How to Develop a Sales Incentive Plan

by Don Simkovich; Updated September 26, 2017
Salesman in eyeglasses store

Create an atmosphere and expectation among sales professionals that rewards will occur when goals are met and initiative is taken. Implement a sales incentive plan that compensates individual salespeople as well as the support staff who must work with them. Applaud sales volume in addition to providing recognition for those who initiate and create the best practices that benefit the company as a whole.

Items you will need

  • Agreements with sales team
  • Sales goals
  • Fact sheet, incentives
  • Profitability report
  • Sales software
  • Reports
  • Incentives, non-cash (optional)

Cash Incentives

Step 1

Form an internal team to define the sales goals that will achieve corporate profitability. Establish a base sales pay during a specified training period. Consultant David Berger explains, a cross-functional team should develop a sales plan and incentives that include “base salary ranges, a mix of base salary and incentive earnings, incentive earnings only, and total cash compensation based upon measurable business results. The plan you build should meet all of your company's needs and have the appropriate reporting mechanisms to track results and link to a commission-accounting system.”

Step 2

Select sales targets for both individual salespeople and sales teams for companies large enough to have territories and areas. Either provide salespeople with a proven structure to achieve their goals, or ask them for a brief, written plan on how they will achieve their targets and earnings.

Step 3

Establish fast-start incentives to reward salespeople who reach a specified amount of sales in one quarter after training. Create incentives for support staff as well, who assist the salespeople in earning more and winning more accounts. “If you view your compensation plan as a motivational tool . . . you’ll be developing an instrument to increase your employee’s performance,” writes business authors Eric Tyson and Jim Schell in Small Business for Dummies.

Step 4

Initiate a separate compensation plan to boost sales during normal cyclical downturns, or if a sales slump hits the company whether on a local, regional or national scale.

Step 5

Pay salespeople in the same way as everyone else in the company to create an overall sense of team. Business owner Norm Brodsky, writing in a past issue of Inc magazine suggests adjusting the pay based on individual contributions with "a salary that is reviewed and adjusted annually, based on the performance of the company and the contributions of the individual."

Contests and Recognition

Step 1

Reward salespeople for non-product achievements, such as generating the most leads in a month, or setting the most appointments. Send press releases to local newspapers, highlighting the number of sales or other important information.

Step 2

Hold contests to see who creates the most effective lead generation or sales presentation idea. Provide gift certificates to local restaurants or “weekend getaways for two” as alternatives to cash-only incentives.

Step 3

Interview sales people who reach their goals for articles on the company Website or newsletter. Provide “thank you” plaques located prominently in the corporate offices, and thank the support staff for their work as well.

Tips

  • Set performance expectations with salespeople. Provide cash and non-cash incentives. Recognize efforts among support staff.

Warnings

  • Do not demean or belittle salespeople. Do not let under-performers continue without assistance.

About the Author

Don Simkovich writes Southern California travel articles and news pieces for business professionals; to date his writing has expanded the online presence of local businesses. Simkovich attended the University of Pittsburgh, has a Master of Arts in communication management from the University of Southern California. His writing has appeared online in WSJ, USA Today and Desert Publications.

Photo Credits

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