Selling Power Blog

News & Insights for B2B Sales Leaders

March 14, 2022

Why Sales Compensation Matters for Revenue Growth

BY Selling Power Editors

Three stacks of coins, each taller than the previous one, with small plants growing out the top of each stack.

The historical perspective on compensating sales professionals has shifted from a one-sided focus solely in the hands of those who make deals, to an approach that considers all aspects necessary for revenue growth.

Organizations that focus on a single aspect of compensation are likely to have an unbalanced sales force with higher attrition and lower morale. The best companies design their incentives and compensation strategy based around the revenue journey – from lead, through close, and beyond – to create equitable opportunities so sales professionals can confidently thrive.

Here are four steps that will help you design a compensation strategy that supports revenue growth.

1. Define what you want your incentive and compensation strategy to achieve.

The first step to having an effective incentive and compensation strategy is to map out your vision for a successful sales strategy. To do this it is important that you define the target market and include clear guidance for your sales team on what they need to accomplish. A good way of doing this would be to provide your reps with an accurate record on historic performance as well as insights into what might happen in future periods based off these numbers. A strong base line will help management understand where they need to improve or optimize current practices. Once you have your sales strategy in place, you can align compensation and incentives to support those goals.

2. Align sales incentives with the company’s goals.

Leaders who want to create an effective revenue management strategy should recognize and reward the employees driving their organizations’ growth. This means creating a strong compensation plan with incentives that motivate sales, marketing, or customer success professionals at every level of responsibility in reaching peak performance levels for company successes.

3. Ensure territories are fair and balanced so all reps have an equal earning opportunity.

In an era where data is king, territory management has become one of the most influential decisions for a sales leader. An organization’s approach to their assigned regions can sometimes have short-term benefits that also create long-term inequities, which will ultimately hurt them in more ways than they imagine. When organizations fail to equally distribute their salespeople, their reps lack motivation or get burned out. However, organizations that use data to identify their ideal customer profile – including industry, company size, and revenue – are better able to build equitable sales territories that serve both customers AND salespeople.

The most important decision a sales leader can make is deciding how to manage their territory. This affects both customers and employees, so each organization should have an approach rooted in data if it wants everyone involved with the company’s success the same way at all times.

4. Create visibility that provides both sellers and leadership with a comprehensive view.

With the rise of digitalization, modern businesses have found themselves at a disadvantage when it comes to managing their revenue. For too long, sales, marketing, and customer success teams have operated in silos with their own separate processes and technologies. The result is a lack of clarity about what works for revenue generation that also hurts decision making when it comes to new initiatives. The key to a successful predictive revenue strategy is having all the necessary data in one place. Aim to use a single system that provides a single, cohesive picture so you can make meaningful decisions that help both the company and your customers.

To get more insight on aligning your compensation strategy to achieve revenue growth, download this e-book Five Characteristics of a Great Incentives and Compensation Strategy, that explores the key components of an effective incentives and compensation strategy to enable better revenue management.