Risks

Without a well-constructed sales compensation plan, a company can be unprepared and at risk in a variety of circumstances:

• Delivery schedules may become delayed. This, in turn, delays commission payments and revenue for the company.  This causes major concerns on several levels for the field sales organization, senior management, finance, manufacturing and engineering.  Processes need to be at work to minimize impact.
• Products or services are delivered that are not stable or have other operational issues. This is extremely demotivating to sales and customer service.  How quickly and effectively the company handles these situations can have a major impact on future sales, employee retention and revenue objectives. 
• Key sales and sales management personnel may leave the company.  Replacing these people is critical and bringing new sales personnel up to speed quickly and to the same production levels of those they are replacing is always a major challenge.  In some cases overall sales productivity will fall off for a period of time.  Sales people develop strong relationships with their customers over time; when they leave and go to a competitor, the customer will sometimes follow them.
• Regulatory issues can lead to the shut down of the shipment of a product or service. The same risks described above come into play (lags in revenue, eroding motivation). However, regulatory delays that lead to sales compensation delays can be even more troublesome, depending on how quickly engineering or quality assurance can resolve the issues and begin shipments or service contracts again.
• Product or service delays may lead your existing customer base to become dissatisfied. If existing customers start looking at competitive products or services, this can create major hurdles to the company reaching its financial objectives and retaining key sales and sales management personnel.
• Competitive product or service introductions with improved performance specs can have a major on impact on your business performance.  A number of a firm's existing customers may hold off on making decisions until they have had an opportunity to evaluate the new product or service.  The firm should anticipate these introductions and their inherent challenges and plan accordingly.
• Macro-economic conditions change, leading customers to cut back or change their purchase plans.  The company needs to quickly implement programs addressing the economic challenges of its customer base and work to minimize the overall economic impact on the company and its sales force.
  

Opportunities

With a well-constructed sales compensation plan, a company positions itself for opportunity:

• A company's products or services exceed expectations. As a result, rapid demand growth creates a situation where financial objectives can be maximized.  This creates an atmosphere of excitement, loyalty and motivation.  Another potential outcome from this situation: top sales people and management from competitors and other industries may seek opportunities within your company. 
• Exceeding financial objectives creates an environment and culture of excitement, loyalty, motivation and pride. This normally spans across all disciplines within the company and is an ideal position to strive for.  Pride and confidence in the company and management will grow, leading to a more motivated, effective sales team.
• Sales and market-share growth bring positive attention to the company. This may result in a higher stock price for a public company.  Non-public companies benefit from the visibility for additional investment, IPO, or acquisition. In either case, sales people will be buoyed by internal pride, loyalty and motivation to continue fueling growth.