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Setting Sales Compensation

This question is more generated towards sales managers, executives and advanced B2B sales professionals.

We have a small business that did over $3MM in sales last year. We have a small sales force of 2 individuals and plan to hire another rep this year. We had another sales rep in the past which we paid a salary of ~50K + commission based on all sales the company did. Needless to say this rep didnt work out in part because they were an engineer and did not enjoy the sales aspect and our compensation plan was not motivating.

We are looking for some insight as to a good starting point for our compensation plan. Our typical sales cycle is 3-6 months, some customers close much sooner. We offer fully paid medical but no retirement or profit sharing package at this time. We think salary + commission is appropriate but not sure how to structure the commission to motivate our reps to do more work and not "free ride" but at the same time be fair for work they have done in the past and new customers/sales they bring in.

Any suggestions would be much appreciated. - by rrsales21
Two ways I can think of, validating or commission/bonus on top of salary.

Commissions can leveraged. Sell up to $ and schedule is 20%. Sell between $ and $$ and commission will be 25%. Anything over that will be Salary plus 30% and do really well... you will get a bonus paid out over the next year on top of your salary and commission schedule.

I've worked like this in the past and it works really well. However, one thing about commission schedules that are stepped... they have to be realistic. To say 30% and bonus for someone who'll never be able to achieve that, is pointless.

If you know someone can sell $50,000, lets say, the first 10K might be at 10%. 10-20K might be at 15% with a retroactive bonus or leave the bonus for the next year retroactively. 20K-50K might be 25% with a retro, and 50K plus might be 30% with a bonus at the end of the year paid out over the following year.

Aloha... :cool: - by rattus58
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