Top 2 Tips Before Building Sales Compensation Plans

Are you working on sales compensation plans for next year?  Don’t know where to start?  If so, this blog is for you.

When thinking about sales compensation plans, some people think “just pay the sales team a commission rate and call it a day”.  While its best to keep sales compensation plans simple, there is an actual systematic process in designing sales compensation plans. 

However, before even stepping into the design process, there are 2 key tips that will help you.  If the items in these 2 key tips are not well defined then it will cause frustration in plan design and most likely plans will not achieve the desired results.  These are the top 2 tips:

• Understand your business objectives
• Understand your sales process & each role’s participation in it

To create plans, you need to understand what your business objectives are for next year.  Because, the plans are a tool to help you achieve those objectives.  If you build plans without taking into account the goals for next year then what are you creating plans for? 

To achieve your business objectives, a sales strategy & sales process is created.  This process includes every role who takes part in achieving a sale.  It should be defined before plans are created because plans are built around the sales process.  The sales process defines who does what in each step of the customers buying journey.  Further detailing, which role has the most influence in the sales process.  Each role’s participation is laid out.  The reason why this is so important is that roles are the foundation for sales compensation plan eligibility. 

In order to build a sales compensation plan, you need to understand each role’s participation in the sales process.  If roles are not clearly defined, then you will encounter challenges.  Some roles may argue participation, when participation should be defined at the leadership level and the sales process and sales organization created accordingly.

There are some more design factors (items that need to be considered before plan design) that play a role in plan creation, but these are the top two.