Blueprint for Bonuses
Tangible-goods manufacturers can structure commissions to encourage salespeople to sell higher-margin products. But can service firms set up similar sliding-scale commissions?
"I tie compensation to the quality of sales," says Marguerite Sallee, CEO of $10-million Corporate Child Care Management Services (CCC), a Nashville-based company that develops and manages employer-sponsored child-care centers. "The terms of a contract determine the salesperson's bonus."
Sallee's industry has a long sales cycle, so she pays her four salespeople a healthy base salary. "But a good salesperson can double her base salary in bonuses." In a CCC contract, there are about 10 negotiable points. For each point, there are ideal, acceptable, and unacceptable parameters, laid out by Sallee in a prototype contract. The closer the salesperson comes to the ideal terms, the higher the bonus.
An example: CCC receives two sets of payments. The employer pays an annual day-care management fee, and parents pay the operations fees. CCC's goal is for the employer to pay the entire management fee up front, to hold down parents' fees. That point is worth 25% of the total bonus. Upon signing a deal, salespeople receive half their bonus, and the rest when the day-care center opens. To date Sallee's six-year-old company has opened 23 centers in 11 states. -- Susan Greco