This is a guest blog written by Graham Collins, Chief of Staff and Interim Head of Sales, at QuotaPath, a sales compensation and commission tracking software.
Not all companies flounder during a market downturn.
Some actually thrive. And, those that do share these in common: a steadfast commitment to all stakeholders and a culture that marries innovation and risk-taking with a focus on efficiency and productivity.
Your outbound sales motion can drive the former, and focusing on key profitability business metrics, such as gross revenue retention (GRR) and gross margin, can support the latter.
What’s more, your sales compensation strategy can steer both.
On the outbound side, for instance, you can motivate your sales reps to amplify your message and commitment to stakeholders by offering lucrative incentives for outbound-generated sales opportunities. At the same time, you can align your reps around gross margin by rewarding bonuses or SPIFs on full-price contracts.
Those are just a few examples.
For 10 comp plan best practices to fuel outbound efforts and rally your reps around metrics like cash flow, GRR, customer acquisition cost (CAC), and more, read on.
10. Boost gross margin: Use decelerators on deals that threaten gross margin.
Incentivize your sellers to focus on deals that have a faster onboarding process by paying a lower commission rate on deals that require significant technical assistance and additional resources. This will help you to:
Accelerate your sales cycle. By focusing on deals with a faster onboarding process, you can shorten your sales cycle and close deals more quickly. This will help you to generate more revenue and meet your sales goals.
Reduce your costs. Deals that require significant technical assistance and additional resources can be more expensive to close. By paying a lower commission rate on these deals, you can deter your reps from pushing deals that threaten your costs and, as a result, improve your profitability.
9. Address high CAC: Award a bonus or higher commission rate on non-discounted deals.
If you are looking to increase revenue and reduce CAC (the amount of money it costs a company to acquire a new customer), consider offering a SPIF or bonus to motivate your reps to sell full-priced deals.
8. Increase outbound efforts: Reward higher commissions for outbound-generated leads.
The key here is to avoid lowering the rate for closing inbound deals and instead focus on paying a slightly higher commission percentage for outbound deals.
If you go this route, make sure to have clear definitions of what an “outbound opportunity” is. Aim for tight attribution to avoid murky ownership of the opportunity and have clear rules of engagement before rolling out the bonus to the team.
For example, think about whether or not the opportunity qualifies as outbound if a rep reaches out to a closed/loss deal from 7 months ago. Set time parameters and specifics to avoid confusion.
7. Promote GRR: Comp on highest onboarding NPS scores.
These tactics aren’t just applicable to your sales reps. To incentivize your onboarding and customer success teams to deliver implementation experiences that set your customers up for no-brainer renewals, comp on perfect or high NPS scores.
You can do this by offering bonuses or SPIFs to reps who earn the highest NPS scores following onboarding.
6. Secure cash flow: Switch commission payout eligibility to the invoice payment.
More than 60% of companies pay rep commissions upon the deal closing versus 20% that pay at the time of invoice payment (2023 Sales Compensation Trends).
If you’re worried your customers might not pay their first invoice, pay your teams’ commissions following the first invoice payment. This will help quality control the deals your team is pushing and might even nudge your reps to lend a hand in the collections process.
For the pros and cons of each, check out this article featuring five RevOps leaders, When should you set your sales commission payment terms for?
5. Bolster outbound demos: Pay a bonus on demos set.
Get your reps fired up to book outbound demos by giving a “per demo set” bonus, similar to an SDR compensation plan that pays a flat bonus for demos completed.
You could also offer a bonus for any outbound effort tied to specific targets, like X number of calls, emails, or meetings held per week or month.
4. Drive GRR: Incentivize early renewals.
To solve for GRR, encourage your Account Managers to bring in renewals early.
Early renewals help GRR by reducing the risk of churns. Because when customers renew early, they signal that they are happy with your product or service and that they are likely to continue using it in the future.
Additionally, early renewals can help to improve your cash flow. When customers renew early, they essentially give you a loan of their subscription fees. This can help you to improve your cash flow and make it easier to meet your financial obligations.
In practice, you could offer a fixed bonus rate of $150 for renewals that close 90 days ahead of schedule and $100 for those that close 60 days in advance.
3. Lower CAC: Up commission rates on ICP deals
Focus your sales efforts on the most likely prospect to convert to a customer by paying a higher commission rate on deals that close with ideal customer profiles (ICP).
This can save you time and money, as you will not be wasting resources on leads that are not likely to buy. Plus, it’ll improve your GRR, since your ICPs are your customers most likely to renew.
To tie this to outbound efforts, you could also add a kicker for outbound-generated deals that fit within your ICP.
2. Motivate outbound efforts: Create a team incentive.
To encourage collaboration and teamwork, offer a team-based incentive that’s based on outbound sales. For example, the entire team could receive a bonus or other rewards if they collectively achieve a certain outbound target.
Also, don’t assume you know what your team wants. Ask them what would motivate them and what they’d like for achieving the goal. Then rally your team to meet the target and celebrate accordingly.
1. Push GRR: Pay higher on multi-year deals and renewals.
Multi-year contracts are your fastest ticket to predictable revenue. To galvanize your team to ask for longer contracts on renewals and new business, increase your commission rates, or offer bonuses for any contract of two years or longer.
Be sure to make the increase in rates is enough to motivate your sellers to actually ask for the longer terms. Consider your average deal size and associated commissions and up your rate from there. You can play around and experiment with interactive comp plan templates, like this one here.
Sales compensation tactics can be a powerful tool for driving your outbound sales motion and key business metrics. By aligning your sales team's compensation with your overall business goals, you can motivate them to focus on the activities that will have the biggest impact.
We wrap up with a few tips for designing a sales compensation plan that will drive results:
Make sure your plan is aligned with your overall business goals. What are you trying to achieve with your sales team? Are you looking to increase revenue, market share, or customer satisfaction? Once you know your goals, you can design a compensation plan that will help you achieve them.
Incentivize the right behaviors. Not all sales activities are created equal. Some activities, such as prospecting and cold calling, are essential for generating new business, while others, such as closing deals, are more important for driving revenue. Make sure your compensation plan incentivizes the right behaviors by rewarding your sales team for the activities that are most important to your business.
Create competitive plans. In order to attract and retain top talent, you need to offer a competitive sales compensation plan. This means setting fair and realistic on-target earnings, as well as commission rates that are high enough to motivate your sales team but not so high that they eat into your profits.
Keep your plan simple. The more complex your sales compensation plan, the more difficult it will be for your sales team to understand and follow. Keep your plan simple by using clear language and avoiding complicated formulas.
Need additional help with your sales compensation strategy and management? Sign up for a free 30-day trial with QuotaPath to build plans and automate commission tracking, or schedule time to chat with our team directly.