There are many questions about sales commission in companies. Many of them revolve around creating a realistic goal so that commercial teams feel motivated to hit them.
It is not uncommon for the parameters used to define commissioning to be wrong in some businesses. And this neglect does affect the results in the medium and long term.
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It makes sense for you to have happy, motivated salespeople working for the company’s growth, doesn’t it? It goes through the creation of a fair sales commission that reality.
Of course, that’s not the only factor that matters. But let’s face it: everyone has their own personal goals and needs to be rewarded for their efforts. It is about the well-being, the self-esteem of those who operate in the day-to-day commercial routine.
So how do you create a fair sales commission? How do you make it motivate salespeople to hit and go beyond their goals?
We’ll talk about that in this article. We will actually give some options on how this can happen within companies and also some ways to commission.
It will depend a lot on the market, on the profile of the customers and also on the product and/or service sold.
By the end of this text, we hope it’s clear to you how to create and its importance to whoever sells – no matter what and how much.
First of all, what is sales commission?
Sales commission is a popular way of rewarding professionals for every sale that is closed.
Usually only the closer would benefit. But in companies with a more robust business process, so is the SDR, as is the entire sales force. (We will talk better about the latter towards the end of the text).
Commissioning can be seen as a strategy to keep salespeople looking for the best for the company. Goals and objectives are set so that they can be beaten and, at the end of that, the reward to come.
However, this is an important point. It’s up to the sales manager to know what those goals are and realistically set them. It is useless to project a very high number of sales if the company does not have this capacity.
The lack of motivation will be immediate and frustration for not receiving the commission will make the sales routine very unpleasant.
It is also necessary to understand the market in which the company operates to know how to create this commission. Does it make sense to just give money or will professionals be satisfied with promotions, trips or rewards?
What makes more sense for your business, within the existing mission, vision and values? Take this into account too!
Why is sales commission so important?
Accelerating sales is what every company wants, right? It is through the payment of sales commissions, one of the most classic ways of managing sales , that this is also possible.
After all, the reasoning is pretty simple. When the sales team hits its goals and is rewarded, it will want to work the same or more next month to make it happen again, right?
And the company benefits from it right away.
To sell more and better it is necessary to generate value for the customer all the time. Within sales techniques, making prospects confident, secure to seal the deal is essential.
Selling and ensuring customer success, you can:
- avoid churn;
- fetch an upsell;
- positively impact companies’ CAC and LTV ;
- shorten the sales cycle ;
- make the customer an evangelizer of the brand, making him bring new people to the company;
- Between others.
Customer experience counts a lot – and you just can’t ignore it. It is the seller who is in contact with him. It is he who exposes what the company is for those who want to buy.
How can this moment be positive for business if this salesperson is discouraged because of the sales commission he will receive? Think about it.
How to create a sales commission that motivates salespeople? See 4 steps
A question may still be in your head. How do I find out which form of commissioning will work best for my company?
The truth is, there is no magic formula. You will have to try a few styles until you find the one that motivates your sales team to sell better.
If they sell more, the company earns more. And earning more will always be possible to grow and be always more of a reference in the area in which it operates.
It takes analysis. Understand sales metrics. Also know the difference between efficiency and effectiveness in sales.
And, to help you in this mission, we have separated 4 steps to create a sales commission that is fair and that motivates professionals.
1 – Be clear from the start
No human relationship works if it doesn’t happen in a clear, direct and frank way. In sales this obviously has the same truth. It is necessary to pass security to the sales team.
Open the game.
Talk about the company’s financial situation. How healthy is it to pay commission and how many sales need to occur (and how often) for this amount to gradually increase.
It is up to the sales leader to call everyone involved in the transaction and discuss it openly. The decision-making occurs by managers, of course. But it’s healthy to listen to the entire sales industry right now.
People heard feel important. This creates a sense of belonging and engagement. Don’t neglect this moment.
So be clear. Say what you expect and understand as a fair goal and ask people for their opinions. They can provide valuable insights into making the sales commission good for both sides.
Another way to always be frank with the team is to document, in detail, how this commissioning takes place.
Record this in your company’s sales playbook and make it available to everyone. Eliminate communication noise to avoid doubts and, consequently, frustration.
2 – Being clear is defining who will be commissioned
Will only the seller be commissioned? Or will the SDR be too? It is necessary to have this well-defined and be clear from the moment these professionals are hired.
CRMPipeRun · Difference between Pre – Sales and Sales
The latter is responsible for, in inside sales, setting agendas for the closer. Your mission is to qualify the lead for purchase. Keep it safe and ready for a product or service demo.
If this professional receives sales commission, this can happen in two ways:
- by number of scheduled agendas;
- By sales that the closer accomplished.
Pros and cons: The first form may look good at first glance. However, this pre-sales professional can mark schedules with leads that aren’t ready to buy to guarantee his commission.
If that happens, the seller will not be able to close deals and that will be bad for the company in all aspects – you can already imagine which ones, right?
It may then make more sense to commission the SDR for closed sales. Will his commission depend on the seller’s ability to seal the deal? Yes,
But, in theory, if the lead is qualified (read: if the pre-sales work was done well) the sale is very close to occurring.
