Sales Compensation Plan: Know Your Worth

Don't take their word for it.
Know how to qualify your earnings!

Let's be honest. You wouldn't be in sales if making money was not high on your priority list. After all, sales jobs are tough and a lot of people cannot handle the long hours and stress that you have become accustomed to. Your ability to do a job that others cannot makes you a highly sought after employee and that's why you are highly compensated. But how many of you have accepted a sales position with expectations of making a specific amount of money and quickly realized that the numbers just didn't add up. Even if you exceeded your target goals, you would not make the money that you were told you would when you accepted the job. What a de-motivator! Unfortunately, most sales people experience this discrepancy at least once in their career. It's a hard lesson to learn, but the bottom line is this – do not accept a sales position unless you have a solid understanding of how you will make your money!

Below are some tips to help you avoid compensation pitfalls and qualify the realistic earning potential of a job before you accept the position:

1. Does 2+2=4? I'm hoping you all answered 'yes'! Then let's start with some qualifying questions you should ask:

What is the average size sale? $10K

What is the sales cycle? 3 months

What will my quota be? $30K per month

How does the deal get paid out to me? You will get paid 10% on total revenue.

Are there kickers for exceeding my goal? You will get paid 12% on revenue over $360K.

Now let's do the math! Your goal is to close 3 deals per month ($10K x 3 deals = $30K). Your annual goal is $360K. Since you are paid 10% on total revenue, if you are 100% of your sales goal of $360K, your commissions will equal $36K for the year. Add your base pay to this and you will get your annual earnings. If you go over your goal, you will receive the extra 2% elevating your earnings. The reason you want to ask sales cycle is that you will need to take into consideration what month you start working and what the ramp up time will be. Get clarification on how this will impact first year earnings.

2. Most sales organizations incorporate sales contests, spiffs, President's Club and other awards to top sales performers. These can also add to your earnings. Some organizations are more generous than others when it comes to motivating their teams to exceed their goals. You will know by the manager's reaction to this question whether the company offers them or not. If they do, the manager will be very excited to share them with you.

3. Ask to speak to two sales reps. I would ask for a recent hire and a tenured rep. This will give you the opportunity to ask candid questions about their experience, earning ability and gauge how realistic the sales goals are. Ask the reps if they, and the team, reached the sales goal last year. I think you will get a gut feeling if the reps are being open and honest with you. If they are hesitant in answering or the reps give conflicting information that should raise a red flag.

4. Get the compensation plan in writing and make sure it is not written in hieroglyphics! There are many comp plans that are very confusing to understand. My opinion is this: if a comp plan is very complicated then there is a reason it is written that way and it is not to your benefit. Be careful, ask questions, trust your gut instinct: the emperor might really be naked!

These pointers are basic, but can rescue you from a bad career decision. Ask questions!!Do not rush into accepting an offer if there is any hesitation on your part.