Best Practices For Sales Compensation Plans

What is a best practice for sales compensation plans?


To help you follow best practices for sales compensation plans, we asked marketing managers and CEOs this question for their best recommendations. From matching incentives to the work done to making compensations fair and predictable, there are several best practices that you may adopt to help you draw up the right sales compensation plan for your marketing teams. 


Here are four best practices for sales compensation plans:

  • Match Incentives To The Work Done
  • Use The S.M.A.R.T. Model for Sales Goals
  • Offer a Base Salary and Commission Variations
  • Make Compensations Fair and Predictable


Match Incentives To The Work Done

Sales incentives must be motivating; hence, it’s worth the effort and best practice for sale compensation plans. If incentives aren’t attractive enough, reps won’t be encouraged to reach and exceed their goals. When sellers weigh the cost against the benefit, their earnings should be organized, so the benefit pops up as the clear winner. Indeed, it’s important to be sure that the leaders have precise sales forecasting in place to boost pipeline visibility, maximize seller performance, and acquire early insight into commissions earnings. This is how companies can steer clear of a nightmare scenario.

Caroline Lee, CocoSign


Use The S.M.A.R.T. Model for Sales Goals

Sales compensation plans can vary widely depending on the type of business and what products or services are being sold. However, there are a few best practices that all businesses should follow when crafting their sales compensation plan. Sales goals should be specific, measurable, achievable, relevant and time-bound (SMART). This ensures that everyone is on the same page in terms of what needs to be accomplished, and provides a clear benchmark for success. 

Also, commissions should be paid out regularly and in a timely fashion. This helps to keep salespeople motivated and prevents them from feeling like they’re being taken advantage of.

Natalia Brzezinska, PhotoAiD


Offer a Base Salary and Commission Variations

The best sales compensation plans are those that contain a base salary and allow you to survive as you build up your sales, along with strict compliance measures. For instance, you may start with a decent base salary with only a 5 percent commission with the directive that your salary will start to go down and your commission percentage will go up in two months. This will continue throughout a six-month probationary period as your sales increase. At the end of the probationary period, a good salesperson should have a small base salary and a large commission pay for their sales that is more than double the amount of their original base salary.

Michael Gorlovsky, Windermere Orthodontics


Make Compensations Fair and Predictable

A best practice for sales compensation plans is consistency. In order to ensure that your sales team is working towards the same goals, it’s important to have a compensation plan that is fair and predictable. If you frequently change your compensation plan, your sales team will never know what to expect, and they may end up becoming less motivated or productive. It’s also important to make sure that your compensation plan is aligned with your company’s overall goals and values.

Rick Elmore, Simply Noted



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