SALES INCENTIVES

Steven Cesare, Ph.D.

A re-energized business owner from Florida called me the other day to talk about his company’s sales program. Despite continuous year-over-year success across multiple performance metrics (e.g., client retention, net profit, gross margin), the business owner has developed an incremental sense that his Sales Manager is not working to the potential he was hired to achieve, and as such, wanted to discuss possible incentives to get his Company’s actual sales revenue closer to the annual forecast.

Imagine that? An underperforming salesperson. Renew my subscription to the Smithsonian!

The obvious introduction began with a set of questions about the Sales Manager’s recent performance. Notably, as stated, the Sales Manager’s performance for this year has been underwhelming. That said, in FY2024, he only sold $650,000 of new maintenance contract revenue, with a 4% commission rate; a lackluster total, well below the standard expectation of at least $800,000. Let’s call it a C-.

Digging deeper, I then asked the business owner the number of landscape maintenance proposals that his Sales Manager submitted last year. 30. “For the whole year?!” I exclaimed. Sardonic to a fault, I then said to the owner, “You know there are 52 weeks in the year, right?” Without pause, I then asked “Is this guy a full-time sales person, or is this just his side hustle?” An average, moderately-aggressive (I know that is an oxymoron) sales person should submit between 2-3 proposals per week. Do the math. I give him a D.

His sales capture rate for the entire year was 23%, which is in the comfort zone of normal landscape maintenance sales (i.e., average is 20%). I guess that means the Sales Manager deserves a grade of C.

Based on these metrics, it quickly became clear that the business owner’s sense of disappointment was not only legitimate, but borderline delinquent. As a capitalist, I pivoted the conversation forward.

First, the new annual sales goal was raised to $900,000. Within that goal, the commission rate was sweetened to 5% for all sales brought in from the Company’s Top 200 Campaign, and 3% for all sales revenue outside those preferred customers. I naturally made my standard pitch for a three-tiered commission plan: 4% for the first $900,000, 5% for annual sales above $900,000 but below $1,250,000, and 8% for all annual revenue beyond $1,250,000. The owner vetoed my recommendation by deciding to instead focus exclusively on his Top 200 Campaign. Of course I supported his decision completely.

Beyond annual sales, I strongly recommended the Sales Manager receive a $1,000 bonus if his final year-end Capture Rate got to 25% (assuming at least 80 proposals were submitted), $2,500 if his Capture Rate got to 30%, and $5,000 if it exceeded 35%. I reminded the business owner: “It’s all about working the sales pipeline,” demonstrating best-in-class “pipeline practices,” rather than focusing only on the goal. To that end, the business owner’s weekly sales meetings were crafted to emphasize the pipeline practices to increase capture rate, not simply being mesmerized on the sales goal. Pipeline practices drive results.

Next, a review of last year’s sales mix showed a disproportionate focus on the HOA sector (e.g., 23 proposals, capture rate of 17%, $325,000 in revenue). Accordingly, the business owner and I discussed offering the Sales Manager a $2,000 bonus if he would achieve at least 15% of total sales revenue in each of the Commercial, Office, and Industrial customer sectors. Each. If he runs the table, he gets $6,000.

Finally, the owner and I agreed to design a Sales War Room replete with a wall map specifying current, proposed, and recommended jobs by geographical quadrant to expand the diameter of the Company’s brand reach around the main office. A $2,000 bonus would be given for each of the four quadrants (e.g., north, south, east, west) that achieved 25% of annual maintenance revenue. Each. $8,000 potential.

In closing, I reminded the Florida business owner to coach his Sales Manager more than ever before, and that he had to start doing so right away.

Do you know why?

Because there are only 52 weeks in the year.

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