It's so important to make sure that you get your targets and commission right, but how do you do that?
And how do you make sure they works not just for your sales person, but also for your business?
I spend loads of time talking to people about setting targets and commission for their sales teams, an the reason for that is because it's so important. As a salesperson, I want to feel excited and motivated by the opportunity to achieve a target and get some of that lovely commission in my pocket.
And how do you make sure they works not just for your sales person, but also for your business?
I spend loads of time talking to people about setting targets and commission for their sales teams, an the reason for that is because it's so important. As a salesperson, I want to feel excited and motivated by the opportunity to achieve a target and get some of that lovely commission in my pocket.
The key to setting any target is ensuring it is achievable but stretching; that's an important balance. I always look at the figures for the previous months, the previous quarter, and he reason for that is because that immediately gives me some insight into what salespeople are currently achieving. Sometimes this will be without any target or commission at all. Sometimes it will be they're achieving something without actually hitting the target that's been set.
Look at what you're currently achieving, the more history you've got on this, the better. If you can look at last year's figures last quarter's, last month's, that is all going to help you build a picture as to what's going on. Ultimately what you want to think about is, what are people currently achieving and what would be a little bit more of a stretch. And this starts to give you an idea as to where your target should sit.
Look at what you're currently achieving, the more history you've got on this, the better. If you can look at last year's figures last quarter's, last month's, that is all going to help you build a picture as to what's going on. Ultimately what you want to think about is, what are people currently achieving and what would be a little bit more of a stretch. And this starts to give you an idea as to where your target should sit.
What are people currently achieving and what would be a little bit more of a stretch?
What is it exactly you are targeting. Is it a one off sale? Is it something that is a monthly recurring amount of money? Is it an annual figure or even a full lifetime value? This will impact which of those things it's best to focus around. You need to be clear what's the target, and what is that target based upon. You might choose to hit targets around the number of deals, or the number of users that have been brought on board. There's lots of different ways to do it; I even work with one business where it's about the profit on an individual deal. It doesn't really matter as long as, it is clear and transparent, and everybody knows what it's based upon.
Once you've got your target, you need to start to think about your commission. This is where salespeople get excited. What are they going to earn for the revenue and the business that they are going to bring in for you? And there's lots of different ways that you can do this. You can choose a flat rate figure. You could choose a percentage. You can actually choose for it to be some sort of profit share. There's all sorts of different ways that you can decide to cut the commission. The key thing is though, it needs to be easy to understand. You need people to be really clear. If they do four deals, they're going to get £500, If they do 10 grand, they're going to get a thousand. It doesn't really matter how you slice and dice that, you'll know what you're expecting them to do based on the targets that you've set. Then, think about the payment, you're going to make to the sales person, it must not only be achievable for the company to pay, but also exciting for the employee.
Quite often when I'm briefing teams, I'll say, "Ok, so if you were to hit that figure and make your £500 commission, what would you spend it on?" And actually getting every person in the room to come up with a response to that, is really motivating. I've even been round after one of those briefing sessions, and in the morning, people have come into their desks with a picture of what they said that £500 was going to get them. How motivational is this? That thing is right in front of them. They can have it. All they need to do is the target that I've set them.
Once you've got your target, you need to start to think about your commission. This is where salespeople get excited. What are they going to earn for the revenue and the business that they are going to bring in for you? And there's lots of different ways that you can do this. You can choose a flat rate figure. You could choose a percentage. You can actually choose for it to be some sort of profit share. There's all sorts of different ways that you can decide to cut the commission. The key thing is though, it needs to be easy to understand. You need people to be really clear. If they do four deals, they're going to get £500, If they do 10 grand, they're going to get a thousand. It doesn't really matter how you slice and dice that, you'll know what you're expecting them to do based on the targets that you've set. Then, think about the payment, you're going to make to the sales person, it must not only be achievable for the company to pay, but also exciting for the employee.
Quite often when I'm briefing teams, I'll say, "Ok, so if you were to hit that figure and make your £500 commission, what would you spend it on?" And actually getting every person in the room to come up with a response to that, is really motivating. I've even been round after one of those briefing sessions, and in the morning, people have come into their desks with a picture of what they said that £500 was going to get them. How motivational is this? That thing is right in front of them. They can have it. All they need to do is the target that I've set them.
It doesn't always have to be about money!
It might be that you don't have a dedicated sales team, so you might not want to go down the commission route. The brilliant thing around this is, there's other ways of doing it. You can reward people with other things, Friday pizza, a night out, even a half day's holiday. All of these things can be super exciting and can motivate people to stretch and deliver for the organization. So really think, it's not just about money, or if money is tight for you on the commission front, what else could you do? This is your chance to get creative. And what you could even do is ask your salespeople; what would you like? It''s a really interesting way of getting feedback. And I know for a fact that one of the things my team used to really enjoy was putting on stretch targets with a four o'clock finish on a Friday. It was amazing how much more business people were prepared to secure to go home an hour early.
In an ideal world, people would hit their targets, we'd pay them commission and everyone would be happy. But you know what? There are sometimes times when disputes come up and this is why I always recommend that you have some clear commission guidelines. These lay out things like, what can be claimed for, what can't. when paperwork needs to be in with the business in order to be submitted and accepted for a commission claim within a month. You might even want to lay out the times that you're not prepared to pay commission, for example, if an order has been canceled or someone leaves the business. I'd really recommend get those rules in place before you actually get people hitting those problems, and you'll make your life an awful lot easier. If you don't know what those rules should look like, then let me know and I'll drop your mine.
In an ideal world, people would hit their targets, we'd pay them commission and everyone would be happy. But you know what? There are sometimes times when disputes come up and this is why I always recommend that you have some clear commission guidelines. These lay out things like, what can be claimed for, what can't. when paperwork needs to be in with the business in order to be submitted and accepted for a commission claim within a month. You might even want to lay out the times that you're not prepared to pay commission, for example, if an order has been canceled or someone leaves the business. I'd really recommend get those rules in place before you actually get people hitting those problems, and you'll make your life an awful lot easier. If you don't know what those rules should look like, then let me know and I'll drop your mine.
LOVE writing big commission cheques!
The last thing to think about is that if you're writing a huge commission cheque, you should be delighted. Often people pay big commissions and feel a bit resentful about it, but actually look at the business that has been brought in on the back of that commission cheque. If you're interested in growing your business and your sales success, then you want to be interested in writing the biggest commission check that you can get your hands on, because that means your salespeople have done a fantastic job for you!
This ties back to playing fair; we all like to feel like we've been dealt with fairly. So you know what? Yes, you can change a commission scheme. You should have it in your rules to say that you can change it at the beginning of any month in line with what's going on with the business, but equally, you should play fair by your salespeople. I quite often come across salespeople complaining that they achieve and every month the targets get put up again, and again and again, until it becomes unachievable. At that point in time all you've really managed to do is demotivate some really great salespeople. So it's a careful balance.
I love to talk about targets and commissions, so feel free to drop me a line if you want to talk about exactly how much you should be paying your salespeople.
This ties back to playing fair; we all like to feel like we've been dealt with fairly. So you know what? Yes, you can change a commission scheme. You should have it in your rules to say that you can change it at the beginning of any month in line with what's going on with the business, but equally, you should play fair by your salespeople. I quite often come across salespeople complaining that they achieve and every month the targets get put up again, and again and again, until it becomes unachievable. At that point in time all you've really managed to do is demotivate some really great salespeople. So it's a careful balance.
I love to talk about targets and commissions, so feel free to drop me a line if you want to talk about exactly how much you should be paying your salespeople.
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