Focus your sales team on profits

In most businesses, the sales team is incentivized based on the amount of revenue they bring in. This drives sales teams to discount products or services and offer special priced bundles to trigger higher sales commissions. However, this is often at the expense of generating strong profit margins after accounting for production and delivery costs.

Focusing on revenue can lead to short-term thinking and chasing after unprofitable deals. By incentivizing your team to focus on profits, you can focus people on selling products and services that will contribute positively to your bottom line. This helps everyone to think long-term about how their actions impact the bottom line and will support you in delivering your financial goals.

During this lesson, we will discuss the benefits of incentivizing your sales team to focus on profits and how you can go about doing it:

Benefits

Here are three benefits of incentivizing your sales team to focus on profits not revenue:

First, incentivizing your sales team to focus on profits will help ensure that your company is making money. This is obviously a key goal for any business and will generate you with more cash to invest in delivering the business plan.

Second, incentivizing your sales team to focus on profits will help them better understand what types of products and services are most profitable for the company. This knowledge can help the sales team be more strategic in their selling efforts, and it can also help the company make more informed decisions about which products and services to offer.

Finally, incentivizing your sales team to focus on profits will motivate them to sell more efficiently and effectively. When the goal of making money is tied to individual performance, salespeople are likely to work harder to hit their targets. This increased motivation can lead to better results for the company overall.

Approach

Here are five ways that you can incentivize your sales team to focus more on profits rather than revenues:

1. Create a sales commission structure that is tied to profits rather than just revenues
2. Set goals for your sales team that are based on profits rather than revenues
3. Make team bonuses dependent on the company’s profitability level
4. Implement a finance team approval policy for discounts
5. Defer the timings of sales commissions until the profit has been achieved

Each of these metrics will encourage your sales team to become more profit focused. However, this should be weighed up against overall motivation levels as you need everybody to be fully committed towards delivering your goals.

Consideration points

Before implementing the above, it is worth considering the following points:

• Is profitability your main strategic objective, or are you prioritizing growing revenues at this stage of your business life cycle?
• How much influence and control do your salespeople have over profits?
• Can you reliably measure gross margins at product level across each division?
• Do you want to share profitability data with your salespeople?
• Do salespeople drive pricing, or have you already restricted discounts?

These are important consideration factors as you need to encourage people to deliver your strategic priorities and you may demotivate those who are being incentivized on items out of their control.

Summary

There are obviously many benefits to incentivizing your sales team to focus on profits rather than revenue. By creating a culture of profit-focus, you can help your company to deliver better performance and achieve greater success in the long run.