It is conventional wisdom to think that the less base you pay a salesperson the hungrier they will be. While you certainly don’t want to hire reps who are satisfied with just their base, a low base-high commission plan has several downsides:
1. Turnover – If you pay a low base relative to other companies in your sector, reps may join your team and continue looking for another job, resulting in lost investment in training and you and your customers will be dealing with higher turnover.
2. Employer of Choice – Even though top reps always hit their targets and earn far beyond their base, it is a simple fact that your company’s health is measured by your comp plan and if you pay less base than your competitors, it may be considered a sign of weakness and the best talent in the business is not likely to be interested in working for you.
3. Staff Focus – The comp plan drives behavior and if your reps are so focused on making enough money to live, they may not be thinking in terms of your customer’s best interests, or yours, for that matter.
It is common to see sales comp plans wherein the reps receive 50 % of their total compensation in base salary when they hit target and the other 50 % in commissions. It is not uncommon to see 40/60 plans, but more aggressive plans are usually associated with the issues described above.
If you are losing good people or having trouble attracting the best, your comp plan may be the problem.
Next week we will write about how you can attract reps to your company when budget is constrained.
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