3 Parts to a Sales Compensation Program

Sales Compensation is not easy.  Throughout my career, I have seen plans which break the sales budget to plans which do are insulting to the rep as they pay too little for a lot of work.  I refer to sales compensation programs as a form of art which requires a bit of science.

3 Parts of Sales Compensation Program

Science is pretty easy as it is understanding how your team should be selling your product and how it translates to the pipeline and corporate goals.  This understanding translates to key performance indicators (KPIs) which one can use to monitor rep performance and team performance.

The art plays in as you develop the actual plan and which KPIs enter that plan.  Average Deal Size, Number of Meetings, or Conference Attendees may not necessarily be the best indicators of sales.  With a mix straight sales revenue compensation (say 2%) and additional kickers and bonuses, the art of using plan structure for influencing rep behavior can take trial and error to get right.

Finally, the best compensation programs leverage transparency, reporting, and recognition. This is plan implementation where making sure the rep understands their KPI progress and how it translates to their paycheck.  Regular reporting and team leaderboard distribution are essential, motivating and drive revenue. A proactive analytics program can ease the calculation and payout of compensation at the end of the quarter.

As a specialist in the field, I encourage you to follow Spiral Analytics, my consulting firm dedicated to sales team optimization and small business promotion.  Follow us on Facebook

 

 

 

5 Things an Analytics Leader Must Do To Make Analysts Happy

bizanalystAnalysts are the lifeblood of a successful, data-driven company.  The analysts within your organization are usually the first to figure out if the company is on track or off track of the goals.  Their happiness can lead to early warnings and quick action to avoid pitfalls.  Their happiness can also help drive innovation and much needed change.

It is essential to keep your analysts happy.  Whether they are part of a corporate insights team, or are a line of business analyst with sales or marketing, there a few things a leader can do to help make them happy.

Trust & Enable, Don’t Dictate – The best leaders lead through influence and enablement, not micro management and total control.   Trust is one of the most important virtues of a team and is a true symbol of teamwork.  When a leader can let things go and let the judgment, experience, and knowledge of their analysts work, phenomenal things happen.

Celebrate Wins, big and small – Analysts have complex and very important roles in every organization. Analysts work hard, very often in sprints at quarter end and quarter begin. For this reason, take the time to help your analysts celebrate.  From cupcakes and beverages in a conference room, to an off-site cart race, let your analysts cut-loose and have fun.

Give Credit – Nothing makes an analyst more upset than another analyst or person taking credit for their work.  Just like recognition helps drive the morale of a sales rep, giving credit to your analyst when and where it counts is a simple act with profound effect.

Freestyle Project Time – Work hard, play hard.  Let your analysts take a few hours each week to work on something they want to related to work.  Whether they want to work on a new data model, an insights project, or attend an online, self service class, give them the time to do something they feel is important to their role.  A few hours each week to work on a project of their choosing enhances creativity and innovation.

Establish a Vision, But Seek Input – As all leaders are responsible for establishing a vision and trajectory for the team, this vision must be based on input from the team.  Allow the team to develop their own mission statement, their own framework, and be the guide to steer them toward corporate goals.   A vision developed by team input is unstoppable.

As an analytical leader, you have a responsibility to keep your analysts happy.  Happy analysts are key to driving data driven change in any organization.   Allow them to flourish, be creative, innovate and share their passion with the organization.

But wait, a sixth BONUS tip

Conference Budget – Allow your analysts to attend one or two conferences of their choosing every year.  Conferences are not only learning opportunities, but also incredible networking opportunities.  An analyst meeting another analyst is like a match made in heaven.  Let your analysts out of the office and share knowledge as much as possible.

The Math Every Sales Must Do

As a sales rep you need to deliver closed won deals to meet your quota.  As with all journeys to a goal, there is a hard, rough road and a superhighway, fast and smooth as a baby’s butt.  To earn your commission the most efficient way possible, wouldn’t you want to be on the superhighway? Of course!

The Math Every Sales Rep Must Do

Let me show you how to do some math to start you down your sales superhighway.  The key is to leverage data as much as possible along your journey.  To get started, you’ll need a few data points.  If you don’t have historical trends to use, an estimation is fine.  In fact, you might want to do the math a few times using different number so you understand the impact each variable might have.

