subject: Increase Sales With Results-based Compensation [print this page] Why pay salespeople who are not motivated or do not make adequate sales? If your joint venture product or service depends upon face-to-face or direct contact with potential customers and clients, you should consider using a results-based compensation system.
Auto dealers do it. Real estate agents earn it. Corporations pay brokers with it. What is it? Commissions. People who meet face-to-face or talk directly with a potential lead earn their keep by commissions. They close a sale and enjoy commission earned.
A set salary can become un-motivational when sales staffs realize that they still get paid regardless of whether a sale is made. If you use in-house staff, set up a motivational compensation system that pays them a percentage of every sale they make. Set sales goals so that each staff has a purpose and destination to reach with total sales. And incorporate bonuses for meeting and exceeding goals.
This type of results-based compensation will ultimately bring your JV sales staff greater salaries, and ensure that you hire and retain the best sales force available. If you prefer not to have in-house staff and your JV product or service can use an independent contractor, such as a licensed broker, set up a similar compensation system with them.
Structure for Results-Based Compensation
Simple Gross Percentage - This is the easiest type of results-based compensation structure. When a salesperson makes a sale, a percentage of the total sale goes back to the seller. For instance, if one of your sales staff makes a $5,000 sale with a 10% commission, they earn $500 for that transaction.
Gross percentage can be tiered as the value of the product or service increases. For instance, you may pay a commission of 10% for items valuing $0-$999, 8% for items $1,000-$4,999, 6% for items $5,000-$9,999, etc. You can structure a tiered commission any way you like to motivate your sales staff, and when items increase in value, so does the commission percentage.
Residual Commission Income - Many JV businesses are offering not a product but a continual service. Service subscriptions are the way these businesses make money. When a customer subscribes, they pay a fee, usually on a monthly basis to have continual access to the service. The more subscriptions gathered, the more income your joint venture can realize.
Salespeople can be motivated to sell subscriptions for a residual commission fee. Every time they sell a subscription, they receive a portion of the monthly service fee for as long as the customer remains a subscriber. With this type of result-based compensation, a salesperson may have unlimited income potential.
Bonus - Bonuses are important for sales staff to remain motivated. As well as receiving compensation for each sale, a salesperson can earn a pre-specified bonus for meeting sales goals. A bonus could be cash, or something else of value such as an automobile, a Hawaiian vacation, or even stock options if your JV structure is a corporation.
Be wary of how you pay your people to sell what your JV produces. With results-based compensation, your income grows, and you attract the most talented and motivated sales staff. Make sure your JV business compensation is win-win.
by: Christian Fea
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