Creating The Right Commission Structures For Your Salespeople

Commission structures are perhaps the best way to motivate employees to sell; they are direct rewards for salespeople. But with so many discrete commission structures out there, the big quiz, for retailers remains: What division of pay should be commission-based and what division should be salary-based?

All too often, commission structures in cellular retail aren't well conceived. Some retailers use fixed-rate commissions whereby a salesperson receives, for example, each time he/she sells a particular handset. This doesn't work.

In order to get the results you want, commission structures must be calculated as percentages. retail executives need to resolve upon a equilibrium between how much to pay salespeople (per commission) and what they deem suitable payment for their sales efforts (on top of their salary).

"To generate a payment package that's fair to both parties, think what it is you are for real paying for," advises Keith Rosen, menagerial sales coach for behalf Builders, on his blog. "Focus on paying for the results... For example, what are you willing to pay for a 50 per cent increase in sales (or more)?"

Calculating the right commission buildings isn't easy - it can be complicated. But it's prominent to think the factors at play in your retail business. Rosen says calculating a salary-commission compound depends on a amount of factors, such as your sales cycle, median sale (dollar amount), commerce (in this case, cellular retail), local and state laws, cash flow, behalf margins, how your firm is set up (S-Corporation, C-Corporation, L.L.C, sole proprietorship), buyer cost terms, the amount of salespeople you need and whether or not there is some type of residual earnings that the salesperson makes on each sale.

"Ask your accountant or attorney what they feel the most thorough payment plan would be for your salespeople," adds Rosen.

Marcus Markou, Chairman of Dynamis, a London-based firm publication and consulting company, says the trick to structuring sales commission is to strike a balance. "Create a commission buildings that rewards team members on retaining customers but also (offers them the) incentive to sign up new customers."

Markou says an efficient commission buildings should be adjustable to how your firm is going. He used to run a sales team for Dynamis and structured his staff's commissions separately, to encourage expansion - recurring buyer earnings (1-3 per cent) versus 'new money' (10 per cent). As the firm grew, the commission buildings changed.

"Today, we are challenging towards new structures that are more thorough for a firm becoming increasingly focused on new sales," he explains. "Ultimately, you have to come up with a buildings that suits the culture of the firm and supports what it is you're trying to do."