|
CompensationMaster Newsletter Article, February 2002 Now that you have closed the books on 2001, it's time to take a
look at your results and see what changes—if any—need to be made for 2002.
First, obtain the following statistics for the past three
years. If you don't already have them at your fingertips, they should be in the
end-of-year information you get from your accountant:
 |
Total revenue |
|
|
Total expenses |
|
|
Operating profit |
|
|
Sales representatives ranked by production |
Start by looking at the trends. Revenue and profit should both
be increasing. Now calculate the percentage increases. Are they comparable?
Revenue and profit should be growing at the same rate. If they aren't, that's
your first indicator of a problem.
Now look at expenses. They should be growing at a slower rate
than revenue—and, optimally, slower than profit. If not, that's a second
indicator. Also look at what expenses are increasing. Are they temporary
investments that will help you increase revenue, or are they permanent?
Finally, look at production levels for your sales force over
the past couple years. Are they fairly stable? If there have been lots of
changes, particularly if revenue is up and profit is not, that's a third
indicator. Significant increases in productivity, such as those brought about
by the Internet or customer relationship management software, cause many
financial problems.
How did your company do?
If you passed with flying colors, congratulations! If not, there's still plenty
of time to make changes. Many profitability problems can be fixed, particularly
in commission-based industries, by adjusting your compensation plans
appropriately. At a minimum, though, you'll want to go over the results with
your accountants.
Back
to Newsletter Archive
|
