The Perfect SalesForce: The 6 Best Practices of The World’s Best Sales Teams by Derek Gatehouse

Author:Derek Gatehouse [Gatehouse, Derek]
Language: eng
Format: epub
ISBN: 9781101191651
Publisher: Portfolio
Published: 2007-11-07T16:00:00+00:00

EXAMPLE OF A SLIDING-SCALE

COMMISSION PLAN

Quarterly

Sales Commission

$125,000 11% ←(Quota)

$175,000 14%

$225,000 17%

$275,000 20%

The first level, $125,000 in sales, is the quota. As stated in the quota section, keep your quota periods as short as they can be. If your sale cycle averages two to three months, make your periods quarterly.

For reaching only the quota level in this example, salespeople will make a commission of 11 percent on that quarter’s sales (the equivalent of $55,000 annually). Remember, we’re defining quota as the results that a properly cast individual can regularly accomplish with reasonable effort, which means this level is supposed to be pretty easily achieved.

If by quarter’s end salespeople have surpassed quota and made it to the $175,000 level, then the commission jumps to 14 percent on the total sales for that quarter; $225,000 in sales will raise the payout to 17 percent; and $275,000 pays 20 percent.

As a salesman, my brain is suddenly telling me, “Hmm…if you stop by that prospect on the way home and close him, that $2,000 sale brings this quarter’s numbers into the $225,000 category—which means everything jumps to 17 percent. Seventeen percent of $225,000 is $38,250 for the quarter. If I don’t make the sale this quarter, I’m still at 14 percent of $223,000, which pays me $31,220.” On the old pay plan that little $2,000 sale I was reluctant to go to on a Friday afternoon was only worth $300 to me. On the sliding-scale pay plan it’s worth over $7,000 to me! I think my son will forgive me if I miss the first inning.

Whenever I design these sliding-scale plans with a company, and we are identifying the different revenue levels, there always comes a point where management says, “We can stop there…. No one has ever reached those numbers.” I encourage them to continue, just in case. And salespeople go ahead and break these records every time! When you identify a target, human nature says, “Oh look, a target. A target with a bigger prize than the one down here.” And when someone reaches that target others are compelled to follow, and then that other human trait, competition, kicks in: “Who will be the first to break the next level?”

Hoarding Sales The sliding-scale mentality addresses another sales department nuisance: hoarding sales. If you have been a salesperson you know how it feels to be behind the pack. And you also know how great it feels to be ahead of where you need to be in the period. An interesting side effect of this sales life is hoarding when you are ahead of the game. Like a squirrel packing nuts away for a less abundant season, our nature tells us to store. If the sales manager wants $125,000 per quarter, and I’m already ahead of that with three weeks left in this quarter, I’m going to stall those sales that I know are imminent in order to have them go to next quarter’s numbers. I’ll be starting ahead of the game next quarter! This applies in certain sale types only, but it happens often.

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