What is a 70 30 sales plan?

Decoding the 70/30 Sales Compensation Plan: Base Stability with Incentive Potential

In the dynamic world of sales, compensation structures are crucial tools for attracting, retaining, and motivating top talent. One popular model, the 70/30 sales compensation plan, strikes a balance between financial security and performance-based rewards. Let’s break down what this plan entails and why it’s often favored.

At its core, a 70/30 plan signifies the distribution of a salesperson’s Total Target Compensation (TTC). This TTC is the total amount a salesperson can realistically expect to earn if they achieve their pre-defined sales goals. The 70/30 split dictates how this potential earning is allocated.

The 70% Base Salary Foundation:

The cornerstone of the 70/30 model is the significant 70% allocated to a guaranteed base salary. This fixed income provides salespeople with a sense of financial stability and predictability. It allows them to cover essential living expenses and plan their finances with confidence. This is particularly appealing to salespeople who are risk-averse or are just starting their careers. The base salary also incentivizes salespeople to focus on long-term relationship building and strategic account management, rather than just chasing quick wins.

The 30% Incentive Opportunity:

The remaining 30% of the TTC represents the incentive component of the compensation package. This portion is directly tied to the salesperson’s performance, specifically their ability to meet or exceed pre-determined sales targets. These targets can be based on various metrics, including:

• Revenue Generation: Achieving a specific dollar amount of sales.
• New Customer Acquisition: Bringing in a defined number of new clients.
• Product Sales: Promoting and selling specific products or services.
• Quota Attainment: Hitting overall sales quotas within a given timeframe.

This incentive-based component serves as a powerful motivator, encouraging salespeople to actively pursue leads, close deals, and strive for excellence. It rewards high performers and directly links their earnings to their contributions to the company’s bottom line.

Understanding the Significance of TTC:

Regardless of the compensation structure, understanding the Total Target Compensation (TTC) is paramount. This number represents the full earning potential in a given sales role, assuming the salesperson meets their targets. Without knowing the TTC, it’s difficult to accurately assess the value proposition of a sales position and compare it to other opportunities.

Why Choose a 70/30 Plan?

The 70/30 model offers several advantages for both salespeople and employers:

• Attracts a Wide Range of Talent: The base salary component provides security, while the incentive component attracts ambitious individuals driven by performance.
• Reduces Financial Anxiety: The significant base salary allows salespeople to focus on their work without the constant pressure of solely relying on commissions.
• Encourages Strategic Thinking: A stable base allows salespeople to invest time in building long-term relationships and strategic planning.
• Motivates Performance: The 30% incentive keeps salespeople focused on achieving targets and driving revenue.
• Provides Predictable Costs: Employers can better budget for sales expenses with a large portion of compensation being a fixed cost.

In Conclusion:

The 70/30 sales compensation plan offers a balanced approach, providing salespeople with financial stability while simultaneously incentivizing high performance. By understanding the importance of the Total Target Compensation and the distribution within the plan, salespeople can make informed decisions about their career path and employers can attract and retain top talent to drive revenue growth. The 70/30 plan is a powerful tool when implemented effectively and aligned with the company’s overall sales strategy.

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