Designing an effective sales incentive plan isn’t just about motivating your team—it’s about aligning their efforts with your company’s goals at every stage of growth. In this article, I’ll share insights and strategies to help you tailor your sales compensation plan to your company’s unique maturity phase.
Here’s what you’ll learn:
- How to adjust sales incentives for startups, growth-stage businesses, and mature companies.
- The role of sales team structure in creating effective incentive plans.
- Key metrics and pay structures to focus on at each stage of your company’s journey.
Sales incentives are the backbone of a motivated and effective sales team, but let me tell you this: one-size-fits-all strategies simply don’t work. Over the years, I’ve seen companies struggle because they tried to copy what others were doing without considering their unique needs. A startup, for example, has entirely different priorities than an established market leader. That’s why I would suggest aligning your sales incentive plans with your company’s current maturity stage—it’s a game changer.
Each phase of a company’s growth journey brings its own challenges and opportunities. In my experience, businesses thrive when their incentive plans evolve with their goals. Let me walk you through what this looks like in practice.
Startups: Building Foundations
If you’re in the early stages of your company, your focus is likely survival. I’ve worked with startups that were laser-focused on landing their first clients and building a reputation. At this stage, your sales team will likely be small, and they’ll need to wear multiple hats—hunting for leads, closing deals, and even managing some post-sale work.
Here’s what I’ve found works best for startups:
- Pay Mix: I would recommend a higher fixed pay ratio, such as 70/30. This reduces risk for your sales team, especially since success at this stage often depends on factors beyond their control.
- Leverage: If you want to motivate your team, consider rewarding them aggressively for exceeding their targets. For example, pay more generously after they hit 100% of their quota.
- Metrics: Focus on goals like acquiring new clients and building brand awareness. At this stage, it’s not just about the size of the deals—it’s about getting your foot in the door.
Growth Stage: Expanding the Base
When your company starts scaling, the game changes. You’ve established a foothold, but now you’re focused on rapid expansion and consistent cash flow. I’ve seen companies at this stage thrive by adjusting their incentives to reward aggressive growth and clear territory targets.
Here’s what I’d suggest:
- Pay Mix: Shift toward a more balanced structure like 50/50 or even 40/60 between fixed and variable pay. This incentivizes performance while still offering security.
- Leverage: Scaling businesses benefit from accelerators for exceeding quotas. For example, a higher payout percentage for revenue beyond 120% of the target can work wonders.
- Metrics: At this stage, prioritize regional expansion, winning new accounts, and driving revenue growth. Retention is important but secondary.
Maturity: Maximizing Value
When your company is well-established, priorities often shift toward profitability and customer loyalty. I’ve seen mature companies lose momentum because they failed to adapt their sales incentives to reflect this new reality. At this stage, your sales team should focus on maximizing the value of existing relationships while still pursuing growth.
My advice for mature companies:
- Pay Mix: A slightly lower leverage model, such as 60/40, can balance acquisition and retention priorities.
- Leverage: While accelerators are still important, they should focus on initiatives like cross-selling and upselling, which drive more value from existing accounts.
- Metrics: Retention rates, account growth, and profitability should take center stage. This is where account management roles become critical.
Aligning Sales Roles to Company Needs
Before even designing a compensation plan, think about whether you have the right sales roles in place. In my experience, startups need hunters—sales reps who can chase leads and close deals. Growth-stage companies often benefit from specialists focused on regional or vertical markets. And for mature businesses, introducing account managers to strengthen client relationships can make all the difference.
Evolving Incentives with Your Business
What I’ve learned over the years is that sales incentives should never be static. Just as your business evolves, your sales compensation plans should, too. By tailoring your incentives to your company’s maturity stage, you ensure that your team’s focus aligns with your goals, driving sustainable success.
Designing the right plan isn’t easy, but it’s worth it. If you’re unsure where to start or want guidance in crafting an effective incentive program, I’d love to help. Let’s talk—reach out today, and let’s design a plan that works for your business.