This article answers the following questions:

 * How do most companies look at return on investment (ROI) for 
   their sales compensation expense?

 * What portion of sales compensation expense do companies 
   allocate to managing existing accounts versus pursuing new 
   accounts?

 * Do most companies expect their salespeople to generate new, 
   additional gross profit each year that is equal to or greater 
   than their compensation?

One conclusion I have reached after working with many different 
kinds of companies is that there is little commonality in how 
they establish the desired return on investment (ROI) from their 
sales compensation investments. Every company's circumstances are 
different; as a result, what might constitute an acceptable ROI 
for one company will not be considered acceptable by another 
company.

Here are some questions to consider as you determine the desired 
sales compensation ROI for your company, and how that ROI should 
be split between existing accounts and new accounts:

 * What is the value of each sales dollar produced? Is the value 
   different if a sales dollar is produced by an existing account
   versus a new account?

 * How does the time and effort required to maintain (and grow) 
   existing customers compare to the time and effort required 
   to bring on new accounts?

 * Do accounts operate pretty much on "autopilot" once they have 
   been brought on board, or must your salespeople continue to 
   invest significant effort (in terms of internal prospecting, 
   opportunity qualification, proposal generation, relationship 
   management, etc.) to maintain sales volume and profitability?

 * Once an account has been brought on board, can ANY salesperson
   manage the relationship, or is there something special about 
   the relationship that exists between the current salesperson 
   and the account?

I have seen cases where management held the opinion that ANYONE 
could manage and maintain the volumes of business that were being 
produced by major accounts. They questioned why they should 
continue paying high compensation to the salespeople who were 
managing those accounts.

In some cases management chose to reduce commission rates, which 
caused the salespeople who had been managing the accounts to 
leave the company. In other cases management simply switched 
account assignments and assigned less "expensive" (in terms of 
compensation) salespeople to the major accounts. Far too often 
the outcome from either approach was a slow decay in revenue that 
eventually added up to millions of dollars in lost sales.

Why did this decay in revenue occur? Close inspection identified 
two key reasons:

 * The replaced salespeople had enjoyed truly special 
   relationships with key players in the accounts. The key 
   players' loyalty was to the salespeople, not the 
   salespeople's employers. When the salespeople left, the 
   key players saw little reason to continue to favor the 
   salespeople's (previous) employers with their business.

 * The replaced salespeople were extremely responsive and 
   provided extraordinary levels of service. In some cases these 
   salespeople were unusually successful in navigating their 
   employers' informal networks. This enabled them to solve 
   problems and do favors for their customers with a timeliness 
   that other salespeople could not match.

If you determine that some of your salespeople DO have enough 
bandwidth to bring on new accounts, here are questions to 
consider as you set their "new business" goals:

 * What level of market penetration has your company achieved 
   to date?

 * How much additional market penetration can your company 
   reasonably expect to accomplish within a specified time frame?

 * How many potential prospects exist in each sales territory?

 * How do these potential prospects compare to your existing 
   customers in terms of revenue potential?

 * How many new prospects will a salesperson need to close to 
   make any appreciable difference in their numbers?

Here are some final questions for you to consider:

 * What percentage return are you currently receiving on your 
   sales compensation investments?

 * Do your salespeople produce multiples of their compensation 
   in terms of profits back to your company?

 * Is it really reasonable to expect your sales compensation 
   ROI to grow every year?

In conclusion, the questions asked in this article can help you 
determine the desired return on your sales compensation 
investment, plus develop targets for ROI from existing accounts 
and new accounts. Don't let the fact that some salespeople earn 
high compensation cause you to set your ROI goals too 
aggressively. Instead, focus on the question, "How much return do 
we receive on the sales compensation we pay?" A solid return on 
your investment means you are completely justified in making that 
investment! 

Sales performance expert Alan Rigg is the author of How to Beat 
the 80/20 Rule in Selling: Why Most Salespeople Don't Perform 
and What to Do About It. His company, 80/20 Sales Performance, 
helps business owners, executives, and managers DOUBLE sales by 
implementing The Right Formula™ for building top-performing 
sales teams. For more information and more FREE sales and sales 
management tips, visit http://www.8020salesperformance.com.