How to set the variable salary of your salespeople

Merchants are a very important pillar in your company, they are in charge of selling the product, without them it would be impossible to generate money. Sometimes, companies believe that in order to succeed, a very large team of traders is needed, but the reality is that quality is better than quantity and for there to be quality, workers need incentives.

The incentives in a company's team of traders are reflected in the salary, specifically in the variable salary of the salesperson. So, there are two types of salaries for a salesperson: the fixed and the variable.

The fixed salary, as its name indicates, is the one that is repeated every month, while the variable one changes depending on the month. But what determines whether my traders earn more or less? In this article, we explain what commissions are and how to calculate them.

If you want to know how to get it right when hiring an employee, discover the 5 keys to hiring a new employee.

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Types of commissions

The variable part of salespeople's salaries is based on commissions, which serve to incentivize the sales of your salespeople: the more they make, the more they earn. There are different types of commissions, and to determine the variable salary of your salespeople, you can choose one or several.

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Standard commission

It is a fixed percentage added to the base salary. These commissions always exist and the salesperson receives them simply for closing the sale, knowing that they will always have it whenever they close a transaction. Sometimes, it varies if the product or service has more value or is harder to sell, but it is usually between 2% and 15%.

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Commission by objectives

This type of commission differs from the standard one because the salesperson does not receive it immediately upon closing the sale, but it depends on the total sales they have closed within a specific period of time.

Commissions based on objectives are somewhat more complex because they must be defined in advance in each salesperson's plan and serve to motivate workers to achieve established goals, as they receive an incentive when they do so.

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Tiered commissions

One of the less common but also used commissions. This is one where the salesperson can adjust the final price of the service or product and receive a higher commission based on how much the price has increased. For example, if a service costs 100 euros, they receive a 10% commission, and if it costs 120 euros, they receive 10% plus 20 euros.

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How to set the salary of your salespeople?

It is important to always consider the final salary of the salesperson so that it is neither too low nor too high. If it is too low, the worker will be demotivated and will not perform their job enthusiastically, resulting in poorer outcomes. If it is too high, it may not be profitable for the company.

To set the salary of your sales team, you must:

• Establish the fixed and variable salary clearly and understandably. Your traders should know how much they earn fixed and what percentage of each sale is an incentive. Normally, the variable part is between 10% and 30% of the total remuneration.
• Define what type of commission they will receive. A commission based on objectives is very different from a standard one, so be clear on what suits you best.
• Consider how profitable each trader is. Calculate from how many sales it is profitable for your trader, so you will know, for example, what sales goals to set.

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What should you keep in mind?

As we have mentioned before, the sales team of a company is crucial, so you must know the best way to manage it. For example, it is not the same to have a sales team completely disconnected from the company structure as having a sales team that constantly interacts.

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Avoid setting limits for your salespeople

This tends to demotivate them, as if you tell your salespeople that they must sell a machine to 20 clients, they will not bother selling it to 25. It is better for the objectives to vary and be surpassable.

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Communicate with salespeople

If you are not in charge of the sales department of your company but are involved in determining the sales goals of the company, you should communicate with them to understand the reality of this team and be able to set realistic goals that do not cause unrest among the employees.

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Check that business objectives are met

You must continuously review whether the objectives that you had set with your sales team are being met or not. This can help you know if they were realistic or if you could still cover many more sales.

If you would like more information, we invite you to read more about how to evaluate a worker.

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Don't forget about the fixed salary

The fixed salary is very important, and you must consider the trader's position when setting it. It is not the same for a sales director as for a salesperson who has just joined the company.

For example, it is not the same for a 'Junior' than a 'Senior' than a 'sales director':

• Juniors have less experience and knowledge of the market, they are workers who have just started in the profession or have started a few years ago. You cannot ask for great results from them because they are learning the profession. You could start with a variable salary of 10% the first year.
• Seniors should have a higher fixed salary and also a higher variable one; they are people who know the market much better. Normally, they earn a significant amount in terms of a variable salary.‍
• Sales directors not only focus on their results but also lead a team of salespeople whom they have to support, accompany, and teach. Many companies opt for their variable salary to depend in part on the objectives of their team; this ensures that they care about training good salespeople.

There are other ways to motivate your employees, that's why we invite you to read our article on 5 strategies to keep your employees motivated.

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How can CRM software help you

A CRM software stores information about your customers, both current and past, allowing you to know them perfectly. It is used to manage documentation, communication, and everything related to your customers.

For the sales team, a CRM software can be very beneficial to create customer profiles, know them perfectly, and offer more personalized plans. Customer service greatly improves with a CRM; it is faster and more effective.

For instance, with a CRM software, you can keep track of your customers and know what interests them most about your service or product; this way, your sales will improve, and you can offer potential customers what they are surely looking for.

With the taclia app, you can manage your customers with a CRM software, but not only that, taclia is a service management software for services, suppliers, tasks, and more. All from one place and from any device. Also, you do not need prior experience, and it is a very user-friendly app.

Try taclia for free here.