No business can succeed and thrive without sales and talented people who make those sales happen. A great sales force is hard to find and even harder to retain, so you will need to have a superb sales commission plan in place to keep your best workers around and eternally loyal. Sales commission is an additional element to the overall sales compensation scheme where a sales professional, on top of their fixed monthly remuneration, is rewarded financially for achieving their sales targets.
To better appreciate the importance of sales commission, it helps to look at what can happen if the company were to only pay its salespeople a base salary. Firstly, your agents will stop trying to put in more effort to improve their performance; instead, they will take longer breaks and seek ways to delegate duties to someone else. Secondly, your customer relationships will suffer, too, as your reps will not be interested in making the customer happy with your products or services. They won’t care whether the client stays or goes because that does not affect the amount they are paid at the end of the month. All of these will contribute to making your business unprofitable and uncompetitive.
Types of Sales Commission Structures
Now that you can see why sales commissions are an integral part of your sales compensation scheme, let us look closer at some of the most common sales commission structures found in this business:
- Straight commission: does not involve a base salary – the salesperson only receives an agreed amount of commission for the business they generate.
- Base salary + commission: consists of a fixed amount of basic salary plus bonus earnings dependent on the agent’s performance.
- Tiered commission: the agent’s commission increases if they achieve and exceed their set target figures. The more target milestones they hit, the higher the commission.
- Revenue commission: the revenue brought in by the sales rep is multiplied by the fixed commission rate.
- Gross commission: sales revenues made by the rep minus certain expenses are multiplied by the fixed commission rate.
- Commission draw: involves an advanced payout paid from expected future earnings.
There are formulas you can use to calculate your sales commission amount manually. However, you can also automate this process with the help of an advanced sales commission calculator found at https://reply.io/sales-commission-calculator/. Visit the Reply.io official website and determine the commission amount you will get in a few quick clicks!