B2B Sales Comp Plan - Hints, Help, and Everything More

[LindseyInteractive]

Hello Guys,

We are looking to build a sales team and we are starting to work on the Sales Compensation plan, we are a Business to Business (B2B) company, so the rules are a bit different for a B2B company over a B2C company.

We don't have any real capital at the moment, so we are going to try to build a sales team of 100% commissions independent sales reps that can set their own hours, but we are running into a couple of issues of how to do it. I have a bunch of network marketing friends who have tried to help me with their comp plans, but it is really driven off of forming a team and profiting from people below them, but we can't do that with a B2B one.

So, we are trying to figure out different things like:

1. Should we base it off revenue? Gross Profits?

2. Should we try to get as MANY as possible in an area, or should we keep it low number so we don't saturate a market and set the reps up for success instead of the business name.

3. Should we do a HIGH based commission with very low bonuses or low commission with huge bonuses?

These are all things I don't know about when setting up a comp plan and sales strategy with it, so I am looking for ANY insight into what we should do, as we have to do it 100% commissions at the moment as we don't have any type of capital.

[Kruncha]

I would always suggest a commission program based on gross margins and not revenue. The problem with a revenue based commission is that salespeople will be motivated to just sell at the lowest price to drive volume and commissions. Basing commissions from gross profits will ensure that you are still profitable in your business.

[LindseyInteractive]

Thanks Kruncha for the information, I appreciate it!

[vaughn31]

I went through this last year as well. I completely agree that gross margin is what you need to base things on for compensation. I originally did it based on revenue hoping that our high profitable services would sell along with the products (which are not high profit by a long shot) but I was drastically wrong. Best of luck.

[billbenson]

Not knowing your industry, it's hard to say. Are the sales people responsible for getting their own leads. If so, you may need to give them a draw against future sales initially. If you are talkinging about professional sales people responsible for a quota of $1M or more, they will expect to make more money on a straight commission basis v.s. a salary plus commission.

What is either the product you are selling or or the anticipated salary for the sales people. Are they order takers, appointment setters,

Be careful about over saturating a territory with sales people. Sales people want to make money. If they are stepping over each other, they will make less money and you will either end up with a hostile environment or they will quit.

[veritasvisions]

I've recruited hundreds of people and one thing remains, commission-only sales reps are by far the best sales reps. Only results oriented people become attracted to the position and there is nothing better then hiring a sales rep that has to work hard to put food on their plate. However, there are a few issues with hiring commission only sales reps that you'll have to get used to.

1) There will be a high percent turnover rate. You WILL HAVE TO GO THROUGH SOOOO MANY REPS TO FIND A GOOD ONE. BUt dont be discouraged because they ARE out there. And when you find them, they will be extremely profitable for your business.

2) Business to Business is extremlely difficult. You will have to consistently lay out expectations i.e the average sales happens after 5-12 touches with a business, you have to consistently have a big pipeline exc..

3) You have to consistently be on all the sales reps at all times, unless you find the rare extremely self-motivated person.

4) To answer all your questions.
1 i pay all my sales reps on gross revenue
2 I provide bonuses based on performance and i make it enticing enough to work hard. So i suppose it's a mix between paying a high amount and giving a bonus that keeps them interested
3 you should absolutely hire as many sales people as possible, trust me on this

[LindseyInteractive]

Hey Guys, thanks so much for the information so far.

I will tell you more about what we do. We are a digital marketing agency, we sell things like Web Design Services, Social Media Marketing, SEO, Display Advertising and things of that nature. Now, we will provide a bunch of cold leads/contacts to our reps, however, as they progress we will also be giving them WARM LEADS and eventually giving them their own accounts that are already setup. This is going to entice them to get their ranks up as well.

[billbenson]

I
3 you should absolutely hire as many sales people as possible, trust me on this

I've really got to disagree with you on this. I think you want to have a bunch of sales people to weed out the good from the bad. But if you over populate a territory with sales people, you will loose good sales people because they won't tolerate this. And the bad or lazy sales people will be pretty obvious pretty quick anyway. I wouldn't tolerate this and I've been a sales person since 1982.

[LindseyInteractive]

I've really got to disagree with you on this. I think you want to have a bunch of sales people to weed out the good from the bad. But if you over populate a territory with sales people, you will loose good sales people because they won't tolerate this. And the bad or lazy sales people will be pretty obvious pretty quick anyway. I wouldn't tolerate this and I've been a sales person since 1982.

I haven't built the sales force yet, but i do agree with this Bill.

I am NOT going to oversaturate our market, I am going to base it on the Business Population and will have 1 - 3 reps per small areas, that is it...I don't want to overpopulate something, as I understand with a commission only model you need to have as many leads and opportunities as possible.