3 – Create a healthy relationship between base salary and commission
This is one of the steps to create a sales commission that most attracts good professionals and also retains talented salespeople within companies.
And it also needs to be defined when hiring sellers. And it needs to take place within what makes the most sense for the company’s financial health.
Will the sales team have a base salary to be supplemented by sales commissions? Or will the commission be the only income?
If commission is the only form of earnings, it can leave the seller in constant tension and apprehension.
After all, if sales don’t go well in a given month, he simply won’t have enough money for the period. And there are often external factors that can influence the results not to be the best in the commercial area.
You actually need to have a balance between salary and commission. Always taking into account the market and the context in which the company operates.
It’s about motivation, of course, but it’s also about well-being. People need to feel good to work well. In sales this is no different.
Therefore, take into account the complexity of the sale and what factors influence to help or hinder this business.
Does the seller have autonomy? Do you have a sales system that helps you? All of this needs to be taken into account.
More complex negotiations, such as B2B sales, must have a higher commission than simpler transactions, for example.
4 – Monitor and review whenever you need
Commissions are processes. And just like any other, they need to be monitored and revised whenever the need is felt.
As mentioned above, it is necessary to test and see which model makes professionals more motivated to go beyond the stipulated goal.
But, more than that, it is necessary to provide conditions for this to happen. Training is essential and needs to take place constantly. Sales coaching can be a solution to getting the best out of each person, for example.
After all, the market is impacted daily with technology. And literally overnight, what was known, what was held as conviction and best practices may no longer make sense.
Software like CRM Online empowers people to sell more and better. They meet what the company needs and ensure that commissions are paid in the best possible way.
Also because, using this system for sales, the cost reduction in the operation is smaller. And, consequently, sellers can be better rewarded from there.
6 types of sales commission for companies to join
There are several ways to pay a sales commissions to professionals within companies. As we talked about in the previous paragraph, the context counts a lot for this.
We’ve split 6 ways into many other ways to commission your teams. That said, sales commissions can be paid by:
1 – Supplement to the base salary
This is the more traditional way – as mentioned above. The commission amount can be fixed or variable, and this usually depends on the size of the sale made.
A percentage of the sale value is established to be assigned to the person who sold it and also to the person who qualified the lead – the pre-sales team, remember?
Everyone has their slice.
And opting for this model, it gives people the security to work. After all, earnings above normal for the month will depend exclusively on the salesperson’s sweat.
In addition, the company needs to understand who it is. If the sale price is always low, it doesn’t make much sense to adopt this model. The already small profit margin will be even smaller.
2 – Directly
Here, the seller’s earnings occur solely from sales made. Sold, earn a commission. It didn’t sell, the money doesn’t go into your pocket.
The amount paid usually occurs at the end of the month and this will be the only income the professional will have.
The risk of this is that, if external factors hinder the business, the gains could be much smaller. And this can make employees always tense, worried about not having money for more basic day-to-day accounts, for example.
The advantage is that it will make the salesperson do his best every day to close deals.
However, there is a risk of “pushing” the product and/or service to the customer. After all, he needs the result every day and will use every possible negotiation technique.
By the way, not only the closer but the qualifying team as well.
And that, in the medium and long term, is not healthy for the image that the company is building. There are more negative factors than positive that can happen.
3 – By profit margin
In this model, the sales commission is not calculated on the amount of trades made, but on how much the company profited in the month.
Billing x total business costs are taken into account.
In businesses that have sales predictability, this can be a healthier model. After all, the commercial manager will know you monthly how much goes in and how much can come out of the company’s coffers.
And, in this happening, the commercial team will also have predictability of how much commission money it can count.
4 – By billing
This model is what we can define as “halfway” in relation to the previous one. Here, the expenses – of any order – that companies have per month are not taken into account.
Commissioning is based solely on what the company has invoiced within the 30-day period. Therefore, the total value that the sales generated is taken into account.
But, if it makes sense for your business, other factors can go into this billing to decide the commission amount. There may be other sources of income such as MRR, stock sales, among others.
5 – By staggering
The commission paid can be progressively increased. A minimum sales amount is established. If it is hit, X commission is paid.
If another half of this minimum value is added, for example, the commission value jumps to Y. And so it goes.
But again: this needs to be clear if this is the chosen model. Table everything and give access to everyone involved in operations within the playbook.
Always reinforcing: when communication is clear, there are no misunderstandings or frustrations.
6 – In a mixed way, with incentives
It is also possible to adopt a mixed model, where both cash value and prizes are offered. But again: it has to make sense for your business.
Want an example?
If the company sells package tours, you can try a commission model where the seller receives as much money as a trip at the end of the year with all paid.
But to be fair, propose this in a team meeting. You, the manager, may feel that you are offering something very good when, in fact, it may be frustrating for the team.
You just can’t know which one is the truth without talking to her, can you?
Understand who your company is. Be clear where she wants to go and how this can happen. Reinforce your business’ organizational culture.
By doing this, it will be possible to arrive at a fair sales commission model, retain and motivate your professionals. Your business is grateful.
So, how can we help you?
Enjoy and read two articles that can help you in this mission.
The first talks about the importance of having activity-based sales in companies.
The second deals with how it is possible to have an increasingly assertive sales control in organizations.