Thanks!

Ran across a great article about common mistakes for a Managed Service Provider.   I thought it was so great I wanted to expound upon it more and focus on the technology monitoring aspects.   Selling the monitoring and management aspect of IT as a …

You want to make sure that your sales plans match the strategic goals of the company. What is more important, revenue or margins, one year contracts or multi-year contracts, renewals or new business? Then you must clearly define the job roles: who is responsible for what, do you want to involve more than just the sales teams, possibly customer support or project managers? Now you can begin to develop your compensation strategy.

Paying higher commission rates by changing the measurement from revenue to margin does not impact the earning capability or the reps. In order for margins to be used effectively, the sales rep must have some control over the margins.

I have seen when the company waited months after the deal closed to pay the rep based on margins. They were calculating actual margins and it took time to complete the project and figure out the actual margins. In this case margins were not effective. Just be careful you are still motivating when paying on commissions.

Paying commissions based on the contract terms may be effective; after all, longer contracts are worth more to the company. You need to balance the payment with the risk of the additional years being canceled and reward the rep appropriately. Paying closest to the event the rep has control over, like signing the deal, is clearly best practice.

When considering paying on the renewal, define the job role; match the effort to the payment. Does it make sense for a rep to take time away from hunting for new business to renew existing customers or should you involve another support person and put them on a comp plan as well?

Bonuses when used appropriately are a great way to cause focus. Make sure they are large enough and announced with enough time to drive the reps behavior.

Here is where we keep all of our best practice information to help better your sales comp plan: http://www.makanasolutions.com/bestpractice

On the topic that John Kilgore mentions, one long-term sales compensation method that we have seen MSPs succeed with is to attach a trailer to any contracts that the salesperson brings in. You can have a mixed plan that consists of commission up front at the time they sign the deal (as a percentage of revenue or margin) as well as a small monthly bonus for every month the client stays with your company. The allure for the salesperson to stay longer is that they are building a book of business that grows in perpetuity if they keep those customers happy.

My team actually have developed a detailed sales compensation planner that allows you to mix and match with up-front commissions, trailers, up-front spiffs, and have compensation plans that cross multiple roles or teams in your company too.

Dell’s Peter Klanian, Senior Channel Manager, guest posts on MSP Mentor about common mistakes MSPs…

Thanks for the article. Error #4 sparked me to address the situation of sales folks who sell longer than a 1 year term and how to address that compensation accordingly to encourage terms longer than 1 year if viable.