Compensation philosophies have always intrigued me in the bottleless water industry. I’ve learned that any 10 dealer principals will all have a different formula for coming up with the same payout plan. The method of “how” you pay out those dollars is important for scalability. The “how” ultimately leads to what you can and cannot expect from your salespeople. As an example, if you wanted to compensate your sales representatives on a 1099 or straight commission, then that’s a way to pay directly for what happens, but it’s not a great way to drive the behaviors that matter in the long run. Paying for exactly what they sell seems like a logical philosophy, but I’ve discovered that paying this way gives you no power to “expect activity” at any level because you aren’t paying for activity; you are only paying for results.
I have found that in a “free trial offense” you need to pay for the activity, expect the activity, and drive the activity to get free trials, and the results will follow. To accomplish this activity, paying a small base salary and expenses to ensure the salespeople are doing the daily/weekly activity that’s required to be successful is most effective. You are paying them do “do the work” and then they are paying themselves with commission and bonuses.
For most good salespeople, the thought of requiring consistent activity without some sort of paycheck to cover gas as well as the “expectations” required seems a little less “legit” than an employer who is willing to invest in them upfront. Reciprocally, when the employer pays a salary and expenses, they can then “expect” the activity they are paying for and have earned the right to “inspect what they expect”. Also, making healthcare, 401K, ongoing formal training, technology and tools available to employees further legitimize the employer’s chances of getting a good candidate in a competitive marketplace. Finally, having two or three “top performers” on a program like this that you can point to as “scalable” or replicable starts to build a culture of expectation and performance. This culture you are trying to build generally starts with the onboarding and compensation process because that’s all the farther most people can see when they start. Make sense?
Now that we’ve established you should have a small base salary and expenses, let’s talk about a commission structure. The structure needs to be easy to understand and include a bonus structure that rewards consistency over time. We have settled on a quarterly “consistency” bonus structure as a good barometer. Sales representatives can be choppy from month to month but as long as they are consistent quarterly, that should work for the cash flow of the business and the owner so driving that behavior makes sense. What I tell people about compensation is this: The base salary allows me to “expect” activity, the commission structure paid monthly helps them earn a nice living and the quarterly bonus structure is a “lifestyle” changer. If the dealer principal can go into the compensation process with these thoughts in mind, they will be able to develop a scalable sales organization.