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What compensation strategy works best to scale up business development in a tech consulting company?
I am running a consulting company and currently I am the only person doing business development. I would like to scale up business development by also incent my other consultants to participate in business development. What is a good balance of giving commission / profit sharing vs still making a healthy margin?
I am good in tech, but new in sales and business development, so any advice is appreciated!
Neal Benedict Entrepreneur
Private Equity Portfolio COO | Board Director | VP Sales & Marketing | Strategy | Execution | Leadership
Much like any skill business development (sales) needs to be trained and nurtured over time. You can certainly design and administer a comp plan that drives certain behaviors. However, if you don't have experience in this area you often times find yourself dealing with the cobra effect (https://en.wikipedia.org/wiki/Cobra_effect).
In a company like yours it is difficult to divorce sales responsibilities from your consultants "day job". That being said you should likely engage with a expert in selling to discuss putting the right incentives and process in place to ensure that your efforts are effective.
So to answer your question it would be difficult to give you the "right" answer to you question on variable compensation without understanding your goals and organization in more detail.
Geoffroy VILBERT Entrepreneur
Founder - OPTEAMUM
Good morning Kristian,
I can understand your issue because myself dealing with it for years... ;-)
I will share with you different items and ideas hoping that it could help you...
- Myself was responsible of 90% of the business development during at least 6 years with the terrible limit of my customer/network portofolio and also geographical coverage considering that I am developing the company in more than 15 countries...
- My first change was to modify my recruitment profiling to choose affiliates and consultants which have a better customer relationship management skills
- I implemented there a business waterfall process energized by a simple rule, each one within the company could be sourcer, leader and/or producer on a project per project basis
- Then I implemented sophisticated (but user friendly) IT solutions to monitor, share and secure this process
- Then I changed the affiliation contract putting from early stage a business plan per consultant (with reasonable objectives)
- I offered a different royalty program: 20% for the company if we bring them the lead but only 10% if they bring the lead
- I created tutorial and document to explain "HOW TO?": sign a mandate, qualify a lead....with basic question lists and action plan to execute
- I implemented all this inside an "ACADEMY" with Processes templates and Documents templates
- and actually I spent myself more time to manage my team instead of producing to many customer projects
Hope it will be helpful
Ron Dimon Entrepreneur
Director at Deloitte Consulting
I've worked in several consulting organizations (from Global Systems Integrators to Boutique specialty firms) and, in general, consultants who also have business development responsibilities have a multi-part comp plan that, as you mention, you want to design to incentivize the right behavior. Here are some components to think about:
1. Utilization against target (this is the basic incentive to drive billable hours). So if you set an 80% utilization rate, and the consultant meets or exceeds, that's one part of their bonus (this is the meat and potatoes);
2. Team or group utilization for managing consultants (to help make sure the senior consultants are keeping the more junior ones applied);
3. Business dev bonus - based on net revenue (this helps the consultants keep margin front-of-mind, comp is based on revenue net of cost of service and any quality concerns/unpaid invoices). You can split this into 2 parts: net new clients and/or existing client expansion - depending on what your goals are; and
4. Profit share - again, based on net margin, for the firm as a whole.
The trick for introducing a new comp plan based on business development is to make sure consultants don't take their eye off of the real reason they are there: providing quality services (utilization) to clients. So you can add in some caveats to each part of the bonus. For example, you can't earn your business dev. bonus if customer sat is below a specific measure (Net Promotor score, for example). Or you can't earn your biz dev bonus if your utilization is below 70%.
Then you put a plan in place and set the expectation that you will adjust the plan accordingly each quarter until you get the behavior and results you want.
I would also recommend Daniel Pink's book "To Sell Is Human" to help consultants get over the stigma of "sales person."
Hope this helps.
Mahesh Srinivasa Entrepreneur
Sales and Business Development is more about building relationship. You would want to involve your consultants who are stronger in relationship building (non-technical at least initially).
It would be a good idea to come up with a standard compensation plan for the first year. Commission structure fornon-equity members andprofit sharingfor equity members would be ideal I believe. You can also have a discussion with your consultants to know their expectation which would help in your decision making.
I am in the same boat as you are and would like to know and learn from your success factors. Let me know if it helps.
And I would like to learn more about your capabilities as well to see if we can collaborate in interesting/common areas.
Neal, Thanks for sharing Cobra Effect information, very relevant and often hard to realize.
Shalini Varghese Entrepreneur
Senior Account Sales Consultant at SCIEX
Have you considered hiring a dedicated Sales/Business Development manager? Instead of creating additional incentives for your current employees, it could be a worthwhile investment to add an employee who can bring this type of experience and skill set to your company.
Thomas J. Kaled Advisor
Business Development Consultant @ email@example.com
Plenty of good ideas here. Agree with a dedicated salesperson whose sole responsibility is to fetch business, assuming you can afford it however there are a number of questions about your firm such as:
Does everyone have the same bill rate?
Is it multidisciplinary, multispecialty?
Do you bill by hour or project?
If hours is there are thresh hold (minimum performance expectation)?
If by project are there guarantee's or pre-set caps?
These are just some of the variables that will impact compensation above hourly rates or in your vernacular "business development".
PN Subramanian Entrepreneur
Global VP-HCM, Utopia Inc
We are not a start up though
A simple Fixed comp and Incentive --Equal amounts have worked well
eg 200K$ PA of Target based comp structure will have a 100K Fixed and 100K Incentives based on Gross Margin,Revenue Targets
I have come across a lower Fixed, higher telescopic incentive structure and Options thrown in too in Startups
Various ways of skinning the cat-Metaphorically (No offence meant -for Animal lovers including me)
Liza Taylor Entrepreneur
Communication Specialist at Keyideas Infotech
Great updateKristian Widjaja.You better hire a BD Executive and provide the basic package that he or she needs. Make sure that you are also working on BD as well so that you would be aware how BD works, which is very important for a Tech Consultant professional. Don't hesitate on giving him or her a handsome incentive. After all, he or she would be your employee. And the more you can give them, the better it would motivate them to assist you. We just can't underestimate BD and the role that BD professionals play.
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