sales commission plan is a must to attract and motivate a sales force that delivers. In the absence of a sound Sales Compensation Plan (or in case of poor planning), you'll keep loosing your sales reps (and eventually your sales) on regular basis. Apart from the motivating factor, it also helps in effective HR management, assisting you in carrying out duties like promotions, downsizing and recruitment. It won't be an exaggeration if we state that the sales-force works as the engine of a business, by the same token sales commissions can be deemed as the fuel that runs this engine. Good commission means good fuel and good fuel means a more strong and effective engine.

Remember, products are more or less the same; and most of the times it's the sales representative who can make a difference.

How to devise a practical Sales Compensation Plan:

As it is the case with most management decisions, you're ought to be fully aware of goals and available resources for your business. As a general rule, sales compensation plan is the combination of basic salaries and sales incentives. ...
... Basic salaries are fixed wages that the sales people are going to get every month, irrespective of the number of sales they make. Whereas incentives are sales based commissions and you can add further bonuses on reaching some monthly or quarterly targets. While doing the planning, you must be able to come up with the answers to the questions like what percentage of total sales could you disburse as commissions? Or what'll be the better option, giving out commission on each sale or when they reach some specific target?

A well planned incentive strategy will go a long way towards making your business a success; on the contrary an insincere plan may cause the collapse in no time. There's no single structure for a good compensation plan, it differs with the type of business, product, industry, and the job market. Sometimes you must offer good basic salary; sometimes just good incentive package will do the trick. However, many businesses just rely on offering a hefty commission and no base salary; such compensation plan can be counter productive as no sales person will take the job seriously, moreover you won't be able to execute any kind of control over your workforce, let alone holding anybody accountable. Therefore, you must take everything into consideration before finalizing a compensation plan.

William King is the director of Mobile Phones Wholesale Suppliers: http://www.wholesalepages.co.uk/ukwholesalers/Mobile_Phones-119-0.html , China Wholesale Suppliers, Distributors, Dropshippers & Manufacturers: http://www.dailytrader.com/china/ , and ADCB UAE Abu Dhabi & Dubai Business Directory: http://www.adcbuae.com/ . He has 18 years of experience in the marketing and trading industries and has been helping retailers, entrepreneurs and startups with their product sourcing, promotion, marketing and supply chain requirements.