Software Sales Compensation Design

At least once every year we all need to create/review our incentive compensation strategy. It’s all too easy to assume last year’s plan will work again in the coming year and, even if it did work, there is evidence that some change to the plan is a good thing because it keeps the sales team engaged and focused.  I use this simple outline to guide the discussion of software sales compensation design.    It’s a little like bottoms-up budgeting; it’s more work on the front end but you will reap the benefit of an aligned plan.

  1. Engage a cross functional team to define the GTM strategy
    1. Market research – Marketing
    2. Customer research -Sales Management
    3. Optimal growth rate – Finance
    4. Capitalization required to grow – Finance
  2. Consider your execution options (i.e. coverage model)
    1. Scope of the opportunity
    2. Nature of the target transaction
    3. Type of territory coverage
    4. Channel partner utilization and/or conflict
  3. Develop an effective sales model differentiating selling/support role based on the skill sets required and differentiating license/services based on product integration and focus
  4. Inventory staff readiness based on skill set and location
  5. Propose a hiring plan based on gap analysis
  6. Overlay compensation plan components most likely to drive respective behaviors
  7. Validate the model to adjust projections and strategy
    1. Growth Rate
    2. Market Penetration
    3. Staff Retention
    4. Staff Training
    5. Product Line Adoption by Market
    6. Recalibrate Expectations
  8. Develop and publish meaningful and actionable metrics

Depending on the size of your organization this process can take 3 to 7 months so calendar it now!

What’s your outline or project plan look like?  Who are the key decision makers and contributors to your sales compensation plan?


Bob Bacon


About Bob Bacon

I work with global B2B high tech Sales leaders to help them enable and optimize the effectiveness of their organization Find out more about Bob here:
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