Schum, a Senior Consultant at Compensation Resources, Inc. in Upper Saddle River, NJ offered his tips for sales compensation design at a recent webinar sponsored by BLR/HRhero.
Sales Compensation Model
Schum offers an example of the true cost of a salesperson and then charts out how that might translate into a bonus program.
Cost of Salesperson
| Base Salary |
$60,000
|
| Benefits (35% of Salary) |
$21,000
|
| T&E ($2,000/month) |
$24,000
|
| Car Allowance ($600/month) |
$7,200
|
| Overhead/Management | |
| Allocation ($3,000/month) |
$36,000
|
| Sales Support ($2,000/month) |
$24,000
|
| Total Cost: |
$172,200
|
| Average Margin: 10% | |
| Sales required to pay off cost: |
$1,722,000
|
| Sales as multiple of Salary: |
28.7
|
To set up a bonus program that increases the percentage of bonus as sales increase, Schum sets up the grid below. This salesperson first becomes bonusable at $1,800,000, a figure somewhat above the “minimum sales required” number from above.
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The first column below indicates the multiple of salary corresponding to dollar value of sales in the second column. The increments of sales go up by $300,000 at a time. The commission column shows what the salesperson gets from that $300,000 and the Net column shows what the company keeps of the $300,000.
The figures in the last two columns are cumulative; for example, if sales were $2,399,999, the commission would be $7,500 and the Net to company would be $592,498.
|
Sales Range mult. of salary) |
Revenue Range |
% Comm. |
$ Comm. (at Max) |
Net to Co. ( (at Max) |
|
29.9 or less |
< $1,800,000 |
0.0% |
||
|
30.0-34.9 |
$1,800,000- $2,099,999 |
1.0% |
$3,000 |
$296,999 |
|
35.0-39.9 |
$2,100,000- $2,399,999 |
1.5% |
$4,500 |
$295,499 |
|
40.0-44.9 |
$2,400,000- $2,699,999 |
2.0% |
$6,000 |
$293,999 |
|
45.0-49.9 |
$2,700,000- $2,999,999 |
2.5% |
$7,500 |
$292,499 |
|
50.0-54.9 |
$3,000,000- $3,299,999 |
3.0% |
$9,000 |
$290,999 |
|
55.0-59.9 |
$3,300,000- $3,599,999 |
3.5% |
$10,500 |
$289,499 |
|
60.0 or greater |
$3,600,000+ |
4.0% |
$10,500 and up |
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