Some Thoughts on Sales Commission Strategy

Sales commissions are a tricky thing. Once you put them in place, it is difficult to change them without the sales team being demoralized that their compensation is going to go down (even if it isn’t!). The goal, generally, is to minimize base salary and maximize performance based compensation. Here are some thoughts on strategy:

  • Align company interests with the commission (e.g. have commission percentages based on the profitability of the item being sold such that things like license revenue have a higher percentage commission than services revenue)
  • Significantly reduce compensation if quota isn’t hit (e.g. cut the standard commission in half if quota isn’t reached for the designated time period)
  • Don’t limit the up-side (e.g. don’t put a cap on the maximum amount a sales rep or account manager can make)

Sales, and management of a sales team, is one of the most difficult, and rewording, aspects of a business. Good luck!

Hiring Inside Sales Reps

Last week I looked for my first crowdsourced answer to a question by posting to my network on LinkedIn. This was the first time I’d asked a question, and I must admit I was surprised by the variety and quality of the responses. It isn’t that I didn’t think that my network would have good responses, but rather that very few people would respond. I had many more responses than expected. Here were some of the consistent themes to the question “What are some recommendations for finding good inside sales reps”:

  • Hire a “Sales and Marketing Assistant” that does all of the coordinating work with prospects so that current sales people can spend more time on serious leads
  • Use a staffing firm that specializes in sales reps as well as uses TopGrading to evaluate candidates
  • Use job boards from local colleges and universities focused on management majors and general business majors
I wanted to say thanks to everyone that responded.