Ivan de Souza
Mar 8, 21 | 8 min read
Reading time: 6 minutes
Many marketing management professionals strive to generate more and more leads so that the sales team can convert them into closed deals and, consequently, revenue.
And this is all very well, but it is not the only important thing: it is also key to define sales commissions , as it is one of the main elements of motivation, which tells sellers that the more customers they bring to the business, the more money they will earn!
But what are the important points in defining this commission? And what are the main types of commissions that can be given to sellers in today's market?
To answer these and other questions, we have written this guide and we invite you to read it until the end.
What should be taken into account when setting up the sales commission model and process?
What are the types of sales commissions?
What should be taken into account when setting up the sales commission model and process?
To choose the commission model that will be applied in your company, you must make some considerations. Below we point out the main ones.
Company objectives
Before determining what type of sri lanka email address commission you will offer to your salespeople, you need to establish what goals the company hopes to achieve in the short, medium and long term.
In this way, each salesperson will know that, beyond pursuing a commission, he or she must strive to achieve the objectives necessary for the business and that financial stability will depend on this, in addition to the delivery of greater and better incentives.
Rules
Next, you need to determine what the sales rules and commissions will be. This step is very important so that everyone is aligned and knows clearly how much they need to sell and how much they will earn from it .
Seasonality
If your business has periods where sales may increase or decrease, it's a good idea to consider these when determining your sales commission.
For example, during peak demand times, you may have a different commission scheme due to high sales volume, while you may increase incentives in historically challenging seasons to close deals.
Period between sale and payment
This point is of utmost importance for the financial health of the company. There are cases where the commission is paid to the seller at the time of the sale and others where it has to wait until the following month or wait for the purchase payment to reach the cash register first.
Knowing which of these models is most suitable is also an important part of the commission selection process.
What are the types of sales commissions?
We have compiled the main types of commissions for sales teams here so that you can choose the most suitable one for your business.
Commission for sales made
In this type of commission, sellers can receive a percentage of the value corresponding to each sale made .
Payment can be made at the time of sale, or at the end of the month, together with the salary.
This is an easy-to-understand type of commission. However, there are a few things you need to consider before setting up this commission pattern in your business.
For example: if your clients pay by credit card and you settle the commissions to your sellers at the time of the sale, you will be using money from your company's cash register, since that transaction has not yet been transformed into liquid assets.
Another example: if your product has a very high cost, the percentage determined for the commission can also be high and even unsustainable for your business finances.
Generally speaking, you need to ensure that after subtracting the commission, your profit margin remains ideal. This also demonstrates the importance of carefully reviewing your pricing strategy .
Commission and salary together
Companies that have a sales team and pay both fixed salaries and commissions usually adopt this model.
In this case, the commission can be fixed, that is, pre-established based on the value of each sale, or variable, since it changes according to the goals determined by the company.
Let's look at an example of a fixed commission. If an employee sells 10 products, he earns 5% commission. If he sells more, the commission percentage increases to a certain amount .
In the case of variable commissions, they increase or decrease according to the product price, the payment method and the credit period granted, among other factors.
The commission and sales scheme is highly recommended as it shows the worker that their work is important, and not just because of the sales they make each month.
In addition to closing deals, the sales team has many other responsibilities, such as:
sales record in CRM ;
sending emails with a commercial proposal ;
cold calling to generate new business opportunities, etc.
Pure Commission
Here, all the money the employee earns comes from commissions on completed sales .
This scheme can be applied as long as it is legal in the country in which the company operates. In Mexico, for example, if the salesperson works on a permanent basis for a company, he or she is entitled to a guaranteed minimum wage , in case he or she does not earn enough commissions.
The benefit of this sales commission model is that salespeople will strive to sell as much as they can. If they are successful, your business wins as well.
If not, your maximum expense will be one minimum wage for each, if applicable (as in Mexico).
However, if you choose this model, you must ensure that commission-only employees have all the tools and resources necessary to sell in high volumes. This requires investment in technology and training programs.