Here’s what you need to get started:

  • Monthly, Quarterly, and Annual Quota
  • Average Deal Size
  • Sales Cycle
    • Ideally, Lead Create to Opp Close, but Opp Create to Opp Close can work for expansion reps
  • Win Rate / Close Ratio
    • Both Count of Opps and Value of Opps
  • Lead to Opp Conversion Rate

We will use these metrics and KPIs to calculate a few additional data points.  The first is translate our quota numbers to the number of deals we’ll need to close.  The second is to understand what size pipeline we’ll need to target to hit our number.  Finally, we’ll calculate how many quarters we need to project out and how much pipeline we need.

  1. The Deal Count

The first calculation is quite simple and uses quota and average deal size.  Simply divide the quota for the period by the average deal size and it will tell you how many deals you need to hit your number.  As a best practice, add 1 to the number you get:

(Quota for period / Average Deal Size ) + 1 = number of deals you need to hit your quota

Write these numbers down in a book or journal so you can refer back to them.  You may also want to use an Excel spreadsheet and keep track of the number of deals you need and which accounts will give you those deals.

2. What Size Pipeline Do I Need?

Once we know how many deals we need, we also need to know what size pipeline we need to close those deals.  This is where win rate (also known as Close Ratio) comes in.  You should have two win rate numbers, one based on  COUNT of opportunities and another based on DOLLAR VALUE of opportunities.

Depending on which you want to calculate, use the appropriate set for count of deals and quota.  The math is:

Count of Pipeline Size:  number of deals needed to hit quota +1  / win rate of count

Dollar value of pipeline needed:  quota for period +  Avg Deal Size / win rate of dollar value

Again, write these number down.  This is the size of the pipeline you will need to build to make sure you hit the quota number based on your historical win rate.

3. How Far Do You Plan Ahead?

You may be wondering why we haven’t used Sales Cycle yet.  While we aren’t going to use it in a calculation, we will use to see how far ahead we need to be planning. to hit our number.

Sales cycle can be calculated  a number of ways so be careful and understand what the number you have means.  For instance, many clients I have worked with in the past have used a sales cycle which measures Opportunity close age, i.e. Opp Close Date minus Opp Create Date. This is misleading if your business includes prospecting.  A true sales cycle uses either Lead/Contact create date or Account First Activity Date.    Make sure the number you are using a sales cycle which represents the true time frame you need to work your leads/contacts and close your opportunities.

quota period in days / sales cycle in days

If your sales cycle is 45 days, planning one quarter ahead is sufficient.  But if your sales cycle is 105 days, you must plan two quarters ahead.

It’s a Wrap

With these three pieces of math in mind, you are well on your to establishing the foundation for your superhighway to 100%.  Understanding what it takes to hit your quota number, how long and planning far enough ahead is huge and gives you a head start against your peers.  You may be amazed at how many reps don’t DO THE MATH.

 

Welcome 2017! My Three Focus Words

2016 is history.  Not the best year, not the worst year.  It was a year of change, strong opinions and shock.  From mass shootings to celebrity deaths to the election of Trump, it was a year we will all be talking about and trying to understand for decades to come.

It was also the year that I established myself in the Pacific Northwest.  It was the year I became a two car owner, a year in which I established my style and a year in which I learned about myself.  While I do not have a lot to brag about in terms of accomplishments, I can say I rode the tide, survived the year, and learned what is important to me.

As I look back on 2016 and dream about 2017 will bring me, I am filled with a bit of anxiety, hope, and inspiration.  Like a blank page in an artist’s sketchbook, the new year is a blank slate waiting to be filled with memories, transactions, people, ideas, and dreams.  It is more inspiring than anything.

Back in 2006, Chris Brogan began publishing 3 words to represent and guide him throughout the year.  This tradition is ten years old in 2016.  The idea, as described by Mr. Brogan:

Pick any three words that will guide you in the choices you intend to make for 2016. They should be words that let you challenge yourself as to motives and decisions. They should be words that help you guide your actions.-Chris Brogan

So, without further ado, here are my three words:  Connect, Learn, Build

Connect – connect is about connecting with the community around me, the people, the places, the events, and the technology.  Throughout 2017, I will be looking for opportunities to connect with everything around me.

