If you’re an insurance sales manager or you’ve just started up an insurance agency, you may be reconsidering your current sales compensation package to find that sweet spot that yields more sales. If you pay too little, you won’t keep your talent pool high. If you pay too much, you won’t be able to scale your sales with the growth you experience. There is an amount somewhere in between these two extremes that will cause your successful salespeople to stay and push hard to deliver results. We want you to find that perfect balance so consider these 5 time-tested tips:
1. Should I Pay More in Salary or Bonus?
If you’re hoping to grow and expand, you’ll want to push your producers to yield the best results. As you probably already guessed, commissions and bonus-heavy compensation packages are the best for getting employees to perform their best. Not only will you be giving your sales people an opportunity to make more than a salary would yield, commissions and bonuses are a good way to ensure consistency (or else they’ll just make less money).
No one over-performs when there’s a ceiling to their income. Well, maybe a few, but that is rare for sales people. Commission and bonus-based methods work very well for insurance sales, both for independent and carrier agents and producers. The power behind this compensation plan is incentive. Without incentives to push harder, people generally don’t give 100%. To maintain their set salary, they don’t feel they need to give more than the minimum. Whether they perform with mediocrity or do the best they possibly can, your team will see their performance reflected in their paychecks.
If you want to retain top talent and at the same time have little overhead, commissions and bonuses are the most inexpensive way of doing it. While this may or may not be the way to go with your sales manager, sales executive, vice president of sales or chief revenue officer, it almost always makes sense with producers and sales agents.
2. How Do I Structure a Salary for My Sales Reps?
Since you’ll be paying a commission or bonus to reps for meeting their sales objectives you’ll want to focus on what their journey entails when coming up with a fair salary. The salary should focus on leading indicators, which can predict strong sales numbers. For example: the number of appointments that will be set by your producer; the number of leads the rep is bringing with him/her; the time spent on win-backs and a prediction of success; and the number of leads you’ll be supplying your producer.
This leads to an important point about lead generation: You will want to pay a much lower salary and a higher commission/bonus if you are the rep’s only source of leads. This is not only advantageous for growth, but you will feel more comfortable setting aside a budget for buying leads. Most agencies rely on ad-tech agencies like SmartFinancial to buy the best organic leads. Otherwise, they’d have to build out a marketing department, which would be huge overhead. You should also let your producers know that you’re spending money on these leads and investing money in their success. This is another way of motivating your sales force to yield results.
3. Compensation Strategy: Tie Goals to Pay
First, you will want to come up with a total revenue figure that will be challenging but not unrealistic. Next, you will need to look at prior years’ numbers. What is your ratio of leads to sales? How many leads will you need to generate to reach your goal? How many deals do you need to close to reach your goal? How many leads should you budget to buy? How many producers will you need to hire to get the job done? Calculate the commission percentages and salaries. If the numbers are not turning out the way you want, crunch new numbers until you find exactly what you need from the people who work for you and what price you can pay them.
4. How Often Should I Pay Out Commissions?
Chances are that many of your sales reps are young or just starting out. For this reason, paying out commissions fairly regularly (every week or every two weeks) is definitely preferable to paying out commissions in one lump sum. You will want to reward successes frequently and with big fanfare. One thing all good producers are known for is their love of winning, so showing them you take notice with a timely commission goes a long way. Keeping them hungry when they are performing well is demoralizing.
Contrarily, your VP of sales or sales director will be fine accepting a year-end bonus because they can afford to wait it out a year.
Rule of thumb: You want people to reach high, but you don’t want to keep them struggling too hard -- or else, they’ll jump ship, especially if they are talented at sales.
You also want to streamline the compensation process. Even though you have already created a formula for how to reach your goals, that doesn’t mean you have to explain it to your reps in calculus. Make it simple so they are able to see where they stand and how much they can earn if they work their butts off.
5. Other Incentives
Do anything you can to motivate your team. Make their achievements visible. Have a dashboard or a board on the wall so they see how they are faring against one another (possibly even in previous weeks and months).
If getting your producers to feel a sense of gratification for their hard work means weekly pay, it means weekly pay. If it means a fancy lunch for each month’s leading producer, cheers! If it means a group outing and free shots for the winner, this may be a fun way to push everyone to work their hardest and prevent turnover. Whenever you feel the overall energy of your team lagging, add on a contest or new incentive.
Only you know what you can offer and how much you can spend while still looking to that big-picture goal. As much as possible, get the whole team involved. Try to celebrate a couple of people’s successes each quarter in case the same top earner over and again (this happens often). Only you know what incentives you can afford to offer. Make it good!