So, not sure when the right time is. We have staff to cover support calls. But I’ve only ever been the sales person.
I know I’m looking for outside sales, as I want someone reaching out to potential new customers.
I’m just not sure on where to look for basic structure and such. I know there has to be a base pay, plus comissions/bonuses. I just do not know where to go from there or where to start looking.
Base pay is a guaranteed, fixed amount provided to a salesperson, often to ensure they meet minimum wage requirements, especially in industries with lower average sales values like retail. It can be combined with commission, creating a hybrid model where the base salary provides income stability while commission incentivizes performance. A common ratio is 60% base salary and 40% commission, though this varies by company and role.
Commission is a performance-based payment calculated as a percentage of sales revenue generated. The most straightforward method is a flat percentage of the total sales value. For example, a salesperson earning a 10% commission on a $50,000 sale would receive a commission of $5,000. More complex structures include tiered or sliding scale commissions, where the percentage increases as sales targets are exceeded, encouraging higher performance. The commission rate can be calculated using the formula:
This ensures that when an employee meets their sales quota, they achieve their target variable compensation.
Bonuses are typically one-time or periodic payments awarded for achieving specific goals, such as exceeding sales quotas, launching a new product, or supporting team objectives. They can be a fixed dollar amount or a percentage of earnings. Unlike commission, which is tied directly to sales volume or revenue, bonuses are often tied to broader outcomes like strategic goals or overall company performance. For instance, a sales team might receive a $3,000 bonus if they all meet a target of acquiring five enterprise clients. Bonuses are usually calculated based on performance ratings or specific milestones.
In summary, base pay provides a stable income, commission rewards the volume and value of sales directly, and bonuses recognize achievement of specific, often strategic, goals beyond routine sales activity.
I have a friend who is struggling with this. He has hired a number of entry level sales people and none of them have worked out. My advice is find someone seasoned, who can not only sell, but will help you build a sales pipeline mechanism, customer segmentation, a prospecting mechanism, direct marketing, etc. You may want to read Jeb Blount’s books, like fanatical prospecting first
You want someone who can build a process, not someone you have to teach. Pay them a very modest base salary. Less than your techs. But offer him or her a significant percentage of all the business they personally bring in. As high as 15-20 percent of the TCV in the first year. Maybe offer milestone bonuses, for doing things like creating a prospecting motion, hitting a certain number of prospects/sales qualified leads in the pipe line, etc. Make sure they understand the comp plan can change each year, and adjust to your changing conditions.
https://www.amazon.com/Fanatical-Prospecting-Conversations-Leveraging-Telephone/dp/1119144752
If you are in the MSP business, pipeline and backlog are going to be some of your key metrics. You want to have a book to bill ratio (total contract value of contracts signed in the period divided by period revenue) of greater than 1 at all times, and ideally, greater than say 1.3-1.6 if possible. A book to bill ratio of 1.0 means your revenue will not grow, you haven’t sold enough. Less than 1.0 and your business is shrinking. > 1.0 and your business is growing. Backlog isn’t constant. What’s in your backlog today could change drastically if a customer shrinks their consumption or terminates your contract. Always be examining your backlog and manage it closely. As you mature you will have account managers who are “farmers”. They tend to the back log and maintain the base. Sales people are the hunters bringing in new accounts.
I have a video on this topic for how we did it at Lawrence Systems.
