HVACR Business

JUL 2017

Help hvacr contractors master the critical components of business management.

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12 HVACR BUSINESS JULY 2017 www. hvacrbusiness .com continued from page 11 As revenues increase and most over- head stays fixed, more money falls to the bottom line in the way of profits and all employees, including salespeople, should benefit. So how do you address this in the com- pensation plan? It's simple. Commission kicker incentives should be placed on predetermined monthly targets that provide an additional percentage commission on all sales or on just the incremental portion over the target each month. Bonus incentives are usually paid as a percentage of salary, percentage of sales or flat amount for commission-based plans and vary by goal performance levels. Bonuses can be paid for attainment of sales goal and incremental amounts above the goal. Other factors used as a measure for bo- nus goals are overall volume compared to team, product mix, add-on sales, new ac- counts, customer happiness, average sale, closing ratio, most self-generated leads over a set amount, increased sales from ex- isting accounts, etc. Bonuses can also be at your discretion. Bonus payments should be structured to begin at the 80 percent-of-goal level to motivate salespeople to achieve goals. Setting an all or nothing approach with a lower threshold level works against sus- tained sales effort and may discourage performance. Bonus payment rates above and below the goal may be uniform, however offer- ing incremental increases beyond the 100 percent mark adds an additional incentive with a lower cost factor over the book of revenue sold. A bonus incentive plan can be difficult to set and manage. Bonuses can be paid monthly or quarterly to elicit active, vigi- lant salesperson engagement from month- to-month, especially in a large income earning month. Rewards paid on a quar- terly basis are not as effective motivators as weekly or monthly commission payments. Additional Incentives Salespeople tend to work mostly solo, with limited personal contact with their manager; have extended periods of time away from the office possibly yielding dis- connect, loneliness, and inconvenience; decisions that require a high level of mo- tivation (when to quote jobs or not, how many follow-up attempts to make when to make them, objectives to be achieved on each call, when to end for the day); and emotional swings from winning sales to potential frequent frustrations of orders lost to competition. You need to create an environment for each salesperson to motivate themselves by providing incentives that make sales- people work harder all around. ese incentives can be financial, non-financial, or a combination of both. Contest Incentives Short-term sales contests are fun and engaging. Costs are typically predictable and covered by results, the sales and profit yield successful, and rewards are imme- diate. Contests can run for a day, week, month or two months. Longer contests can also be run, but require regular promotional reminders. Awards can be money, trips, personal paid time off, merchandise and personal recognition. A successful sales contest should in- clude these basic elements: well-defined objectives, simple rules, short duration, goals attainable by most salespeople, in- clusion of significant others and families when possible, and follow-through to sus- tain enthusiasm. Be careful to ensure fairness in con- tests. When contests are improperly used or done so for the wrong reasons, they can create discord and unhappiness amongst the team. When done right, contests can promote a friendly-competitive climate to drive sales and additional benefits. Most importantly, contests should be fun for everyone and elicit other staff in- volvement when possible. In addition to the usual contest objec- tives of increased sales and profit perfor- mance, more new customers, etc. contests can serve to minimize the impact of shoul- der seasons, build other departments, reac- tivate dormant customers, help cover and reduce costs. Nonfinancial Incentives Emotional currency is something that is not typically given a lot of attention by owners and sales managers, however, is something that drives the ego of most salespeople. Ego-drive is a crucial element for sustained success in sales. Drive is the fire of desire for salespeople. Ways in which companies can leverage a salesperson's ego-drive is by conferring more meaningful roles and titles as com- mensurate with the person's role and de- sire for a higher level of involvement. Elevating a salesperson's status with Competitive people are also stoked by commission play plans. This plan also ensures compensation is in direct proportion to sales volume.

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