7 ideas for restructuring your compensation structure and sales teams around selling cloud-based services

by Jennifer Clark on March 8, 2017 · 0 comments

in Technology

In the early days, it was easier for technology companies to compensate their sales teams with total sales-based commissions. With hardware going out, money came in, and sales employees were compensated based on the company’s commission structure. Now, however, technology is offering more cloud-based services that generate monthly recurring revenue and not one large influx of cash, so sales teams are having to reconsider their old methods in order to attract and retain high-performing employees.

So, what do you do? Split the teams up? Divide their focus between on-premises and cloud-based services? Give accelerators to those who sell more cloud? Treat it as a peripheral to the bottom line? Should sales people receive an upfront commission when someone signs a services contract? Do they just receive an annual payment? Solution providers, as they embrace cloud computing and managed services, must adapt to the recurring revenue streams that come with a services-based business model. According to CompTIA, the sales staff’s inability to sell services instead of products is the No. 1 sales-related challenge IT channel companies are confronted with when restructuring their sales team to one that supports a managed services model.

Below are seven ideas to think about restructuring your payment structure and compensating your teams. The ultimate answer will be what works best for your company and ultimately, your bottom line.

    • Throw out the old way: Plain and simple, the traditional compensation plans won’t translate to this new model. However, we know a salesperson wants you to show them the money upon close of a sale. But with the cloud-based services and other monthly recurring revenue models, it’s not always possible. You can pay a base commission on a percentage of a service revenue that is a lower percentage off the top. Then the sales reps know how the service’s profitability is calculated.
    • One-time payment: You can also pay a sales rep a commission up front based on the total full-year value of one of the services’ contracts or a one-time commission that equals a percentage of the first month’s service contract revenue. This allows employers to look at the first month, pay a commission and go on to the next. It can also transition the customer engagement work to the tech support teams and allow the sales rep to move on to what’s next.
    • Percentage-based payment: You can also pay a percentage of monthly billings, which provides regular but smaller commissions. This can be a problem though for smaller solution providers who don’t have a lot of upfront capital.
    • Divided Expert Team: Another strategy is having a divided team of sales reps who are services-savvy and specialize in generating demand for cloud and managed services. They can be paid a different mix of salary and commissions based on the new cloud-based deals that come in, and allow the other salespeople to continue to work on on-premises hardware sales. Just make sure your teams are performing duplicate calls to the same sales rep if they purchase both cloud and traditional hardware.
    • Cloud Sales Accelerator: Give your sales reps extra commissions/bonuses based on the cloud they sell in addition to their regular hardware goals. The advantage is sales reps wanting to work hard and generate extra accelerator payments, but the sales rep who sells nothing doesn’t feel any lasting effects.
    • Sales Multiplier: Look at paying your sales rep based on the cloud business they will potentially sell; although, it can be hard to make projections and goals from month to month. This plan will help accelerate your sales on cloud but shouldn’t be used for a long-term solution.
    • Sales Modifier: You could also consider modifying earnings based upon Cloud sales achievement; however, this option introduces the “carrot” and the “stick idiom. You’ll have to ensure every sales rep has the same opportunity to sell Cloud solutions in their assigned territories and accounts in order to dangle the same carrot fairly in front of everyone.

 

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