I have created a few sales comps plans but I am working with a company that has a very high margin product that has a payback of 5 years. I am thinking i do a 15, 10, 5, 5, 5 in commissions for the 5 year period for sales.... are there things I should know before committing to this type of plan... what is fair for a sales management override?

My concern on something like this would be the contractual obligations to pay out the tail portion of the incentives, even in the event your arrangement with the sales person is terminated. You are going to want to have an attorney draft a bullet proof contract. I had a client who failed in that regard and had to pay out sales people even after they had departed the company.

Also, if it is structured as you mentioned you might expect sales people not to provide much if any support after the initial sale but instead to just focus on the new growth, since the commissions reduce so strongly after the 2nd year. No big deal but you will want to make sure you have adequate account management staff depending on the required support of the product.

Also, how would the sales people be compensated if the cross sold or increased product/platform usage after 2nd year? Would their be incentives to that?

Hope some of this info helps!

Answered 6 years ago

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