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Bonus structure for sales team

Your thoughts on implementing a bonus structure for sales team

I work as an FC for a small, growing company in the access control industry (locking mechanism wholesale/retail). I am reviewing the current performance related salary/bonus structures currently in place. I feel that a little guidance from the AW community would be helpful to me here as I am sure that some of you guys have considerable experience in implementing these types of remueration schemes for sales orientated people.

What info would be useful to me: I would like to know if there is a frequently used standard bonus structure, how this would work and how I would go about setting out the parameters.

Any pointers on this would be very appreciated.

RA

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By DJKL
02nd Apr 2019 13:57

Scheme re individual performance or group scheme that is allocated to a sales team?

Not that I do anything these days but when I worked for a retailer we ran the latter for each shop.

Other point- what do you do for those not directly involved in sales?

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to DJKL
02nd Apr 2019 14:39

Thanks DJKL. For non-sales, we have salaries with a small company performance related bonus.

Re sales team, I would like to ensure that we have a scheme in place which rewards delivery and encourages talented, driven sales people, without over egging beyond a possible market rate.

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By DJKL
to readingaccountant
02nd Apr 2019 14:54

For our ten shops we had prior year same month comparatives to use to set targets, each shop (selling unit) got set a target for a month and the "shop" earned a percentage of all sales over that target, paid monthly in arrears via payroll. The bonus for a shop was split in prearranged percentages, manageress earned x%, Assistant Manageress y%, Sales assistant split balance based on hours worked (as not all full time)

We only had (apart from myself/directors) one member of staff outwith the shops, our warehouse/delivery chap, hate to say cannot for the life of me remember what system we used to reward him.(Well it was 1990-1994, a fair time ago)

Re myself and the directors, ours were more adhoc and needed consultation with a 50% external shareholder, they tended to more consider the profits the overall business had generated.

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02nd Apr 2019 15:40

Two things to include

- pay on sales made, not orders taken. Better still, pay when the customer pays. Or have a mechanism to clawback if customer doesn't pay;

- don't make it all directly related to sales - include an element that incentivises good behaviours (eg collaboration with colleagues, customer satisfaction). This could be a multiplier - say +/- 20% according to performance against the criteria.

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02nd Apr 2019 17:07

Personal bonus to reward the high achievers combined with a team bonus to stop them [***] each other over.

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02nd Apr 2019 17:12

My thoughts are that this is a matter for the HR department and Sales Director. They come up with a proposal and then ask the finance team to cost it.

I have never ever worked anywhere where the finance department created remuneration practice.

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By DJKL
to Accountant A
02nd Apr 2019 18:07

In smaller companies you may also make the tea and order the toilet rolls. When younger I also carted 8x4 sheets of plasterboard up stairs (We had 500 delivered over 2 days!!!!!!) as part of my job

I need a very long hat rack in my room so that I can , like Mr Benn, change hats as needed:

Head of Finance
Head of Administration
Head of HR
Head of Purchasing
Chief person to colour in plans re property titles
Head of Legal Services
Sometimes Tea and Coffeee Maker with specialist roving biscuit procurement role.
Head chauffeur when owners/directors visit

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to DJKL
02nd Apr 2019 20:29

DJKL wrote:

In smaller companies you may also make the tea and order the toilet rolls.

Indeed but the OP previously posted about working for some multi-million £ concern.

Maybe the HR department are busy doing the accounts ....

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to Accountant A
02nd Apr 2019 20:28

Duplicate

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04th Apr 2019 10:13

Many years ago in the car sales business, salesmen were given a low wage and then commission. Every year the boss would look at this structure and change it to pay out less. The good salesmen (they were men in those days) used to work it out, realise they would lose so sell in a different way in order to keep the status quo.
I would say have a basic, then reward by time at company, reward by commission (this will include individual performance. Then a bonus if the company has done well. Do not change the format once you have decided.

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04th Apr 2019 12:34

Make sure you know the gross profit margin on the products and how this compares to staff costs, to determine what can be afforded.

Think about bonuses calculated based on GP to control freebies/sales incentives.

Depending on the working environment, team bonuses are a good idea.

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04th Apr 2019 13:23

I have a couple of thoughts on this, from harsh practical experience.

First; if possible, let the Sales Director sign off on the scheme, but don't let him or her create it. They have a habit of thinking first about how to give as much as possible to their team to make them happy and give himself the minimum admin and hassle (as well as the biggest possible slice to themselves of tean-based commission), without thinking also of what is good for the business.

Second; make the commission based on profit not revenue. I've seen far too many sales staff gaining huge commissions from selling at a loss because they care about their pocket rather than whether the work is good for the company. Ideally design a scheme which operates over a period of time to help generate long term repeat customers.

Team bonuses are great, as are incentives for leads generated by staff in other roles (what tyhe sales staff see as "just another cold call" can often be a friend or family member, with an implied duty of trust for one of your staff).

Most important of all, always calculate the overall cost of bonuses in relation to profitability of the business as a whole, and model some extreme cases - what does it do to cashflow and profitability if the star sales person comes in with a massive order, and could the business also afford any additional cashflow needed to deliver the order ?

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