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4 Common Variables in Sales Commission

By October 20, 2020 No Comments

Variables in sales commissions differ as widely as the salespeople who work for any company. Anything from a salesperson’s location to the range of products they sell can impact how commissions are calculated.

Four sales team members lean on a table in a sales office discussing sales commission variables.

A wide array of variables may impact how your sales team earns commissions.

Determining which variables need to be considered in your organization’s sales commission plan can be intimidating. However it’s important to outline all the details and calculations that go into each commission cycle and clearly communicate that to your salespeople so they can be prepared to earn at their highest potential. And drive more revenue in the process.

Since we’ve been working with sales commissions for the last 15 years, we’ve seen a lot of these variables and how they work. To help sales organizations navigate the complexity of variables in sales commissions, we’ve outlined the most common elements that impact commission rates and earnings below.

But First:

It’s important to know your sales team. The elements that influence commission are the same ones you’ll find in your workforce. It’s important to know how your team sells and what motivates them. Your team may entirely consist of team players or you may have a few aggressive and endlessly driven sales stars who will excel as independent workers. Any of these qualities will help decide the variables that will best enhance a commission plan.

Additionally, setting reasonable on-target earnings will allow an organization to calculate how each variable will fit into the commission plan. Once that target exists, it’s easier to see how the entire puzzle comes together.

Common Sales Commission Variables

  • Product Margin: How much a company nets on the sale of a product often impacts the commission distributed on that sale. Occasionally organizations will reward higher rates on certain products that drive more revenue. This motivates salespeople to push products that earn more for the company as a whole.
  • Hierarchy: As salespeople move up the ladder and gain experience within an organization, their commission rate will evolve with them. Additionally, managers and other senior supervisors may earn additional incentives as a result of high performing members on their team. Rates for each of those positions will fluctuate from employee to employee as well as organization to organization.
  • Territory: The location of a salesperson matters when it comes to commissions. This is due to cost of living variances, local competition, the size of the market in the area, and the number of leads available. Organizations tend to consider on-target earnings based on territory and determine how commission will be paid as a result.
  • Time of Year: For organizations that experience seasonal demands, commission rates may change depending on the month, quarter, or another predetermined time frame as defined by the company. For instance, with products that see higher close rates toward the end of the year, an employee may have the opportunity to earn at a higher commission rate during slow sales periods.

Whatever variables fall into your sales commission plan, we can help you navigate them each and every cycle. Core’s tools can handle commission variables of any complexity and we’re happy to show you how our application can work for you and your team. Drop us a line or set up a free demo and we’ll walk you through the process personally.

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