Sales Commissions: Find the Plan that Works for You
Dona DeZube, Monster
For every salesperson, there’s a perfect product and a perfect commission structure. Finding both leads to sales success. Common structures for sales commissions include being paid a high salary with low commission or being paid based on individual sales, territory volume, a share of the profits, bringing in new business, maintaining old business, wholesale or net (retail) sales, hitting an exact target or hitting variable targets.
What product you sell, whom you sell it to, the length of the sales cycle and your experience may dictate the type of commission you’re offered, but knowing the pros and cons of different commission plans can help you choose the right one for you. The most common pay plans include:
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High Salary, Low Commission
Inside sales, in which the salesperson is given a list of customers to contact, often offers a high base salary and low commissions. Those who like to smile and dial and need a guaranteed paycheck will be happy with this plan, says Greg Bennett, a senior account executive for The Mergis Group (a division of Spherion) in Durham, North Carolina.
Payment for Individual Sales
If you’re a sales rep focused on your direct relationship to the customer and individual transactions, getting paid a commission for individual sales is a great fit, says Donna Flagg, president of The Krysalis Group LLC, a New York City organizational development consultant and former Chanel salesperson. Look for a low base and the highest possible commission.
Payment for Territory Volume
If you’re all about building networks and teams and excel at getting others to participate in the process, you’ll do best when you’re paid based on territorywide sales versus individual sales, Flagg says.
Remember that a territory is only as rich as the customers it contains. “You have to know who your target market is and if they’re located in that territory,” says business coach Tom Maier of Action Coach in Shelton, Connecticut.
A protected territory keeps others in the company from poaching your customers, but prevents you from following customers who move out of your territory or selling to customers’ out-of-territory branches.
A Share of the Profit Margin
Companies that sell services often pay salespeople a percentage of the profits. “The employer will say, ‘If you can get a better profit out of that deal, your commission rises,’ but it’s still split with the company,” Bennett explains. The catch? If you have to discount the price due to competitive pressure, the discount comes directly out of your paycheck.