Great news:
We've been recognized as Best support & High Performer on G2 and we rebranded! Celebrate with us on LinkedIn!
Expanding into new geographies, verticals, or product lines is a thrilling opportunity for growth—but it also brings a unique set of challenges. One of the most critical factors for success in a new territory is getting your sales compensation plan right. Proper incentives are essential to motivate and reward your sales team as they venture into uncharted areas. In this article, we’ll explore how to configure effective sales categories and adapt your compensation plan to ensure your team thrives in new territories.
When launching a new territory, the first step is to understand if your current sales team structure is appropriate to duplicate. The likely answer is that it will need some adapting, big or small. Structuring your compensation plan is configuring your sales categories effectively. Sales categories define the targets, incentives, and priorities of your sales team. In a new market, it is essential to adjust these categories to reflect the unique challenges and opportunities.
Start by clearly defining what success looks like in the new territory. Are you focused on securing new customers? Increasing revenue per deal? Or building long-term client relationships? Once you identify your primary goal, you can tailor your sales categories accordingly. For example, if customer acquisition is your priority, your compensation plan should heavily reward new business.
Additionally, consider the nuances of the territory. Different markets require different sales strategies. In some regions, long-term relationship building may be more effective, while others might respond better to aggressive closing techniques. Your compensation plan needs to reflect these differences by rewarding the most relevant sales activities.
Finally, make sure your sales categories are scalable. As the new territory matures, you’ll want the flexibility to adjust your plan and introduce more complex incentives, such as accelerators or product-specific bonuses. But in the early days, keep your categories broad to give your team the freedom to explore and establish themselves.
Adapting your compensation plan for a new territory requires a strategic approach. The key is to keep it simple at the outset and evolve it as you gather data and insights. Here are the critical elements to consider:
When entering new territories, quotas can be challenging to set due to the lack of historical data in the region. However, you can leverage data from your company’s early days or similar markets to set benchmarks. Look for patterns in your existing territories, including how long it took to close deals and the average deal size.
Once you’ve set the initial quotas, consider implementing accelerators and decelerators to reward over-performance and manage under-performance. Accelerators offer higher commission rates once salespeople exceed their targets, motivating them to push for more deals. Decelerators, on the other hand, reduce commission rates if reps fall short of their targets, encouraging accountability and consistent performance. However, in a new territory, it’s often best to keep things simple. Introducing accelerators and decelerators right away may complicate things. Start without them and then introduce these tools as your team gains traction.
In the early stages of launching a new territory, simplicity is key. Don’t overwhelm your salespeople with complex compensation models or unattainable quotas. Instead, use your compensation plans to set a clear direction to what they need to focus on. As the market matures, you’ll have a better understanding of what works and what doesn’t, enabling you to refine your compensation plan.
As your new territory begins to show results, it’s time to scale your compensation plan and introduce more structured incentives. Here’s how to move from a simple, commission-focused approach to a comprehensive compensation strategy.
Ensure your compensation plan aligns with your overarching business objectives. For example, if your goal is to dominate a specific region, consider introducing market penetration bonuses to incentivise large-scale customer acquisition. According to McKinsey, sales teams that directly tie compensation to strategic goals see a 15-20% increase in performance (McKinsey, 2023).
As your team grows in the new territory, you’ll need to establish clear roles and responsibilities. Are sales reps responsible for both closing deals and nurturing client relationships? Or will there be dedicated account managers? Clarifying roles will help you create compensation plans that reflect each team member's contribution.
The right pay mix is crucial for motivating your sales team while managing risk. For new territories, you might want to start with a higher base salary to provide stability, as entering a new market can be uncertain. Over time, as reps become more confident in the market, you can shift toward more performance-based incentives.
Establish clear, measurable performance metrics that reflect both short-term wins and long-term goals. Metrics such as deal size, sales cycle length, and new customer acquisition should be tracked consistently to assess how well your team is performing.
Finally, determine the payout frequency that will best support your sales team. Monthly payouts provide immediate rewards, which can be crucial in new markets where closing deals might take longer. Quarterly payouts, however, may be more aligned with long-term goals.
The key is to start with a simple, scalable compensation plan that focuses on landing initial customers and collecting valuable data. As the market matures, you can introduce more complex elements like accelerators, decelerators, and structured bonuses.
Remember, understanding your business goals and supporting your salespeople with the right incentives is crucial for long-term success. With the right approach, your sales compensation plan will not only motivate your team but also drive significant growth in new markets.
