Compensation Made Simple

I’ve seen lots of sales leaders grinding away on commissions late into the evening after the end of a quarter. They have stacks of paper everywhere and are attempting to figure out if the commission payouts are correct. Sure enough, the rep gets paid and contests the accuracy. Both are now wasting valuable selling time comparing notes to find the answer to small discrepancies. Why put yourself through the anguish?

In my last article, I mentioned keeping your compensation plans simple. In fact, the best plans use fewer than three variables to measure sales rep performance and incentives. One example would be to do the following:

1. Determine the sales quota ($) & commission (%)
2. Determine a hurdle rate when the commissions start
3. Pay an accelerator for dollars above quota

This is one scenario where the plan is straightforward, easy to explain and sets a clear goal for the sales rep to achieve.

To see a great example of this plan, check out BizCompare, Inc. They’ve created a simple commission calculator small businesses can use to build incentive plans and pay commissions.

The calculator contains the incentive plan components outlined in the earlier example. You can make adjustments to the plan variables to determine what works best for your reps.

If you find yourself spending hours developing compensation plans – and then having to calculate commissions each quarter –this tool may help provide some clarity and ensure your commission payouts are simple and accurate.