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If you read my last post you know that I am a big proponent of calculating how much money you want/need to make on an annual basis as a primary goal for sales professionals. This principle should also be used by sales managers to motivate their people. It’s simple, determine what your income goal is and then see what you need to do in order to achieve that goal. This sounds easy to calculate, and is, by using the following formula. Reality check: Calculating the goal is easy, getting there is where the real work comes in. As we all know, if you don’t have a target…

Your Total Pay = Your Base Salary + Your Annual Commission

Let’s break it down one more step.

Your Total Pay = Your Base Salary + 12(Monthly Average Order Total X Commission Percentage)

Using the assumptions above you can calculate how much you need to sell each month to reach your annual income goal by using the following formula.

Monthly Average Order Total = (Your Total Pay – Your Base Salary) / (12 X Commission Percentage)

Here’s an example.

Debbie wants to make $83,000 per year, her base pay is $45,000 and her company pays her 15% commission on each order. How much does she need to sell each month to reach her goal? (And you thought you’d never use those word problems from junior high algebra.)

Monthly Average Order Total = ($83,000 - $45,000) / (12 X .15)
Monthly Average Order Total = $21,111

Debbie needs to sell $21,111 per month to make her annual income goals. How she is going to do it is where the real work comes in.

Tags: commission

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