In part 1 of our Pay for Activity series, I introduced the concept and talked about how it could save you money. As I said before, it’s a win-win. It costs you less, and gives your sales team the opportunity to lock down a portion of their bonus, which means less variability for all.
So as with most things in business, it all boils down to the numbers. Stop me if you’ve heard this before, “The Numbers Never Lie”. While that quote probably gets overused, it’s entirely applicable to the Pay for Activity concept. At ConnectWise, we’ve proven that if our team makes a certain amount of calls, a percentage of those calls will turn into sales qualified opportunities, and a percentage of those SQOs will result in sales. So why not incent your sales team to make that certain amount of calls?
Let’s say I goal my sales team on making 1,000 calls every month. It doesn’t matter if they have a 2 hour conversation or they get voicemail, a call is a call. I know that the act of making those calls and the effort that goes into it will pay off with sales in the long run, so my plan is to incentivize the behavior that drives sales. If someone on my team hits their activity number for the month, they’re guaranteed to get a specified portion of their bonus, even if they don’t close a single deal that month. Why would I do this? Because the numbers tell me that if they made 1,000 calls, 100 of those become SQOs, and 10 of those become new clients, making the activity bonus completely worth it.
1. Do the Math.
Plug in all your conversions, and solve for x. Decide which numbers work best for your organization. If you currently pay out a 4.5% commission, attach 4% of that money to the sales and .5% to activity.
Mixing activity and performance controls variable cost. So, if everyone on your sales team overachieves, you’re not stuck with an astronomical payout. And on the flip side, if a territory has a dry quarter, your salesperson can still attain a portion of his or her bonus.
2. Define Activity Goals.
So what type of activity should you pay for? I suggest phone calls. Every company is different, so you’ll have to find your sweet spot, but for us, phone calls are the most lucrative. 1,000 calls = 20 sales qualified opportunities with a 50% close rate.
Activity still requires effort. It’s not a straight-up guarantee they’ll receive it. However, if they’re diligent, and perform the activity you’ve defined, they’ll get that portion of their bonus regardless of close rates
3. Reap the Benefits.
As I mentioned earlier, the numbers always work out. If you know it takes 1,000 calls to get to 10 deals, and you give your salesperson an activity-based goal of 1,000 calls per month, you’re probably going to close 10 deals as a result. This helps you ensure deals keep flowing in, and helps set your sales rep up for success achieving the rest of their bonus.
It’s really that simple. Crunch the numbers, add activity-based goals to the mix, and watch your sales team achieve. You’ll be amazed at the difference this small change can make.
What’s holding you back? Comment below. Your comment could be addressed in an upcoming blog post.