How do I know when it’s time to update my sales-compensation plan?

Answer the following questions to help you decide if you need to tinker with your sales-compensation plan:

1. Has it been three years or more since you last made significant changes to the plan?
2. Does the total compensation for your sales force cost you more than 25 percent of gross profit? (Note: Consult your last year-end Profit and Loss Statement. Gross profit is the difference between gross sales revenues and the cost of goods sold.)
3. If the sales force costs you 25 percent or less, is the business still failing to achieve a satisfactory growth rate?
4. Are you facing more significant competition today than a few years ago?
5. Is there an inherent dichotomy between achievement of the business’s strategic goals and how much the sales force is rewarded? (Note: If your company does not have a written, published strategic plan, the answer to this question has to be “yes.”)
6. Do you believe you may not have the right salespeople in place today to ensure your company continues to be successful over the next three to five years?
7. Are you having a difficult time finding and hiring new salespeople who will contribute to the profitability of the business as quickly as you’d like?

If you answered “yes” to two or more of these questions, you would have good reason to consider a revision to your plan. More than four answers in the affirmative would be an indication your sales-compensation plan needs a major makeover.

—Your Personal Business Trainer