Sales Commission Plans Need to Change

How companies need to structure commission based on GTM strategies

Good Morning. Sales process, quotas, and timelines are changing… but one thing remains the same: Costco’s $1.50 hotdog & soda combo. Last week, Costco’s CFO retired after 40 years on the job and left us with some reassurance. When asked if the $1.50 combo would change, he saidIt’s probably safe for a while.”. Phew… 😁 

In today’s Follow Up:

  • Sales commission structures 💰️ 

  • Your next project’s BFF 🔴🟡🟢 

  • Sales tip of the day 🧠 

  • Sales around the internet 💻️ 

  • Sales jobs, LinkedIn & meme 😂 

Sales Reps Need New Commission Plans

B2B sales is complicated. 

There’s a million factors that go into a deal, and every prospect is different.

Leads come through inbound & outbound, and deals come in all different shapes, sizes, and timelines.

With all of the differences in deals and functions of the sales team, a one-size-fits-all commission structure doesn’t make sense.

Yet many companies still have outdated commission plans they’ve been using for years.

In a recent HBR article, the authors discuss the mistakes companies make in their comp plans when only thinking about deal size (SMB, Mid Market, Enterprise).

Comp plans should start by identifying the function of the sales rep, so let’s take a look at the 6 most common ones. 👇️ 

Inbound Sales Reps 📨 

Aka, the ‘order takers’… kinda.

Inbound reps rely on inbound leads to generate sales. No inbound leads = no sales.

Comp: Higher base salary & low variable sales commission. Reps in this role can expect reliable pay, but won’t see any massive commission checks.

Outbound Sales Reps 📞 

These are the hunters of the sales world.

They’re tasked with creating a pipeline from scratch, which typically requires a lot of cold calling, emailing, and other forms of direct communication.

Successful outbound reps typically have more experience, persistence, and the ability to overcome rejection, and should be rewarded for it.

Comp: A lower base salary with a higher commission motivates outbound reps. Their compensation should be heavily correlated to their sales performance and can include also reward metrics like calls, emails, and meetings.

Partner-Led Sales 🧑‍🤝‍🧑 

This strategy involves using partners (authorized resellers) to generate sales.

Sales reps who work with partners rely on their relationships to directly impact sales outcomes.

Comp: This role should typically have a higher base salary with lower variable commission, but also needs to consider factors like what motivates the specific rep and how much they’re involved in sales processes.

Event-Led Sales 🛩️ 

These sales reps do their selling in person.

Typically traveling to events and shows to meet prospects in person and work on enterprise-sized deals. These reps are usually charismatic industry vets who are great at building relationships.

Comp: This role should be heavily commission-based to reward large deals, but also come with an above-average base salary to keep these reps fed through the long deal cycles.

Community-Led 🌐 

This approach uses niche communities to find customers.

These sales reps may have specialized knowledge to build relationships within the communities, but also be able to turn those relationships into sales.

Comp: This role should favor the base salary, but also offer an attractive variable commission to incentivize reps to turn community members into customers.

Product-Led Sales 🛠️ 

This strategy relies on the product as the main driver of customer acquisition.

To do this, your product needs to be really freakin good.

Sales reps in a product-led org are similar to inbound reps but will need to have more product expertise.

Comp: Similar to inbound reps but with a higher base salary due to their product knowledge and a lower variable commission structure.

Now that you’ve identified the sales rep function, there are 5 steps to building a new comp plan:

  1. Your go-to-market maturity: Do you have product-market fit or still working on it? Comp should include higher commissions for pre-market fit, and will shift to higher base salaries for post-market fit.

  2. Growth strategy of the rep: Inbound, outbound, partner-led, event-led, or product-led.

  3. Current performance: Aim to have 75-80% of reps hitting quota. If you’re under 50%, something needs to change.

  4. Motivation: Does the current comp plan motivate sales reps, or is it discouraging? Adjust accordingly.

  5.  Make the plan: Time to put pen to paper. Map out all of the different factors of the reps role including activity levels, timelines, lead sources, tools, etc. This part is easier said than done, but it’s crucial to any successful sales team.

Do you think your commission plan is fair?

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Sales Tip of The Day 💡 

Schedule your cold calling to reach your prospects between 8-11 AM their time.

According to a study, you are 15% more likely to get a prospect to pick up their phone between 8-11 AM.

Every 15% counts. 🤷 

Sales in the News 🗞️ 

Remote Sales Jobs 💼 

Interviewing Gone Wrong

Chipotle delivery = WFH employees. Do you agree? 🤔 

Sales Meme of the Day

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