Over the years, I’ve had numerous conversations with entrepreneurs, inventors, and companies seeking sales support (primarily in the German market). These discussions have revolved around various forms of collaboration, from business partnerships and freelance arrangements to full-time employment.
Through these interactions, I’ve noticed a common pitfall: a reluctance to offer competitive compensation. Companies often fail to recognize that when it comes to attracting top-performing salespeople, compensation is the most critical factor. Aligning sales success directly with compensation is essential, as it directly impacts your cash flow. Failing to do so will likely result in attracting mediocre talent at best.
Imagine a garden where you plant seeds but refuse to water them adequately. Just as a plant needs sufficient water to grow and flourish, a salesperson needs proper compensation to stay motivated and deliver outstanding results. If you deprive your sales team of the nourishment they need in the form of competitive pay and incentives, you’ll end up with a garden full of wilted, underperforming plants. On the other hand, by generously watering your garden and providing the right nutrients, you create an environment where your sales team can thrive, ultimately yielding a bountiful harvest for your company.
Aim for a compensation structure that rewards ambition and drive: uncapped, sky-high commissions that motivate your sales team to reach for the stars. Let’s say you offer a generous 25% commission on every deal closed. For instance, if a sales person closes $800,000 worth of deals in one year, they would earn $200,000 in commission alone. At first glance, it might seem like a hefty expense for your company. However, consider the alternative: a meager 5% commission. They will close fewer deals, let’s say $500,000, and be left with $25,000. That leaves your sales team feeling undervalued and unmotivated.
In this scenario, paying a higher commission is like investing in premium fuel for a high-performance engine. Sure, it costs more upfront, but it propels your sales machine to operate at its full potential, closing deals left and right. On the other hand, opting for a cheaper, low-octane fuel might save you a few pennies per gallon, but it will leave your engine sputtering and struggling to reach its destination.
Moreover, when you prioritize top-line revenue and free cash flow, you create a virtuous cycle of growth. The more deals your motivated sales team closes, the more resources you have to reinvest in your business, fueling further expansion. Focusing on margin optimization early on is like trying to fill a leaky bucket – no matter how efficiently you pour water in, it will keep draining away. Instead, concentrate on increasing the size of your bucket (i.e., your revenue) first, and worry about patching the leaks (i.e., optimizing margins) later.
Finally, don’t be afraid to increase your prices to accommodate some of the cost of compensating your top performers. Just as a rising tide lifts all boats, a small price increase across the board can create the budget necessary to attract and retain the best sales talent in the industry. Your customers will hardly notice the difference, but your sales team will be invigorated by the opportunity to earn what they’re truly worth. In the end, everyone wins: your company, your sales team, and your customers who benefit from a superior product or service backed by a passionate, motivated sales force.
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