How to compensate your first sales

Michael Humblet — part 2/5

How to compensate your first sales

We interviewed Michael Humblet, former VP of Sales of one of the largest growing startups in Europe, on how to compensate your first sales rep.

Should I work with a commission?

Clearly, you should because you want your sales rep to be motivated to make more money, to close more deals.

How much you pay fixed versus variable… it depends. The typical hunter would be between 50 to 60 percent fixed, the rest variable. A more farmer type of person would be 60 to 70 percent fixed. The rest would be variable.

On what base do I pay commission?

You need to pay a commission on what you want, what the effect is that you want. Either it is going to be revenue or it is going to be margin. As you just start, i would advise you on revenue and not to go for margins straightaway.

Should I use commissions from day one?

Yes, you should, but you have to do it a bit differently. That means that the sales cycle, if your sales cycle takes three months or six months, what you should do is, you should measure and pay a commission on how to get there. You would actually do it on a KPI like the amount of calls or the amount of visits. That’s how you start paying him and then you switch it to revenue or margin or whatever else you have.

What are the most important pitfalls?

One, you need to make your commission plan very simple and straightforward. You want your sales to be able to calculate how much commission he would get on a big deal. That will drive them and that will focus them to bigger amounts.

Two, a very important one, make the commission plan in such a way that if you hit above hundred percent you really get big money. I mean pay double commissions. You want to drive them towards going above hundred percent overachieving.

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