Sales Force Evaluation Topics covered

1
Sales Force EvaluationTopics covered

• What should the commissions/bonus be based on?
  Revenues or Gross profit or Operating Profit and
  why?
• Revenues or sales or fee revenue
• - Cost of service or cost of sales
• Gross Profit/Margin
• Selling expenses
• Profit after sales force salaries, commissions
  and selling expenses
• - General and Administration Expenses
• Operating Profit
• Some simple ratios to evaluate the sales force.
• Some simple ratios to evaluate an individual
  sales persons performance.

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What should the commissions/bonus be based on?

• Revenues or sales or fee revenue
• Cost of service or cost of sales
• Gross Profit/Margin
• Selling expenses
• Profit after sales force salaries, commissions
  and selling expenses
• General and Administration Expenses
• Operating Profit

3
Poll Question

• What is the primary method you use to evaluate
  your sales force?
• Gross Profit/Margin
• 2. Profit after sales force salaries,
  commissions and selling expenses
• Operating Profit (QuickBooks calls this Net
• ordinary income)

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• Revenues/sales/fees does not focus sales force
  on anything regarding costs they have no
  incentive to sell the service or product with the
  highest margin/profit.
• Gross Profit/Gross Margin provides incentive to
  sell the most profitable services and goods and
  also provides incentive for the sales person to
  control or influence costs/expenses.
• Profit after selling expenses provides
  additional incentive to have sales control
  promotions, advertising and other sales costs AND
  makes them cover their own cost (salaries and
  bonus).

5
Example Income Statement (P/L Statement)
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Some simple ratios to evaluate the sales force.

• Revenues
• people employed
• Revenues
• sales people
• Revenues
• Sales salaries bonus(commission)

• A productivity measure for the whole
  organization.
• A productivity measure for the sales team.
  Average revenue
• A productivity measure/profit measure for the
  sales team that must be greater than one if they
  are covering their costs.

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• Revenues new clients/customers
• Sales salaries bonus(commission)
• Do all of the above ratios with Gross profit
  and/or Profit after sales force salaries and
  commissions

• A productivity measure that focuses on new
  customers the future.
• Productivity measures using gross profit or
  profit after selling costs tells the owner of the
  business the contributions they are benefiting
  from.

8
Some simple ratios to evaluate and compare the
individuals on the sales force. The higher the
ratio the more valuable the individual is to the
organization.

• A productivity measure for the sales team. This
  is the average revenue per person on the sales
  force. Compare this to the revenues per sales
  person.
• Using all sales salaries and bonuses this shows
  the average contribution. Compare this to the
  revenues per each individuals salary and bonus.
  The highest is the best producer.

• Revenues
• sales people
• Revenues
• Sales salaries bonus(commission)

9

• Revenues new clients/customers
• Sales salariesbonus(commission)
• Do all of the above ratios with Gross profit
  and/or Profit after sales force salaries and
  commissions

• Same as above except now the focus is on new
  clients and customers.
• Interpret the ratios as the highest represents
  the sales person who provides the most
  contribution to the overall business.