Blog Post #1: What does a great commission plan look like?

By: Devin Oakes

Introduction:

For the last 2 years we've seen hundreds of compensation plans in a variety of industries. Lets take a look at 4 trends we've seen with the companies who have a GREAT commission plan. Also, be sure to read on so you can see the #1 trend we've seen from TERRIBLE commission plans.

Here at STAKT we believe commissions should be simple, automated, and transparent. When companies make these changes to their commissions there are so many positive outcomes for the organization and for the sales pros who are working within the org. The STAKIN' WINS blog is our effort to share best practices and celebrate wins from service companies who have made the move and enjoy high production and profits because of their deliberate decision to make commissions in their orgs great again.

So lets get started!

Here are 4 trends we've seen from companies with GREAT commissions plans and 1 trend you MUST AVOID! 👊❌

Let the Do's and Don'ts Commence!

1. DO Incentivize volume with tiered commissions bonuses

Sales pros are hunters by nature (well the best ones are). They want something built in to their commissions structure that allows them to feel the rush of a CHASE. Adding volume tiers on a monthly or quarterly basis gives them this added incentive to keep pushing. What seems to be successful is small bonuses on % of commission that can be earned based on active sales or total revenue that sticks with the company. Apply this best practice to see your sales team push production AND care about retention as well.

2. DO Allow for pricing flexibility with % based commissions

More and more home servcie companies are popping up every year. Whether you are in solar, pest, alarms, or roofing the competition has never been greater. So lets be sure your GREAT commissions plan represents that. Giving your sales pros the ability to have some pricing flexibility is helpful for not losing a deal due to price competition. It is also helpful because it make the customer the focus and allows for the sales pro to give a reasonable price and still make the commissions they want. We've found more wins created by this structure for the sales reps, the customer, and by default the company.

3. DO Only allow 2 layers of overrides in sales structure

This may not be a hard fixed rule but in general the fewer layers of overrides we see in a commission structure the more healthy the company and more money the sales rep can keep. Ultimately the sales rep is the one adding value and bringing deals to the business. When company profits and sales commissions are eaten up with many layers of overrides its just not a good experience for anyone. Two layers is healthy meaning youve got room for a recruiting override and for the manager as well of a sales rep. After all, we do believe there should be incentive to grow the team and manage the team BUT adding multiple layers after that seems to have diminishing value.

4. DO Weekly payments...but bonus quarterly

The trend in home services sales, especially for in-field sales teams, is to pay out commissions weekly. While that is very very helpful for the sales pros, it can sometimes cause a strain on businesses. So a happy medium here is to add to your GREAT sales commissions plan a bonus that can be earned quarterly. This helps the sales pros push for volume and also helps the company with cashflow and retention. After all, if we know commissions are earned quarterly then theres an alignment between the sales pro and the company so that the customer is happy. Win Win Win.

5. DON'T HAVE TOO MUCH COMPLEXITY (If you can't explain your commission structure with 1 slide, its too complex)

As you can imagine we have a unique perspective where daily we see multiple commissions structures from a variety of industries in the home services world. The BIGGEST RED FLAG we see is that as soon as it takes more than a minute or so to explain a commissions plan we know its just not a great plan. If the owner of the company needs more than 1 page to explain the commissions plan within the organization we believe there probably could be some simplification. Sales pros need simplicity and with STAKT we can help you evaluate the complexity and give you ways to see the simplicity and know the profitability of your commissions plans. The key is keep it simple and resist the urge to add tons of complexity.

THATS ALL WE'VE GOT FOR YA THIS WEEK! IF YOU WANT TO TAKE A LOOK AT STAKT SIMPLY BOOK A DEMO WITH US HERE.

Thanks!

-Devin