The Best Commission Structures For Closers & Appointment Setters (Ep. 6)
Welcome to the 6th episode of our Whiteboard Wednesday. Thanks for the overwhelming response. I hope that these sessions will impart immense value and help you increase your income and productivity.
We aim to provide you with deep insights into the processes, strategies, and tips and tricks to succeed as an agency through our Whiteboard Wednesday sessions. Learn how to save time and money, generate more business leads, and keep your customers happy, so they stick with you for a long time.
In this episode of Whiteboard Wednesday, Chad Kodary, the CEO of DashClicks, discusses setting up your sales organization for success.
We will take a deep dive into how to properly structure salaries and bonuses for your sales team to keep them excited and focused.
The Typical Sales Process That Works for the Agencies
Here is the best commission structure for your sales reps and appointment centers. It has worked well in our agency, so we are sharing it here.
“Fronters” and “Closers”
Typically, we refer to sales guys as closers because they are responsible for closing sales deals. The guys who call and approach the prospects are called “fronters.” Fronters are usually appointment setters. They generate interest in your products, devices, or services. So, fronters book calls for the sales reps and fill their calendars.
So, they keep calling people all day long. Besides phone calls, they also send messages and email and receive inbound calls. They handle various streams of leads and filter them so that they may get to the people who are seriously interested and qualified.
They get them on a sales rep calendar, and their job finishes here. Sales reps take it from here as their job is to close the deal. The entire focus of the sales team should be on generating revenue for the organization. They are also concerned about their commission and cash flow, etc.
The KPIs of Fronters and Closers
So, the KPI for the sales team is sales, whereas, for the fronters, the KPI is “appointments booked.” However, it isn’t necessary that all appointments booked will convert into sales. All it means is that someone is interested in your offerings and is ready to talk further. Practically, only a fraction of these prospects converts into paying customers.
It also means that you will measure the performance of the fronters on the number of leads generated or appointments booked for the sales reps. While you can evaluate the sales reps’ performance based on closed sales volume.
Here, we would restrict ourselves to discussing how to build commission structures.
The traits required to succeed in these roles are your conversational skills and ability to interact with people.
Planning a Successful Incentive Program
We will try to explain it with a bit of storytelling.
At our agency, DashClicks, we have a designated call center. We use it to prime our sales pump. Once, we were selling our InstaSites tool. With the help of this tool, your agency can build fully functional websites for its clients within a few seconds.
The Sales Script That Works
We use a specific pitch to sell this fantastic tool. It takes weeks of hard work and hassle to render a professional website functional within seconds. So, when we called up prospects, we said that we had gone through their website and found some issues, so we built a free website for them. “We would love to share that with you and send you the link via email or SMS. So, let’s know which one would be a better option for you.“
We also added, “See the 30-page brand new website that we built for your company (plumbing, locksmith, or real estate company as the case may be).”
It followed a round of some pre-qualifying questions to make sure they were a good fit for our products and services. If the prospect were a good fit, the fronter would book an appointment.
When we started our agency, we used to book five to ten such appointments per day on average.
However, if we hire a person today for this job, they will not be able to replicate that performance and may lose their job. So, you should set your expectations realistically. In my view, a target of two to five booked appointments is logical for someone new to this field. A fronter can easily book 25 appointments a week and around 100 appointments a month at this rate.
Generating 100 leads a month is a remarkable achievement. Even the average fronters, who need training, can easily book two appointments a day, making 40 appointments a month.
Such an approach can turn an agency into a successful sales organization. You can make different packages, such as bronze, gold, diamond, etc., for your fronters based on various performance slabs.
Someone who books less than 40 appointments a month is an under-achiever. The figures of 100 and 75 stand for great and medium spots, respectively. Evaluation becomes easy when we have performance slabs. When you pit the fronters against each other based on their performance and commission, the team’s overall performance will increase.
Killer Incentive Plans
If you hire VAs (virtual assistants) as the fronters from places like the Philippines, you can also announce bonus packages. For example, if someone hits a package, they get some bonus apart from their payroll that includes salary + commission.
For example, you can promise to pay your fronters one dollar more for each appointment booked above their target slab. In sales, some days are good, but some can be extremely disappointing, so the managers should focus on the averages.
Similarly, if a fronter books 40 leads per month, you can offer them an extra $100 for hitting the bronze package.
So, the commission structure should be exciting enough to prompt the fronters to achieve even more.
How to Encourage Underachievers?
Let’s try to understand it with another example. Suppose a fronter hits 75 appointments every month and usually falls in the gold package, but they could book only 74 this month. They can slip into the bronze package by just one number. Don’t let them tip over for falling short by just one appointment.
Inform them that they will get $250 as a bonus if they hit the figure of 75. If they hit 100 appointments, they will get $500. You can increase or decrease these numbers according to your product and business, but the best part is that this structure works!
Have Realistic Expectations?
Now, let’s discuss the commission structure for the sales reps or closers.
If a closer gets 100 leads on their calendar from the fronters at the top of the funnel, we can assume a 30% to 40% no-show rate on an average.
Having realistic expectations will help, and for this, you need to look at historical data. It’s important to not set people up for failure based on unrealistic expectations.
A Realistic Commission Structure for the Sales Reps or Closers
For every 100 leads with a 30% no-show rate, you stand a chance to do 70 demos or calls. Now, we can figure out the conversion rate based on historical data, which is 10% in our case. Based on this example, for 70 demos, the conversion rate should be seven.
Suppose we are selling InstaSites, our niche website builder tool, for $500. For seven conversions, the revenue we get is $3500 in setup fees. Add the monthly maintenance charges of $50, and it comes to $350 per month for seven conversions. Keep in mind that this is recurring revenue.
In that case, the closer brings you $350 per month from selling those websites. Since this is just an example, you may have products of even higher value.
If your product is valued at $1000, the setup fees it will attract would be $7K for seven conversions. It will be followed by a recurring revenue of $1K per conversion and $7K for seven conversions.
Suppose you sell a package (e.g. SEO package) that costs $399 a month for a six-month contract. You sell this package for a set up fee of $149.75 to local businesses in your area using door-to-door selling. The first month’s revenue of this product would be about $400+$150, i.e., $550.
If you sell two such packages in a week, the first month’s revenue would be $1100.
You should have an exciting salary plus commission structure to encourage and motivate closers.
Pro Tip: Most closers aren’t interested in salary. They are more interested in a commission. So, you should plan an exciting commission structure.
So, if you pay $500 a week to a top-level closer, it can be their base salary.
Let’s assume that your closer achieves seven deals in a week. It will bring about $3500 in setup fees and $350 in monthly recurring revenue. It means you made almost $4K in sales. You can offer 10% of it for that month as commission to your closer, which would equal $400.
For 20 sales, it would be $800 for that month.
So, the structure goes like this.
$500 a week as base salary + $800 a month in commission
Doesn’t it sound enticing?
We can combine packages like this and keep our salespeople motivated. You can pay 2% of your Monthly Recurring Revenue (MRR) as incentives to these guys.
This incentive payment plan is highly effective, and it keeps both the fronters and the closers engaged and motivated.
You can personalize it according to your revenue streams and profit margin. You can also subscribe to our YouTube channel to be the first to watch these valuable tips every Wednesday.
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See you in the next session of WhiteBoard Wednesday. Have a fantastic day!