3 Examples of a Sales Compensation Plan
Your compensation plan can make or break your business. It motivates your team to succeed, ultimately impacting your bottom line. There's a delicate balance between providing fair compensation and giving your employees the chance to earn big rewards for good performance.
Not sure where to start? Here are some examples that can inspire you and give you a good idea of best practices for sales comp plan.
Sales Compensation Plan Basics
First things first, let's talk about what a compensation plan is. In sales, compensation plans typically include a fixed salary and variable pay. The variable pay is the performance-based commission. Meanwhile, a fixed salary is guaranteed.
Generally, best practices for sales comp plan say that you should create the package around on-target earnings (OTE). The OTE is what you should pay your employees annually based on industry, location, and other factors. Know more about the best practices for sales comp plan by visiting this website.
From there, you can decide what percentage is fixed and what is variable.
Plans should vary based on position and goals. Start by establishing role levels, figuring out OTE, and setting targets.
The 60/40 Sales Development Rep
Here's a standard compensation plan that offers a good balance.
It's a 60/40 plan with an OTE of $60,000 per year. The base pay is $36,000. However, the variable is $24,000.
The target is to process roughly 100 inbounds per day. Because sales development reps focus on prospecting and moving leads through the sales pipeline, it's a lofty goal that is still manageable.
The 50/50 Account Executive
This compensation plan is for an account executive with an OTE of $200,000 a year. They have a detailed understanding of client needs and focus on improving their lifetime value (LTV).
At 50/50, $100,000 is for base pay while another $100,000 is variable. The goal is to achieve roughly $800,000 in sales per year and increase LTV by two years. It's a big goal, but it can pay out handsomely.
The 75/25 Account Manager
With a 75/25 compensation plan, a good chunk of the OTE goes to base pay. For an OTE of $200,000, that's $150,000. The rest of the $50,000 goes to variable pay.
An account manager oversees large accounts or a group of accounts. The target here is to grow the business by $2 million.
Creating Plans That Work
These compensation plans are just two examples. What's right for your business depends on your goals, budget, and positions. The best course of action is to crunch the numbers and create motivating plans for every position in your sales funnel.
Read a similar article about email employee pay statements here at this page.