Amplify!, Business Dev/Sales

Amplify | Unveiling the Art of Compensating Business Developers

There are two broad types of business developers – hunters and farmers. Hunters are proactive individuals seeking new opportunities, while farmers focus on nurturing existing relationships and uncovering opportunities within the current client base. Who a firm ultimately hires depends on the firm’s specific goals and growth strategy. However, compensating these business development executives is quite nuanced and compensation is not a one-size-fits-all model.

From navigating commission structures and addressing concerns about high compensation to emphasizing the importance of uncapped commissions and realistic ramp-up periods, there is a lot to consider for firms seeking to optimize their business development strategies. In a recent Amplify! podcast, Ty Hendrickson, the leader of sales training and business development coaching at Inovautus Consulting, shared valuable insights into the dynamic world of business development within the accounting profession.

For firms contemplating the introduction of business developers, start by defining the specific needs of the organization. Whether it’s a hunter focused on new opportunities, a farmer building relationships, or a hybrid of both, understanding the strategic goals helps in crafting targeted job descriptions. Tailoring the requirements ensures that firms attract candidates aligned with their business development objectives. Then offer these business developers compensation that motivates them to perform at their best for you.

Deciphering Compensation Models

One of the most pressing questions for firms delving into business development is how to compensate business development professionals. Ty emphasized that there are any number of possible solutions, but the compensation generally includes a combination of base salary and commission. The challenge lies in determining the right balance, considering factors like the individual’s goals, the firm’s margin and the nature of the business developer’s role.

According to Ty, business developers are often motivated by compensation, and a base salary alone may not align with their expectations. While commission structures vary widely, most business developers have a base salary plus commission model. The commission structures can differ significantly, ranging from lower bases with higher commissions to vice versa, reflecting the diverse expectations and backgrounds of business developers. Commissions typically range from 3% to 10%, with variations based on factors such as the type of commission (split or individual) and the goals set for the business developer. And the amount may vary depending on whether the new work is recurring or project-based.

One notable approach involves a staggered commission model over two to three years. Some firms opt for an upfront payment on expected costs in the first year, followed by increasing commission percentages in subsequent years. This strategy aims to incentivize long-term relationship building, acknowledging the recurring nature of client relationships in the accounting profession.

Navigating the Credit Quandary

A big challenge in business development is determining who gets credit for leads, especially in scenarios where multiple individuals contribute to the client acquisition process. The most common is the seller-sourcer model, where credit is shared between the person finding opportunities and the one closing deals. However, Ty highlighted the need for clear guidelines to avoid conflicts and ensure fair compensation for all involved parties.

Incentives are pivotal in driving business developers and partners to collaborate seamlessly. By tying compensation to recurring work, a symbiotic relationship is nurtured, fostering continuous engagement and client satisfaction. The speakers stressed the value of maintaining relationships beyond mere lead generation, emphasizing that ongoing communication and collaboration are vital for retaining clients and ensuring sustained revenue growth.

Commission Structures and Compensation Conflicts

When compensating business developers, especially high-performing ones, there is a potential for conflicts. Consider that business development professionals could earn a base salary of somewhere between $80,000 and $250,000, depending on the individual’s performance and contributions. With commission added on, the best business developers may earn more than partners within the organization. Not all shareholders will be comfortable with that.

The key to overcoming concerns about high compensation lies in evaluating the value brought to the firm. Rather than fixating on the absolute amount paid to a business developer, firms should consider the substantial revenue generated through their efforts. If a business developer can secure $2 million for the firm but is compensated $300,000, the net gain to the firm should be the focus, demonstrating the significance of looking beyond the immediate costs.

To control compensation, some firms consider capping commissions, but this is not advised. Ty has seen hard caps lead to decreased motivation and productivity. It encourages individuals to hit their limit and then coast, diminishing the potential for further revenue generation. Rather, align incentives with continuous performance and client relationship management.

The Ramp Period and Realistic Expectations

Before a business developer can start making significant contributions, there will be a ramp period. Depending on the individual’s familiarity with the industry and community connections, the ramp-up time can vary from six months to a year. To support business developers during this phase, some firms opt for higher base salaries or draw structures, ensuring that individuals feel adequately compensated while building their pipelines.

Beyond sales goals, which are imperative, there are other key performance indicators (KPIs) that business developers can control that should be tracked, especially during a ramp-up period. Activities such as community engagement, lead generation and relationship building are tangible aspects that directly influence the achievement of sales goals. Including these metrics in compensation structures allows firms to coach and monitor business developers effectively, fostering a holistic approach to performance evaluation.

Focus on a Win-Win Scenario for Sustainable Growth

While there is no single solution when it comes to compensating a business developer, firms must carefully consider their goals, the role they want their business developer to play, and the dynamics of their specific industry and market. Then be sure to align compensation with the goals and expectations of both the firm and the business developer, creating a win-win scenario for sustainable growth.

As the business development landscape in accounting firms continues to evolve, firms can tailor their approaches, ensuring they attract, retain and motivate the right talent to drive success in an increasingly competitive marketplace.

 

This blog post was written based on content from the latest season of Amplify, the podcast of AAM – dedicated to firm growth. This article is based on Season 4, Episode 2, featuring a conversation with Ty Hendrickson, the leader of sales training and business development coaching at Inovautus Consulting. Learn more about the podcast and listen first-hand at https://accountingmarketing.org/category/amplify/

About Katie Tolin


Katie Tolin is the president and chief growth guide at CPA Growth Guides. She’s a former in-house marketer having spent time at regional, super-regional and national accounting firms. Today she helps CPA firms drive top-line revenue and profitability through data-driven marketing strategies. She’s a past president of AAM, a former marketer of the year and was inducted into the Accounting Marketing Hall of Fame.

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