The Right Compensation Plan - Sales Infl...

Compensation Structure

1. A base plus Commission plan is optimal for long sales cycles (3-5 months), providing a motivating base salary and Commission tied to quota to encourage salespeople to accelerate revenue beyond targets.
   
   
2. In this model, salespeople earn a percentage of base salary as Commission, with payouts starting at 50% of quota and increasing as they achieve higher percentages.

Motivation and Performance

1. Accelerators like 150% payout for sales above quota and 200% payout for exceeding 1.5 times quota create financial energy driving salespeople to sell more.
   
   
2. A quota-based Commission plan outperforms a percentage of sales plan by tying rewards to quota achievement rather than raw sales performance.

Plan Design

1. Effective plan design involves setting a base salary, quota, and determining the Commission structure with specific percentages and payouts for each quota level achieved.
   
   
2. This structure creates a financial incentive that motivates salespeople to hit their numbers and accelerate revenue beyond quota, benefiting both the individual and the company.