barcode font excel 2003 free Advanced Thinking about Income Producer Commission Rates in Software

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Advanced Thinking about Income Producer Commission Rates
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We suggest that companies consider the following adjustments to the traditional flat commission formula for income producers when presented with the following conditions:
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Increase commission rates if the income producer is instrumental in adding substantial incremental growth Reward the economic contribution of the income producers when they singularly drive new revenue growth Provide a progressive commission rate for these new dollarsA progressive ramp commission schedule motivates additional sales, recognizes contribution, and helps contribute to seller loyalty Figure 6-7 is an illustration of a progressive
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Component Progressive Ramp Participation Rate
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Commission Rate to Agency Varies by Product, Between 5% and 10% Seller Performance To $5M $5M $75M Over $75M Commission Split Seller 20% 22% 25% Agency 80% 78% 75%
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1st Participation Rate 2nd Participation Rate 3rd Participation Rate
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Figure 6-7 Progressive Ramp Participation Rate
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participation rate for an income producer The agency (employer) gets a commission for selling a product line, in this case, 5 to 10 percent of the sale priceThe principal of the agency then in turn splits this with the sellers who work for the agencyThis split is known as the participation rate Figure 6-8 is the method used to calculate the participation rate
$163,125 25%
Compensation
$116,250 22% $75,000 20% $375,000 $562,500 $750,000
Agency Earnings Average Commission = 75%
Figure 6-8 Progressive Ramp Rate Calculation Participation Rate
Figure 6-9 presents the formula for calculating the participation (share of the agency s commissions)
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Six
Participation Rate Schedule
Agency Commissions $5,000,000 $7,500,000 $10,000,000 Avg Agency Commission 75% of Actual Revenue $375,000 $562,500 $750,000 Target Payment to Income Producer $75,000 $116,250 $163,125 Percent Participation Rate 20% 22% 25%
Figure 6-9 Participation Rate Schedule
The first participation rate is calculated as follows: $75,000 $375,000 100 20%
The second participation rate is calculated as follows: $116,250 $562,500 $75,000 $375,000 100 22%
The third participation rate is calculated as follows: $163,125 $750,000 $116,250 $562,000 100 25%
Increasing the participation rate from 20 to 22 to 25 percent recognizance, in this case, is the pivotal role of the salesperson in securing additional business
Decrease commission rates as volume increases when income producer is incidental to added growth While a regressive commission rate schedule may be motivationally challenging, in situations where additional sales volume (bluebirds) is not caused by exceptional sales efforts, then using regressive commission rates is appropriate Reduce sales compensation credits for recurring revenue Review crediting practices for recurring revenue If the income producer is instrumental in maintaining and reselling the recurring revenue, then include all recurring revenue in incentive calculations If recurring revenue is inherent in the original sale and does not require hands-on attention by the salesperson, reduce or discount recurring
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revenue Consider terminating, after a period of time, the revenue credit on recurring revenue if the income producer s influence is inconsequential
Establish a tiered producer program A tiered program provides different categories of commission participation depending on levels of performance, investment, certification, and exclusivity, for example, Platinum, Gold, and Silver, or I, II, and IIITiered programs allow differentiated commission treatment
Unlimited earnings means just that: unlimited The president of a privately held investment company was dismayed to learn that the top salesperson was to earn incentive payments five times what was expected What was he to do After years of lackluster performance, a new management team was brought in to revitalize the commercial real estate unit With an uncapped incentive plan, the new team produced sales results in excess of any conceivable level Now, faced with making payments far in excess of intended levels, what should the president do Preferred Solution: First, pay the incentive owed A good lawyer will have no trouble in convincing a judge that the company is in breach of contract if it fails to pay Second, redo the compensation plan to manage upside earnings For example, use a regressive commission rate above a high sales level, or cap the earnings on any one order or account
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