How to use the Sales Compensation Plan & Calculator - FAQ
What is the purpose of this sales calculator?
This calculator provides a user with a way to quickly and accurately calculate total sales compensation based on 5 key variables. It is essentially a cost of sales tool, most helpful for budgeting and forecasting purposes.
Who is this sales calculator designed for?
This calculator is designed for smaller companies who do not have a formal performance management methodology in place for their sales reps NOR have the expertise in-house to create one. While most sales reps will be assigned a simple quota, this tool allows a sales manager or CEO to put more structure and expectation attached to that quota. Therefore, this is INTENDED to be simple, straightforward.
Who is this sales calculator NOT designed for?
Typically, medium to large companies already have established sales plans and a commission structure that are very specific to their company policies and goals and may involve many other factors and qualifiers. Therefore, this calculator may not be suitable in such scenarios.
How, specifically, can it be used?
- > To plan a sales rep’s quota.
- > To structure expectations of minimum performance, and show rewards for over achievement.
- > To calculate cost of sales at various achievement levels.
- > To help guide a sales rep to plan and/or forecast their own performance and earnings at various achievement levels.
What is the sales compensation strategy behind the calculator?
- The strategy is fairly simple:
- > A rep is assigned an annual goal or quota.
- > The rep also gets a base salary with an expectation that he/she only earns more money (commissions) AFTER they reach a specified % of quota level. We call that the commission threshold.
- > For every dollar ABOVE the commission threshold, the rep gets a commission.
- > Finally, once the rep hits their full year (or month or quarter) quota, they are rewarded with extra commission dollars. This is called the commission accelerator factor or multiplier. The commission rate is factored up for every dollar above the quota. Example: A commission rate of 20% and a commission accelerator factor of 1.5 would be: 20% x 1.5 = 30% commission rate on every dollar above the quota.
Can this calculator be used for 100% commission reps with no salary?
Yes, this can be accomplished by inputting "0" in the "Sales Rep's Salary" and the "Commissions start at (% of quota)" fields.
If you have any other questions, comments or suggestions, please feel free to Contact Us.
