Introduction Compensation is a powerful tool in business operations, particularly when it comes to sales teams. Well-crafted compensation structures not only motivate employees but also safeguard the company’s financial health. However, finding the right balance is often difficult—especially in industries like roofing where compensation models are heavily influenced by external factors such as client funding schedules and job completion timelines.
The Thin Margin of Error in Compensation At scale, even the most generous compensation models can be unsustainable if not aligned with the business’s production capacity and cash flow. Many business owners, particularly in roofing, fall into the trap of overpaying or underpaying without understanding the long-term financial implications of their decisions. Overpaying can drain resources, while underpaying can lead to high turnover rates among sales teams. Proper planning and forecasting are essential to maintaining a healthy balance between fair compensation and company profitability.
Setting Realistic Goals and Adjusting Compensation Models One of the key elements of successful compensation planning is setting realistic goals based on business capacity. A roofing company owner I worked with initially thought their compensation model was generous, but they failed to consider the added responsibilities on their sales team. As a result, it became financially unfeasible to meet expectations without either increasing sales or adjusting compensation. This example highlights the importance of regularly revisiting compensation models to ensure they remain aligned with company objectives and employee needs.
Reverse Engineering Targets and Micro Actions Once a clear financial goal is set, it’s possible to break down that goal into smaller, actionable steps. For instance, if the monthly target is $100,000 in sales, and each sale averages $20,000, the goal becomes five completed jobs. However, due to factors such as insurance denials and funding issues, more contracts may need to be signed. This leads to a deeper analysis of the necessary daily activities—like door knocking—required to achieve the goal. For roofing businesses, where commission-only compensation models are common, it’s vital to determine whether employees can realistically achieve the daily targets while still meeting their financial obligations.
Feedback Loops and Performance Monitoring By breaking down the entire sales cycle into measurable stages—such as lead generation, customer engagement, and job closure—companies can identify weak points in their sales pipeline. This allows for more precise intervention and coaching for underperforming reps, improving overall team performance. Roofing companies can particularly benefit from this data-driven approach by identifying areas where sales efforts consistently fall short and addressing them before they impact revenue.
Cash Flow and Payment Delays The roofing industry, especially when working with insurance-funded projects, often deals with significant payment delays. Sales teams may need compensation structures that account for these delays to prevent cash flow issues for the sales reps themselves. Without a strategic approach to managing cash flow, roofing companies risk losing both sales talent and their own operational stability. This balance becomes even more crucial when considering commission-based payment structures, as reps often face months without income before a job is funded.
Conclusion The importance of designing compensation structures that are both motivating and sustainable cannot be overstated. In the roofing industry, where cash flow and client funding cycles play a substantial role in financial planning, compensation must be carefully considered in relation to the business’s long-term viability. By aligning compensation models with realistic sales goals, ensuring the model works for both employees and the company, and regularly monitoring performance, businesses can maintain a healthy, motivated sales team that is incentivized to meet goals while also safeguarding the company’s financial future.
