Commission plans — how to get them right

From Commission plans by Fred Wilson:

The killer commission plan starts with two critical questions:

What do you want to sell? Existing products or new products? Services or software? More revenue or higher margin? Answering these questions up front matters.

How do you want the team to behave? Do you want new accounts and new business or more business from existing accounts? If you want new accounts pay for hunting, if you want them to work the accounts you already have, then pay for farming.

The key is to sit down with finance, product and marketing with the budget in hand and ask the questions; what do we need to sell by the end of the year? How much revenue do we need? How much margin do we want? How many new customers do we need? Once these questions are answered, incent the sales team to do exactly that.

Once the incentives have been nailed and properly aligned, make the plan dead, stupid, simple. A plan is simple stupid if a sales person knows exactly what they will be paid on a deal without looking it up.

In addition, all plans must have accelerators. Accelerators are when more commission is paid for a deal after a certain threshold is met, usually quota. Finally, and most important, once the plan is done DON’T MESS WITH IT.

Notes:
(1) Andy Swan commented: “Embrace the idea of salespeople making more than you do”.
(2) Thank you Eran Ben-Shushan, co-founder of Bizzabo, for the recommendation.

One thought on “Commission plans — how to get them right

  1. Pingback: What’s the right amount of salary to give to employees? | BrainQuilt

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s