By Robert O. Carr
Do you want to develop an extraordinarily successful sales organization? Based on my experience founding Heartland Payment Systems (acquired last year by Global Payments for more than $4.3 billion) and my newest company, Beyond, I can share eight innovative steps for catapulting sales revenue potential to new heights.
Step #1: Pay Residuals for Recurring Sales Revenue
When a company acquires another company, it will pay a certain multiple of “revenues” and it will pay more for “recurring revenues” than for “non-recurring revenue”. My company was acquired for five times revenue – 95 percent of which was recurring. Why is it a bad idea to pay the person who originated that revenue a percentage of that sales revenue in the form of recurring residuals?
Companies should think of the long-term value of the revenue generated by a salesperson instead of looking only at the current-year revenue. We all want recurring revenue. Why not share in that revenue with the person who created it?
Step #2: Allow Sales Pros to Monetize Residuals
Allow sales representatives to monetize their hard-earned residual income. We valued residuals at 30 times the monthly average for active clients. For example, if a sales professional earned $1,000 of monthly residuals, we would “buy them back” for $30,000 in cash. Sales representatives should be able to create true wealth for themselves and their families while they are creating wealth for their company.
Step #3: Don’t Change the Compensation Plan
Experienced sales professionals have seen it all – they build up the revenues for the company and get punished next year with higher quotas and smaller territories. Changes in compensation models breed distrust and resentment. If a sales compensation model works for the company, why change it when the sales professionals succeed with it? Our model is called the “94 plan” because it was created in 1994 and has never been changed – because it has worked so well for all the constituents.
Step #4: Reward the All-Stars and Do It with Consistency
Consistent all-stars should be paid at a higher rate of compensation than the average salesperson. It costs less administratively to support a consistent all-star than it costs to support an average or below-average salesperson. We define an all-star as one who is performing at twice the company average of veterans – and we pay them 33 percent more if they maintain an all-star average for a rolling 90-day average.
Step #5: Never Cut Side Deals that Are Not Available to All
The best currency is trust in sales management – and the best way to destroy it is by giving different compensation for the same results to different sales professionals. Salespeople quit primarily because of their sales managers. A major reason is unequal treatment – or the perception of it.
Step #6: Eliminate Territories
Don’t listen to the sales experts. Do not establish fixed geographic territories unless you are a very major player and own the marketplace. One of the worst things you can do is limit the benefits of networking for your sales force. With today’s technology and communication capabilities, anyone should be given the chance to close a sale anywhere.
Step #7: Give Sales Reps a Chance to Manage – but Don’t Fire Those Who Fail
Groom the future sales leaders of your company by giving them a chance with a sales management role – early, on a small scale. By dividing sales reps into small 4- to 5-person teams, you provide a team-enhancing player-coach model while giving a sales rep a no-jeopardy opportunity to try out a management role. We all have heard the bromide that “a good salesperson doesn’t make a good sales manager.” Yawn. Oftentimes, a good salesperson does make a great sales manager – but how do you know if you don’t give them a chance? The key is to let the failed sales manager have his or her sales job back. They will be even better at sales when given the chance.
Step #8: Provide a Signing Bonus
Starting a purely commissioned role is no easy task. Residuals are great but they take time to build up. Give your teammates a leg up by paying up to six months of estimated margin with an upfront signing bonus for each merchant. You can true-up the initial check after 12 months of account history. This gives your reps a way to survive financially while they build up their residual income.
Note: We have proven that the above model works for commission-only salespeople. However, sales professionals on salary plus bonus should be paid substantially less of the benefit of recurring revenue than described. However, with the more risk taken by the sales professional by being full commission, the closer to the model they should be.
Robert O. Carr is the CEO of Beyond, a newly launched business services and financial technology company. He was the founder and CEO of Heartland Payment Systems, a Fortune 1000 payments processing company acquired last year by Global Payments for more than $4.3 billion. Carr is author of Through the Fires: An American Story of Turbulence, Business Triumph and Giving Back and Working Class to College: The Promise and Peril Facing Blue-Collar America.