In this two minute video I discuss sales compensation.
A couple things with sales guys and compensation is one, keep it fair. Actually, keep it generous and keep it simple. So I like to say the sales guy should be able to calculate what his commission is going to be on, the deals he’s working on in his head as he drives in to work.
Second thing is that you want it simple; you want it generous. You can always tweak it back later if things have changed and sales comp points change all the time. And sales guys know that, but if you discouraged a guy by keeping your comp kind of thin and not very generous, it’s hard to motivate him again to work hard for you because remember, selling is hard work. There’s a lot of his ego that gets bashed when he’s out selling.
I’ve had CEOs say to me, “Well, hey I don’t want my sales guys gaming the system.” Well, no, you do actually do want them gaming the system. You just want them to game the system the way you’ve designed it. So you want to make it clear what kind of behavior you want out of them. And you’ll get that behavior if you’re being generous.
The other thing I’d say early stage company. It’s tempting to say, “Hey you’ll peg on 100 percent commission. If he brings in business, I’ll reward him generously.” Great idea. It doesn’t work very well. Most sales guys and the kind of people that you want to hire have commitments they need to meet on a monthly basis. And they can’t take the risk of a 100 percent commission. And candidly, they don’t believe in the product the way you do because you’re a founder and they’re not. So I’m an advocate of paying your sales guys a solid base salary, market level and making commissions generous.