One of the most important questions that company leaders ask is “How much are these comp plans going to cost us?” That is where plan modeling or costing comes in.
This is the time of year when companies are creating sales compensation plans for next year. They usually invest time in determining the best mechanics (e.g. thresholds, accelerators, caps, etc.). They also spend an extensive amount of time determining quotas, which is good. However, one of the most crucial items to get correct, and that is typically not done well, is plan costing. The most effective way to determine the cost of a sales compensation program is through a cost model.
