The right sales plan plays a vital role in achieving sustainable and growing revenue for any business. As an organization transitions to a recurring revenue approach, the right sales compensation program becomes even more crucial.
The information and views outlined here are the result of two years of analyzing hundreds of sales plans, identifying the underlying issues that, if avoided, can lead to a functional, recurring-revenue sales plan and services that works.
Implementing a recurring revenue sales compensation plan has the same core dependencies as any sales plan including:
- Acknowledging that sales planning does not sit as a standalone activity
- Ensuring that the plan is integrated into the business framework
- Supporting the organization’s revenue objectives
It is important to recognize that transforming to a cloud-based recurring business model does not need to be overwhelming.
Many times, an organization’s existing sales model becomes an impediment to growing and sustaining cloud and recurring revenue services sales. In addition, you’ll need to ensure that your business and financial model are in alignment – many times they are not. Which leads many companies to thrash and not make the moves necessary to successfully implement a recurring revenue sales plan.
With your sales, business and financial models positioned correctly it’s time to focus on implementing a sales plan that will drive consistent and sustainable recurring revenue that will begin your evolution towards a recurring revenue friendly business model.
There are several strategies that can strengthen your sales plan, such as:
- Supporting and driving your business objectives
- Integrating it into your company’s current business model
- Driving the sales professional to build a book of business
As always, it is important to remember that any sales plan should be straightforward, easy to understand and most importantly, easy to track and manage.
To produce solid month-over-month gains and build a truly sustainable, recurring revenue services business, the approaches below are the most effective:
- Pay entire Year 1 commission up front as though it were a transaction.
- Pay Month 1 revenue to sales professional as total commission.
- Pay a percentage of the deal (e.g., 25%) upfront and then the remainder monthly over the term of the contract.
- Pay commission on a monthly basis for the term of the contract.
We’ve seen the number 4 approach deliver the most consistent results.
There is no perfect or one-size-fits-all approach. Rather, there is a framework, critical thinking, hard work and commitment towards creating an effective sales plan. Using a multi-pronged strategy with conviction will ensure that you create a positive, pragmatic shift as you transform to a cloud and recurring-revenue services business.