5 Tips for a Successful Sales Bonus Scheme

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Bonuses can be a brilliant driver of sales growth for some companies but they can also land you in big trouble...

Bonus schemes are amazing.

Bonuses are probably one of the top reasons people decide to pursue a career in sales.

Did you know top B2B salespeople can earn as much as a managing partner in a top law or professional services firm?

The Good and the Bad About Successful Sales Bonus Schemes

The good thing about bonus schemes is that they can drive behaviours which are beneficial to the company

The bad thing about commission schemes is that they can drive behaviours which are detrimental to the company

Recently, we've all seen what can happen when the wrong behaviours are demonstrated so, it's vital to put plenty of thought into your next bonus scheme to ensure you generate the right outcomes for your company.

Further below I've listed 5 Top Tips to create a best in class bonus scheme but before we get there, let's have a look at the purpose of a bonus scheme and how it can benefit your company:

Bonus Schemes: What's the Point?

When salespeople are rewarded for the deals they close, they’re more likely to pursue objectives that benefit the company, so a well-designed bonus scheme can bring many valuable benefits:

1. Increased Sales and Revenue: Bonus schemes provide direct incentives for salespeople to close more deals and earn more money - the primary motivation for most salespeople - and at the same time drive sales and revenue for the company.

2. Improved Sales Focus: When bonuses are linked to sales targets or specific product areas, salespeople are more likely to focus their efforts on those products.

3. Enhanced Motivation: Financial incentives are powerful motivators for salespeople. A well thought out bonus scheme can drive salespeople to put in extra effort, leading to greater sales and company performance.

4. Attracting and Retaining Talent: Competitive schemes can attract top sales talent and help retain them as high performers are often motivated by the opportunity to earn substantial bonuses.

5. Better Alignment of Interests: Let's face it, alignment is the hallmark of all great companies. Alignment gets your company firing on all cylinders, so to speak. Bonus schemes align the interests of the sales team (earnings) with those of the company (KPIs).

6. Rewarding Long-Term Success: If structured appropriately, bonus schemes can reward not just the initial sales success, but also nurture long-term client relationships and repeat business opportunities leading to lower cost of sale.

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Beware the Pitfalls

Remember we said earlier that bonus schemes can also drive bad behaviours? Here are some of the less desirable behaviours that can happen as a result of poorly positioned or targeted bonus schemes:

Short-termism: If deals disproportionately benefit your company in the short term, there is a risk they could disadvantage the customer in some way. If you spot short-termism occurring, consider whether it's the right scheme for your company...or not.

Demotivation: There is nothing more demotivating for a salesperson than to believe they will earn a juicy bonus working on a major deal only to learn that there's small print which means they won't actually get paid. That can lead to team tension and even trigger an employment tribunal claim.