One of the most fundamental aspects of any business is determining how much money to charge for your products and services. As a salesperson, this task is not usually something you would want to do yourself. Many managers outsource this task but are also careful when creating their pay scale and commission structure. Many times they will hire an outside consultant to design the pay scale. Still, many other variables determine a competitive yet fair sales commission software. The main factor to consider is sales volume. Many factors should be considered if you are a large or small company. Your sales structure will vary based on your customer relationship and market. Some simple but often overlooked statistics can help determine if you should change your sales structure.
The five leading indicators that reconsider your present sales commission structure include:
1. Variations in Your Sales Force
Some companies have a sales force of only two people, or they may have hundreds of salespeople. You can choose one person to be your top producer and pay him accordingly, or you can offer specific incentives to each member of your sales team. If you have many salespeople that do not achieve their quota, it could be a sign that your commission structure has the wrong incentives and you are paying too much.
2. Your Average Sales Volume
The average sales volume can be determined by your total sales revenue divided by the number of salespeople. If your average sales volume rises, you are likely on the right track with your commission structure. If you notice that volume increases are levelling off, it could be a sign that you will experience revenue stagnation in the future, and you need to adjust your pay scale accordingly.
3. Your Sales Prospects
A good commission structure is when many potential new customers for your company and these prospects become actual paying customers. This is a sign that you have a competitive pay scale structure with great incentives for new customers and high quality products or services. A stale commission structure could mean overpaying your salespeople for the same customers and products. If you cannot increase sales volume to make up for a stagnant pay scale, you may want to consider changing the incentives offered to the salespeople.
4. Your Revenue
The revenue being made is a good indicator of if your current commission structure is paying out or not. You should compare total revenue with total payouts over time to determine whether your pay scale has room to grow or if you need to increase your commissions. This could be accomplished by dividing the number of paying customers by the months it took them to become paying customers and comparing this number over time.
5. Selling Prices
The selling price of your products or services is probably the most critical indicator in determining if you should change your commission structure. If you have an increasing number of salespeople achieving their quota, but your sales prices are not increasing, it could be a sign that you need to increase the margins on your products. You can accomplish this by decreasing the costs required to manufacture and market your products or increasing your sales volume. This could be done by increasing sales bonuses and reducing per unit profit margins.
What is the sales quota meaning?
The sales quota meaning is a term used to describe the amount of money predicted to be made in one month by an employee. This is important information because if an employee is making more than they are expected to make, they are overpaid, and if they are underpaid, they are underpaid. Both of these scenarios could be detrimental to the company. For instance, many companies will keep track of their employees who have the most potential by rewarding them with higher pay. These pay increases can become a problem when employees do not achieve the quota initially set out for them. The employees may be overpaying or underpaying depending on their sales performance.
One of the best ways to maintain track of your commission plan is by using ElevateHQ. It is not specifically used to monitor sales commissions, but it may be used for various enterprise-level applications. The majority of the functions are geared toward sales and marketing. Tracking your sales and ensuring that your organisation has a solid infrastructure are the primary functions of this program. This program allows you to keep track of every sale and lead and send daily reports to your management.