Last month we introduced this series, which aims to boost your sales with scrambled eggs. Scrambled eggs? Yup. You can read our first installment with a complete explanation here; but, basically, we think sales and operations shouldn’t be independent of one another. We suggest taking basic operational structure and principles and mixing them into your selling approach to fry up a more appetizing, protein-rich, top line.
Our first strategic recommendation had to do with hiring. And, now that we’ve helped you get the right people in place, we’re going to tell you what we think about compensating them. Because we all know the truth … MONEY MATTERS!
Strategic Opportunity #2: Compensate More Intentionally
Whether you have been fortunate enough to bring on the most motivated people; or, you’re committed to making the best of your existing team, you must keep them hungry, and make them accountable. How can you do this? By adjusting the commission structure for your salespeople! We recommend doing this in two key ways: on dollars earned and dollars paid.
If your commissions are centered only on gross sales, or if you’re paying salary plus straight margin, then you could be missing the mark. Satisfactory volume can be achieved simply by maintaining existing, or grandfathered, accounts and standard orders; but, that does not steadily increase your company’s top line over time nor does it help you create business longevity. It can make you dependent on the same core businesses; and, you’ll feel the impact of their natural ebbs and flows more than you should. Yet, one Net New account, or additional product order from an existing customer, could bring in thousands of dollars per month or year. It can also provide more depth to your business.
It may seem small, but merely getting in a company’s payables system is a great sales goal. Once you’re in, they’re more likely to call on you in the future; and, over time, it can become a big account. Another goal could be getting on an approved vendor listing.
If organic growth is more appropriate or appealing for you, then another excellent goal might be to focus on selling more of one or two certain products. Your aim might be to shift existing purchases of those items away from other vendors to diversify, while expanding orders from existing customers. Regardless of the goals you choose, incentivizing your salespeople to pursue new business can pay off for both of you.
One operational change to achieve this growth is to develop a routine promotional program that becomes a process for “feeding” your salespeople. The word “routine” is key here, as that’s what makes it transition from isolated sales tactics into strategic (and standard) operational procedure.
The particular promotions that work for you will be dependent on your customers and your salespeople; but, once you figure out what makes each of them tick, you can create spiffs with that in mind. It may be a “deal of the day” format, an individual product focus, special terms on a short-term basis for new customers, or all of the above. As long as you’re consistently providing a reason for your salespeople to talk with new (and existing) accounts, you’ll be approaching sales with a more structured, operational mindset.
Another operational shift is variable pay. If you make commissions variable, weighted or scaled, (not only by volume, but by age of account) you could motivate your salespeople to bring in more business. In comparing it to an operational principle, think of it as buying 60 days of supply versus automating Purchasing within Eclipse. In the old days, you would buy 60 days of demand for all items; but, with Eclipse you variably purchase items depending on their demand.
The same can be said for using a fixed percentage commission plan based on volume. It’s simple and familiar; but, it’s the method from days gone by. Using it probably isn’t going to produce the results you need. Applying a variable commission structure may seem more complex; but, as long as you invest some time up front, it will be much easier, and more fiscally beneficial, in the long-run.
To automate the payments, you can apply your desired variable commission structure to Eclipse’s settings. However, keep in mind that Eclipse can’t always accommodate these changes out of the box. Depending on what you have in mind, you may need a custom report to handle it for you.
When you’re ready to truly blur the lines between sales and operations, consider ‘paid when paid.’ It works exactly like it’s name; and, when you switch to it, salespeople are paid when the customers pay, rather than when they are invoiced. While this is a somewhat controversial and sensitive subject, there is no doubt that ‘paid when paid’ further engages salespeople in the business and holds them accountable for their sales. They become ingrained in the collections process; and, they retain their point-of-contact status with customers. This can improve cash flow because checks aren’t being cut to salespeople prematurely; and, a more invested party is involved in collecting payments. From a system perspective, Eclipse handles this process very well.
Now, we’d be lying if we said any of these transitions would be seamless for your salespeople. Even though this kind of change has the potential to garner them (and you) more income, and it will motivate them to sell more, it is still change. And, it’s change that impacts paychecks. Nobody likes it when you mess with their money. So, we suggest lots of lead time, over-communication, and training to help them understand and prepare for the change. For example, typically ‘paid when paid’ works best when there is a six-month transition period to allow for adequate preparation and all commissions to cycle through.
At the end of the day, you have to do what’s best for your organization; and, management has to have their eyes on the long-term health and profitability of the company. But, it doesn’t have to be at all costs; and, it doesn’t always have to sacrifice people’s feelings or the food on their plates. If you need help making any kind of transition, Zerion always is available for consulting, custom reports and more.