Know your company's average profitability in business operations. Determine any remarkable difference in profit generated by various products and services. Calculate the profit to the company from each individual product or service. Categorize your business by channels, groups and their profitability to the business. Clearly indicate which products provide your business with the most profit, so as to direct your salesperson's energy towards selling them.
Determine the percentage of your business profit that you would like to use to compensate the sales force. Deduct the company's expenditures and the amount you want to re-invest in your company, then calculate a percentage of the profit that you want to spend on your sales-force reward system.
Direct your salespersons' efforts toward your business priorities. After determining the profitability of your products, place a higher commission on the most profitable package. Ensure that your reward system encourages profitable sales force behavior, and push the sales force towards maximum productivity.
Determine the total number of sales calls that a salesperson can manage comfortably in a day, the amount of time taken to complete a call and the closing rate versus the number of calls made. Evaluate whether the time it takes to complete a sales cycle is effective or needs improvement.
Set a target achievement system. Calculate an income target, using the percentage of profits set aside to compensate your sale force and the total number of sales that a salesperson can realistically complete annually. Consider if the target income you have set is able to motivate your sales force.
Compare your compensation method against those of your competitors. Conduct market intelligence on how your competitors are compensating their sales force. Develop a competitive package while considering your business performance.
Determine the compensation method you would like to provide for your sales team. Decide whether you would like to pay your sales team on 100-percent commission, or to split the pay into fixed (salary) and adjustable compensation. The adjustable compensation will be made up of commissions, incentives and bonuses. Set a compensation method that will offer security and motivation to your sales staff.
Make your commission plan understandable to your sales personnel. Establish a commission reward mechanism and keep it simple. Give an example, allow your sales people to calculate the commission and make sure they understand how the commission will be awarded.