A Guide to Giving Sales Commissions The amount of of commission depends on a host of factors, most notably the typical commission structure in your industry.
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Q: What should I give my salespeople in commissions?
A: I know you're looking for a straightforward number here, but there are so many variables that--you guessed it--there's no single answer (as with most every decision in business). The amount of commission depends on a host of factors--notably, the typical commission structure in your industry. But there are others as well.
- If this year calls for a major new-product push, then the sales-compensation plan may call for bigger incentives to move that new product.
- Are sales based on existing personal connections and relationships? If so, then higher commission rates are needed.
- If deals in your industry take months to close, it makes more sense to have higher fixed salaries with small commissions/bonuses.
- Are your salespeople "hunters" tasked with finding new customers, or "farmers" selling to existing customers? Typically, hunters are motivated by higher commissions; some may even be unhappy with anything but 100 percent.
- Do your salespeople have some control over prices? I worked at a printing business where we paid the salespeople 50 percent of the profit of each sale. This achieved the perfect balance between holding the line on prices to maximize commissions and lowering prices to get sales.