Sales reps are accustomed to being compensated with a form of commission that incentivizes them to sell more of your company's products and services.
For a good rep, commission-based compensation can be more lucrative than the compensation package they would receive if they advanced into a management position.
But although sales reps generally prefer commission-based compensation, commission plans aren't necessarily the best deal for the business. In fact, there are many scenarios in which your company's growth could be hindered solely by your sales commission plan. When sales commissions are consuming profits that would normally be used to grow the business, it may be time to switch to a straight salary plan for sales compensation.
Before you make any decisions, carefully evaluate your existing compensation program, keeping in mind that the following situations represent a legitimate basis for transitioning to a salary-based compensation approach.
- Low selling requirements. Some products simply don't require an experienced sales pro to be sold effectively and aren't appropriate for a commission-based sales structure. For the sake of simplicity, let's use the example of a guy selling hot dogs on a street corner. Since sales techniques have little to do with how many dogs are sold, his compensation should be based on an hourly wage or salary – but definitely not commission-based.
- Sales support. Sales support personnel are sometimes categorized as sales staff and are included in the company's commission program. But if the individual's role is to essentially take orders from existing clients, straight salary compensation is more reasonable.
- Seasonal sales. Seasonal sales volumes are high primarily because of timing, not sales expertise. Unless the sales rep is required to deliver substantial improvements over prior seasonal sales volumes, there is really no reason to compensate him with commissions. Instead, base his compensation on a straight salary with a possible bonus for extraordinary performance.
- High-tech sales. The sale of high-tech products requires a unique combination of sales expertise and long-term customer service skills. In many cases, high-tech sales reps are actually technology consultants who should be compensated with a salary. Otherwise, you'll risk sacrificing the level of customer service your clients receive from your company.
- Trainees. Most sales trainees receive straight salaries until they have been fully trained and equipped to meet expected sales volumes. Starting a trainee on a commission is a recipe for high turnover and will ultimately lead to a lackluster sales force.