- August 13, 2013
- Posted by: Dave Kurlan
- Category: Understanding the Sales Force
Sales candidates, especially good ones, are exponentially more difficult to attract than they were just two years ago. We regularly observe clients struggling when it comes to getting resumes from quality candidates. One of the reasons is compensation.
1. True or False: The higher the compensation, the better.
2. True or False: Compensation isn’t that important to most salespeople.
3. True or False: Compensation is always relative.
4. True or False: Base salary is usually more important than % of commission.
The answers are False, False, True and False.
There are four variables that impact the importance of compensation:
- Requirements – If there aren’t many significant requirements, expectations, experiences, or expertises, then $50,000 may be fair. But if you need a salesperson who has had success selling expensive products or services to CEO’s amid a tremendous amount of competition and you need this person to both find and close new business, then you are describing a salesperson who would expect a compensation plan to pay them in excess of $125,000 and as much as $250,000.
- Industry Norms – If you want one of the effective salespeople to join your company, you need to divorce yourself from the mindset that, “In our industry, it’s traditional to pay…” That’s fine if you will never, ever interview and hire salespeople from outside your industry. But if your industry provides a $135,000 base and the salesperson being interviewed comes from an industry that pays a $35,000 base, you will overpay and undermotivate.
- Splits – Once again, you’ll need to move away from the one-size-fits-all comp plan. Extrinsically motivated salespeople will thrive on a low base and high commission plan while intrinsically motivated salespeople will perform more effectively on a high base with small commission plan. That’s why I always ask candidates to provide me with an earnings history broken down by salary and commission (and bonus if applicable).
- Needs – What a salesperson needs to earn to pay bills must be considered at the start and you may need to subsidize this person during ramp-up if the plan is weighted toward commissions and if income will fall short of the bill-paying requirement. Regardless of motivation type, what salespeople desire to earn to get what they want in life must be considered for long-term retention. When salespeople are successful and their income continues to grow, they will grow with you. When success or income stagnates, look for them to add your company to the previous employers listed on their resumes.
Well, I found some sanity over the 80/20 rule in Perry Marshall’s new book, 80/20 Sales & Marketing: The Definitive Guide to Working Less and Making More. Perry busts some long-standing myths and backs it up with sound data. I read the first chapter and am hooked – a must read for me and perhaps for you too!