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Here's another option to consider: While royalties maybe paid monthly, we like to calculate the commission based upon an annual revenue stream, then pay 50 percent of the commission upon the initial order or first payment. After six months, we would then pay the remaining 50 percent of the commission, and then at the "renewal" of the second year, we pay one final compensation payment.
As an example: If we were to pay a 12 percent commission rate, we would pay 6 percent at the time of the order, 6 percent at six months and on the renewal, we may 6 percent or a lower rate of 4 percent. This allows the salesperson to be involved in the success of the implementation, focused on the renewal and yet not create an annuity compensation plan for the salesperson to build up. It is also easier on your administration department.
Certainly every partner may have different situations depending on maturity or size of the organization, geographic opportunity and mix of current services or product offerings. Thinking through all the variables for compensating your sales team will help keep sales efforts aligned with your firm's strategic goals for the cloud.
Ken Thoreson is managing director of the Acumen Management Group Ltd., a North American consulting organization focused on improving sales management functions within growing and transitional organizations. He can be reached via Ken@AcumenMgmt.com or www.AcumenManagement.com. You could also read more on his blog: www.YourSalesManagementGuru.com.
PUBLISHED MARCH 5, 2013
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