22 Jan 2013

An Ideal Sales Compensation Plan For A Lead Generation Team

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This topic is important because the Sales Compensation Plan for the Lead Generation Reps is one of the main motivators of the Reps, and thus dramatically affects their productivity, your pipeline, and your revenue success. One of our accounts set their Sales Compensation Plan up similar to what we describe below, and the Lead Generation Team was extremely successful and built a great pipeline for the Sales Force. The company exceeded its revenue goals and was later sold for a very high multiple of its revenues.

Let’s give an example. Let’s take the case where you’re building a Lead Generation Team whose job is to develop Qualified Sales Opportunities (QSOs) for a Field Sales Force. Let us say the on-target earnings (OTE) for the Lead Generation Reps is $80,000.sales compensation plan

Sales Compensation Plan Is Crucial:

The Sales Compensation Plan for Lead Generation Reps has a major impact on their productivity. Below I will explain the key elements of an ideal plan.

1. Base Salary + Commissions:

65% base salary, 35% variable commissions is what we have found to be the best ratio. For example if we want the OTE for the Lead Generation Rep to be $80,000, then the base salary would be $55,250 (65%), and the commissions would be $29,750 (35%), or $2479 per month.

2. Monthly Quotas:

The monthly QSO quota should be a realistic goal for the number of QSOs produced by the Lead Generation Rep per month. It should be realistic – not too aggressive and not too small.

3. Quota Ramp:

If the steady state quota is 8 QSOs per month, then a reasonable ramp over the first 4 months for a new Lead Generation Rep might be 0, 3, 5, and 8 QSOs/month.

4. Simple Calculation Of On-Target $/QSO:

If the monthly commission is $2479, and the steady-state QSO quota is 8 QSOs per month, then the value per each QSO equals $2479/8 = $310 per QSO developed up to goal. Let’s call this $310/QSO the on-target QSO value. During the ramp-up period of a new Lead Generation Rep, the value per QSO developed should be the same as the on-target QSO value, $310 in this example.

5. Accelerators:

Accelerators are critical to incent the Lead Generation Reps to overachieve, which is definitely what you want. One way to do this is to give the Lead Generation Reps 1.3x of the on-target QSO value (1.3 x $310 = $403/QSO) for all QSOS between 101% of quota and 150% over quota. Over that, the Lead Generation Reps can earn 1.6x of the on-target QSO value for all QSOs over 151% of goal. So that value would be 1.6 x $310 = $496/QSO over 151% of quota.

A Sales Compensation Plan similar to the above will motivate the Lead Generation Reps, will allow them a realistic opportunity to make their quota, will give them enormous incentive to overachieve, and will help you more realistically forecast the revenues that will come from these QSOs.

 

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