Should You Take That Job Offer? 13 Ways to Evaluate a Sales Compensation Plan

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Teanna Spence
Teanna Spence




Right now, there are 173,000 sales rep jobs on Indeed. You’ll find nearly 150,000 listings on Glassdoor. Meanwhile LinkedIn features 35,000 open positions for sales representatives, with base salaries ranging from $40K to $200K.

So if you’re a sales professional who’s working with one foot out the door, it shouldn’t be difficult to find new job opportunities. The hard part is getting your hands on comparative data that really matters: A fully detailed sales compensation plan.

Companies that employ sales professionals should always provide comprehensive documentation surrounding base pay, commissions, bonuses, etc. -- including when, why, how, and how much. This documentation, known as a sales compensation plan, should be transparent and accessible, and accompany your job offer.

However, it can be difficult to evaluate a sales compensation plan. What separates a good plan from a bad one?

In this post, discover the 13 sales compensation plan points you’ll want to dig into before choosing your next employer.

1) Commission Rates

One of the first things you’ll want to know -- especially if you’re a top performing sales rep -- is how commission rates are determined. You may want to avoid flat-rate plans, which pay the same rate regardless of what you sell and/or how much you sell. Give preference to companies that ramp commission levels (and keep you motivated) beyond X-level of sales.

If your prospective employer gives you a quota to sell different types of products or services, you should expect to see commission rate differences that align with the different quotas. The one that pays the most is where they want you to spend your time. Be sure the rate accounts for the extra sales time and effort needed.

2) Earnings During the Training Period

A good employer won’t expect you to be on pace with your sales team colleagues by the end of month one. Check to see if your job offer includes a guarantee or a recoverable draw to normalize your earnings during the initial training period. Remember that you have to pay back the recoverable draw, but get to keep the guarantee.

3) Quota Setting

Do you know what your sales quota will be? Do you know if that figure has gone up or down since the last person occupied this role? Does it take the ramp-up time into account? Do you know what percentage of sales reps at the company are performing at or above quota? Does your prospective employer even know? An aggressive quota is clearly important for the company’s livelihood, but it should also be realistic. Avoid companies that pull sales goals out of thin air.

4) Sales Crediting

Lots of job-seeking sales professionals miss this little “detail,” which is actually pretty major. At what point does the company consider a sale to be official, from an earnings perspective? Will you be credited when a contract is signed, or when the cash actually comes in the door? In the second case, you might be waiting considerably longer to receive your commission check.

5) Sale Value Measurement

It’s very difficult to plan a sales strategy if you can’t quantify prospective sales values on your own. Some companies use complex formulas to assign final values to sales, in terms of commission payouts. Ask how sale value measurement works, and if you’ll be reliant on accounting, as you wait to see how margins/profits affect your actual numbers.

6) Performance Tracking Tools

Does the company offer an online portal for sales tracking? If not, are you expected to guess or email an administrator every time you need to check your pace against quota?

7) Earnings Projection Tools

How easily will you be able to project your earnings, given the opportunities in your pipeline? Some companies now provide “what if” sales projection technology that calculates potential commission earnings based on pipeline figures.

8) Commission Recovery Provisions

Unfortunately for sales reps, most sales are not final in today’s marketplace. When comparing sales job offers, you need to know what will happen at each company if there are changes to your closed deals. If several months have gone by, can the company still reclaim commission earned? Will the recovered amount be automatically deducted from your next paycheck?

9) Commission Payment

To protect cash flow balances, some companies withhold commission payments until the cash is received. Either directly or indirectly, these companies bring sales reps into the cash collection process, which naturally affects selling time (and potentially sales/customer relationships). Are you comfortable leaving your earnings in the hands of accounts payable and accounts receivable departments? On the other hand, are you willing to use some of your valuable sales minutes to be an unpaid agent in sales collection efforts?

10) Commission Thresholds

Some companies don’t even offer sales commissions below a certain level of sales. Be sure you understand any commission threshold requirements, and consider how feasible it would be to live on base salary alone.

11) Earning Caps

Does the base pay and commission rate sound too good to be true? Look out for earning caps, a point at which you’ll stop earning commissions on your sales. Be very leery if you find them. Companies that institute earning caps tend to be less established or otherwise vulnerable to rapid growth. Unless the base offer is considerable, you don’t want to be limited by your employer’s ability to accommodate new business.

12) Withholding Provisions

Commissions are designed to reward you for the sales activities you can control. Yet some companies withhold payouts based on events you can’t control -- like whether they reach their revenue or profit goals. I give these compensation plans two thumbs down, and you should too.

13) Sales Commission Software

It might sound odd, but knowing about your future employer’s sales commission software is every bit as important as knowing about its CRM software. You shouldn’t have to wonder how commission checks are calculated, or worry about formula errors every time you make a sale. You should expect detailed statements, transparent policies, and reasonable quotas based on historical performance. Sales commission software makes it easy for companies to provide these essentials. Employers who still use spreadsheets and ad-hoc Word documents are behind the curve. Proceed with caution … and expect to do your own shadow accounting if you sign on with one of them.

Editor's note: This post originally appeared on Cornerstone Software's blog, and is republished here with permission. 

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Topics: Sales Jobs

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