Learn – While we are required to spend roughly 18 years in school before we are ready to participate in the world, the truth is life is one big school and you should never stop learning.  I am eleven years into a career in Analytics and I realize how fast technology changes.  I need to stay current on the tools.  I also want to set the foundation for grad school, so I have some studying to do for the GRE.

Build – This word has a few meanings to me.  First, I want to spend more time doing things with my hands, away from computer and not reliant upon technology.  From a hydroponics system to arts and crafts, I want to build. Second, build represents establishing a foundation for the latter half of my life.  I see myself undergoing a lot of personal change and 2017 is the year the foundation is built for that change.

What are you three words?  What’s your focus on 2017?

My Views on the 2016 Presidential Election

My disclaimer:  I am not normally vocal about my political views.  Politics are best left for the debate table and not for work or other sensitive environments.  But, my feelings and observations regarding the 2016 Presidential election are so strong, this blog post is a fair expression and my right of Freedom of Speech.

The results of the 2016 Presidential election were none other than shocking.  For so long, the media hyped Trump as unfit for the office of President and fed us poll after poll of Hilary Rodham Clinton’s (HRC) lead.  In the late hours of November 8th, it was clear that Donald Trump was to be our 45th President.  As floored, shocked, saddened, and scared as my reaction was, reviewing the results over the past few days have begun to change my opinion.

What worries me most about the events of the last few days is how disrespectful people have been.   I received a number of harsh responses to my tweets on Twitter regarding my shock and disdain for the “The Don.”  These people were quick to judge me as a wrong for my point of view in a very disrespectful manner.  While I knew the conversation wasn’t going to civil, nor productive, I simply asked them to respectfully disagree and show some respect for a fellow human and American.  Once we lose our respect for each other, we lose America. Politicians may have lost respect for each other, but citizens are better than them and we can lead be example.  Always be respectful.

Here are some points to consider:

  • Was the media biased against Trump and trying to sway the public toward HRC?
  • America didn’t vote for Trump as much as we rejected HRC
  • Those who did vote for Trump, did so with a short-sighted view of the world
  • Voter turnout was at an all time low
  • The DNC was oblivious to the changed voter sentiment and still stood by HRC as their candidate, offending the ever important Sanders voters (myself included)
  • Clinton was so arrogant about her quest to be POTUS, she lost site of reality
  • Bernie Sanders would have been a better candidate, but was forced out by Clinton
  • The political establishment needs a shakeup, Trump might actually be good for this country
  • Clinton received the majority vote of the population, but the electoral college went to Trump; let’s rethink “democracy” in America
  • America is bitter and divided, but we must find a way to respect each other.
  • Protests and riots did follow the election of Obama eight years ago, calling out protests against Trump as unfair is unfair in itself.
  • On Dec 19th, the Electoral College could still sway to Clinton

While I will never go out of my way to support Donald Trump, I do respect the Office of the President of the United States (POTUS).   I think we do owe him a chance to lead this country and begin a process of unification.  I am scared to death of what could happen if Trump is really tied to Putin’s Russia.  On the other hand, Trumps presence as POTUS could be the shake up this country needs to rebuild its middle class and set America back on a course of innovation, prosperity, and best practice.

If he does not lead with compassion for all Americans, continues to berate fellow citizens and world leaders, and shows disrespect to the office of POTUS, I will be one of the first to sign a petition to start impeachment proceedings.   Let keep an open mind in the interim.

Understanding Our Past: Support LIDAR Mapping at El Pilar

In the late 1990’s and early 2000’s, while I was attending University of California, Santa Barbara, I had the honor of working with Dr. Anabel Ford and her resilient crew on various projects surrounding the Maya site of El Pilar.   From archaeological excavation to mapping, to cutting trails, analyzing artifacts, and building predictive models, the time I spent on this project was phenomenal.

Recently posted on my Facebook page was a notification the Dr. Ford is undertaking a new project, mapping El Pilar with LIDAR to better understand Maya settlements beneath the thick rain forest canopy.  Please follow this link for more details.

Support the El Pilar LIDAR Mapping Project

They are currently seeking $2,700 in funding via Experiment.com, a crowdfunding platform for scientific research.  $2,700 is a bargain for the wealth of data and insight this team of researchers will acquire.  At 30% funded with 22 days left, let’s push it to 100% and beyond!

Cheers!