3x-5x Your ROI

The Bottom Line: A business owner should have their sales team generating at least 3x-5x their total compensation annually.

The Pain: When some business owners invest in hiring salespeople their primary measure of ROI is simply relief. “Thank goodness I finally have someone to take care of sales in my business!”.
A common trap/pitfall at this point is to bask in this relief and simply expect the sales team to go out there, drum up business and bring it home.

Nine to 12 months down the road is a frustrated business owner who’s invested significant money in a sales person[s] who did not perform. Not only is the compensation money down the drain, the expected revenue lift did not occur, which of course negatively impacts pretty much every area of the business.

The Fix: Before hiring salespeople set out their revenue goals. If your candidate was a solid fit they should produce the amount that you paid them all in + their benefit costs etc. at minimum in their first year. Good would be 2x that number. After 24 months that person should be producing at least 3x that number. Good would be 5x that number. Considering this will inform the compensation level at which you can afford to hire. It becomes quickly apparent that the best way to compensate a salesperson is to have a medium level base salary with an uncapped commission program. This will keep your fixed costs low and when your seller performs, you can then afford to pay them handsomely.

Next, document your sales process as it exists today. Teach it to your new sales hire[s]. Work with them weekly [yes, weekly!] to optimize it using Deal Opportunity reviews to understand its strengths and weaknesses and course correct as you go. Make CRM your one source of truth around sales. The mantra is “if it’s not in CRM, it didn’t happen”.

“But what if I have a sales team already and they are not producing 3x-5x total compensation?” This of course is a bigger nut to crack. At this point you may need to reengineer a] your sales compensation plan, b] your sales team composition, c] your sales process, or d] all of these.

A business owner is after a sales compensation plan with a lower fixed cost [modest-based salaries] and a higher variable cost [a commission program that incentivizes appropriate selling behaviors]. This is a shared risk & reward model. When sales go up, the sales person is rewarded, as is the company. Note that not every sales person likes this model. If they are a true Hunter they’ll love it. Hire Hunters.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply