Apr
29
STOP burning your money!
First of all consider this question.. are you motivating your employees & sales people to drive the results your business actually needs (effective) or just to be busy (ineffective)?
- Any equity MUST be
- vested over a period of time (typically 2-4 years) just to be eligible, not just paid out
- performance based in order to even qualify for vesting
- time locked to ensure that you get the desired results within the time-frame your business needs them
- allocated to someone who is actively contributing with effective & significant results
- side note: always check to ensure ongoing rates
- I’ve seen too many entrepreneurs or CEO’s give away up to 2 percentage points too much straight out of the starting blocks (!!)
- Compensation packages must motivate individuals toward the objectives your company actually needs to achieve
- is profitability important to your business model or stage of your company?
- will you pay a commission or compensation just on a certain revenue achievement or must that revenue be profitable?
- how profitable?
- will you pay all commissions or compensation upon contract signature from your client or will you phase it to ensure better cash-flow?
- 25% at contract signature?
- 50% at invoice issued?
- will you issue the invoice upon termination of service?
- will you stagger the issuing of invoices to benefit your cash-flow?
- will there be a warranty period on your invoicing schedule?
- how will you reflect this in your commission payout?
- 25% at invoice paid?
- have different commission accelerators for activities that bring your company greater benefit
- on products that you want to clear from stock or are strategic to your business needs
- early, mid or late month, quarter, year if that’s when you want to bring in significant results
- always “cap” your commission for “over-achievement”
- motivate your staff to spread the consistent revenue income throughout the year
- keep them hungry
- always have a minimum achievement barrier for eligibility of a commission
- typically 70-80% of budget becomes a trigger
- i.e. only upon reaching 80% of achieving your sales do you qualify for 80% of your total commission and then incrementally onward
- typically 70-80% of budget becomes a trigger
- is profitability important to your business model or stage of your company?
- Objectives, goals & budgets must be S.M.A.R.T.
- make plans clear and simple so that your staff is motivated to stretch themselves & achieve their objectives
- instill milestones to ensure that you monitor the progression
- create triggers / pulse checks for additional support, adjustment or facing the reality & consequences of short-falls
- time lock the revenue targets
That last element is the simplest yet the most overlooked item of them all. I’ve seen too many passionate entrepreneurs & CEO’s set sales targets but then leave the window for achievement open.
Here’s a painful example of what can happen:
- You’ve written into the gals contract that she’s to receive x% commission upon achieving x revenue.
- You needed the revenue in Q1 and she hasn’t delivered, so you’ve invested in coaching & other resources to help out.
- Q2 has gone by, then Q3 & finally in Q4 you decide to fire her for non-performance.
- And guess what happens next?
- The revenue you badly needed in Q1, Q2 & Q3 never came, but in Q4.. on the 3rd week of December.. a deal finally comes in.
- Now mind you that you’ve had to lay-off valuable resources because the sales weren’t coming in.
- If you’re an early-stage entrepreneur you’ve probably had to stop paying yourself along the way for the company to survive.
- Your head is barely above water, and because you didn’t do your job by time-locking over what period of time the revenue needed to be generated, your gal is about to walk away with a commission check.
- These are funds your company dearly needed just to stay afloat!
How are you feeling about your situation now?
