Tel: (01) 901 1310

menu

Incentivise Sales People on Margin not Revenue

The debate rumbles on, should you incentivise your sales team or not and if you do is it better to set their targets on revenue or margin/profit. There may be no right answer but you need to consider your Business model and Sales strategy and the long-terms goals of the business.

Share Post:

Share on linkedin
Share on twitter
Share on facebook
Share on email
High-performing teams

The debate rumbles on, should you incentivise your sales team or not and if you do is it better to set their targets on revenue or margin/profit.

Well let’s answer the first part:

Incentivising sales people depends on the type of culture you have or desire to have in your business. If you want an out and out hunter type of environment then paying on performance is a must and that could by up to 50% base + 50% performance.

If you want a more account manager/farmer type of culture then a 90%/10% would be more appropriate. In some cases we recommend no performance incentive/commission because customers like to know that the person they interact with is not motivated to “sell” and has their best interest at heart. Grow, profitability and productivity should be at the heart of any of these decisions.

Where you do get into a commission structure or bonus payment on target we encourage you to set targets that are based on gross profit:

  • Yes we do understand that there is a wide swing in margin depending on the product and we get told all the time that a rep will only sell the products with the highest margin, but that point is weak because with a revenue based target the same rep would only sell the highest value products wouldn’t they.
  • To get over the margin issue we recommend that you segment your products into low, medium and high margin categories and set a target for each category so the reps must sell equivalent amounts across the product range.

There is one final objection that we often hear and that is that “we don’t want the rep to know the actual margin” reason being that it is commercially sensitive. The fact is that any rep worth their salt could calculate the margin of any product to within 1-2% in the blink of an eye.

How do you incentivise your team?

Quick Contact - Or Call: 01 9011310

Sign Up To Our Latest Transmission

To be sent automatic updates to our latest news articles, please fill in your details.

More News

Leadership

Do You Feel Stuck Trying To Grow Your Company?

Good leadership is vital for organizational success, but even good leadership can be an obstacle. Successful leaders often struggle with a few common issues: difficulty trusting others, identity and worth and self-discipline.

Warehouse Management

12 Tips for Keeping a New Warehouse Organized

If you want to serve your customers quickly and efficiently, you’ll need a good system of organization in place. But with potentially thousands of items to keep track of, dozens of people to hire, entire systems to build from the ground up, how are you supposed to do it?

The Business Troubleshooters Ltd.

Dublin

Carlow

Cork

Ⓒ 2020 - All Rights Are Reserved

Sign Up To Our Latest Transmission

Dublin

3013 Lake Dr,
Citywest Business Campus,
Dublin, D24 PPT3
Tel: (01) 901 1310

Carlow

Enterprise House,
O’Brien Road,
Co. Carlow, R93 YOY3
Tel: (059) 910 0440

Cork

Acorn Business Centre,
Mahon Industrial Estate
Blackrock,
Cork, T12 K7CV
Tel: (021) 2021130

Share on linkedin