HARDISON’S TIPS – DECEMBER 28, 2021 – Creating a Sales Process
Component 2: Sales Compensation Plans
Ideally, a compensation plan should encourage your salespeople to perform at their best while still making sure that the goals they need to hit are realistically within reach. In reality, these plans are often created by leaders who haven’t personally dealt with compensation tied to performance, so they don’t always understand how salespeople think and behave.
This results in plans that either favor base salary too heavily or commission too heavily. On both ends, these sales compensation plans can fail to drive the right behaviors — and sometimes even encourage the wrong ones.
Meanwhile, a 50-50 sales compensation plan (i.e., a salesperson’s compensation is based 50% on salary and 50% on commission or bonuses) can provide the right level of motivation and security. A compensation plan should be easy to understand and based on behavior instead of specific contracts or tenure. Here are a few things to keep in mind when structuring a sales compensation plan:
- Decide what the optimum sales level needs to be.If you don’t know what you want, it’s going to be hard to create the right incentives. How much are you looking for, and when do you want these sales goals reached? What kind of revenue mix do you want? Are you looking at it by product, customer type, or some other metric? These are questions you need to answer before you can create a proper plan.
- Make sure sales reps can earn their desired income in the increments you want.The compensation structure you create should depend on how much of each revenue stream you want to bring in. If you want reps to generate more new customers, for instance, then the commission percentage should be higher for those than what they receive for existing customers.
- Explain what your plan is.One deceptively simple obstacle to making a compensation plan effective is making sure your sales reps understand how it works. A good sign of a well-written plan is whether it’s easily understood. If you find yourself struggling to explain it or fielding quite a few questions, that probably suggests you need to take another pass at it.
Component 3: Result Tracking
The previous two components of a sales plan can largely be approached as before — just with some modifications. However, the way many sales organizations track results (i.e., by spreadsheet) needs a serious overhaul. Spreadsheets aren’t built to handle modern sales objectives and needs.
With spreadsheets, real-time collaboration is tricky at best and disastrous at worst. Even with a cloud-based solution like Google Sheets, having multiple users updating information simultaneously can lead to a variety of data conflicts.
More importantly, spreadsheets are passive rather than active. Once the data is entered into a spreadsheet, it just sits there; it’s not analyzed or spun off into reports that can be used later. There’s no depth to a spreadsheet, which can make it hard to spot issues or create game plans out of the information stored there. Instead, sales organizations should consider onboarding a CRM to track results. A CRM can also manage a variety of other useful tasks, including lead management, workflow automation, and analytics.
Most modern CRMs are accessible from any device and updated in real time, which makes them significantly more suited to digital-first sales teams. This might explain why, in 2019, CRM use increased from 56% to 74%. What’s more, 74% of CRM users said the tool offered improved access to buyer data. In short, CRMs are more than just a pandemic convenience.
If you’re still using spreadsheets to track results, it’s past time to make the change to a CRM. If you haven’t yet because you’re worried about how best to implement a CRM into your current sales infrastructure, here are a few best practices to keep in mind:
- Define your vision. A CRM can do more than just replace spreadsheets, but you won’t get the most out of your investment unless you have an idea of what you want it to do. Outline your sales objectives and overall vision, researching how a CRM can help you reach your goals. This will give you a much better idea of where a CRM fits into your current processes — and how it can improve them.
- Identify buyer profiles. Do you know the buyer personas of your target customers? Having a clear idea of who your customers are and what they need is important if you want to use a CRM to help create a buyer-centric sales process. Before you commit to a CRM, you should have defined, detailed profiles of your ideal customers to help you understand exactly what you need.
- Map out the buyer’s journey. At this point, you already know how important the customer journey is to your sales plans and actions. It’s also important when implementing a CRM. Plot out your entire buyer’s journey, if you can, asking yourself what customers’ goals are each step of the way, who will interact with them during each stage, and how you can improve each engagement.
- Integrate your data. A CRM shouldn’t just be integrated into your sales infrastructure — it should be integrated with your data. Modern CRMs make it possible to not only collaborate with your sales reps in real time but also to communicate with various data sources and organizations. This is one of the key ways a CRM is a more effective and efficient alternative to a spreadsheet.
Component 4: Sales Forecasting
Traditionally, sales organizations have based future sales on past performance. While learning from experience is important, using past sales numbers as the key element of sales forecasting is a good way to remain stagnant. Customer needs continue to change rapidly at the moment, so basing what you expect for the future on what you had in the past won’t get you where you need to be. Instead, a robust sales infrastructure should have metrics in place that can help companies plan for the present and the future.
Of course, that probably sounds easier said than done. How do you determine future sales using metrics other than by looking at past sales? If, as one survey found, 86% of reps don’t know what is supposed to happen at every step of the sales process, how can you make any consistent projections for the future? Let’s look at three strategies for getting a more realistic forecast out of your data.
- Determine your average sales cycle.Rather than simply looking at sales, use your historical data to define the average length of each sales cycle. Once you’ve determined how long it takes a prospect to become a buyer, you can better understand how long it will take for an action to turn into a sale.
- Identify your sales process steps.Each step in the sales process comes with different needs, goals, and probabilities of closure. Looking at your historical closing rates will help you determine those percentages for each step of the sales cycle. Figure out which parts of the cycle are most likely to turn into sales, tracking each opportunity in your CRM.
- Encourage realistic forecasting.Your forecasts shouldn’t be overly optimistic or pessimistic. Your sales team should know the top priority is delivering accurate information into the CRM so you can get realistic predictions from the system. Future sales shouldn’t be based on an individual sales rep’s viewpoint — everything should be based on data.