It is well known that you have to pay at, or more likely a bit above market levels in order to attract the best sales talent in the business. There are numerous surveys that indicate what sales reps are getting paid and there is always anecdotal feedback that comes to an employer either via its own sales reps or through candidates in the interviewing process.
But all this needs to be taken with a grain of salt. There are several reasons why the market may be wrong and why your compensation plan may need to be different. We take a brief look at each of these reasons.
The Numbers are Inflated – Reps have a tendency and, when making a career change, a direct incentive, to overstate earnings. So often there is lot of misinformation about who is making what compensation in any sector.
Different Compensation Models – There is the concept of total target income (the amount a rep will earn in base and commissions at target), but without holding a competitor’s compensation plan in your hand, it can be tricky to reverse engineer to know how total compensation is earned. Different companies pay different ratios of base vs commission, the commission rates may be different for different types of deals and there may also be achievement accelerators and spiffs. All of which have varying levels of attainment difficulty. The skill set and effort required to earn $X in one company may be completely different in another.
Different Business Models – While the compensation plans are different across different companies, so too are the business models which ultimately dictate the selling activities and abilities and traits that reps must possess in order to be successful. One company may sell direct while another may sell primarily through channels. Even small differences in business model can have a huge impact on the profile of the successful rep and the compensation model.
Non-Monetary Incentives Matter – Sales people value various rewards besides the cash compensation. Career growth, company culture, vacation and flexible hours, for instance can offset a lower compensation. Even the culture or values of the company can play as significant factor as compensation in the career choices of sales people. Just as much as sales people want to optimize earnings, they want to work in jobs they like for companies they admire.
Company size – In most sectors, the largest companies are able to pay more than smaller companies (with some exceptions such as the market leaders who leverage name brand to attract talent while paying slightly less than competitors). While the best sales people in the business gravitate to successful companies that pay more, often it is a different breed of sales person that belongs in a large company versus a small company so it can be like comparing apples to oranges.
Figuring out the meaning of market compensation can be tricky in sales and in the end it often comes down to what you have to pay in order to get the candidates you want.
To your success!
Eliot received his B. Comm. from Carleton University and has been honored as a Top 40 Under 40 Award winner.
He co-authored Sales Recruiting 2.0, How to Find Top Performing Sales People, Fast and provides regular insights on sales team management and hiring on the Peak Sales Recruiting Blog.
Latest posts by Eliot Burdett (see all)
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