Many sales organizations will periodically experience a windfall sale. In some cases the win fell into the lap of one of the sales reps and in other cases, the sales person played their cards right, the stars aligned and the big sale occurred.
Back in my earlier days as a sales manager, I had a situation where we secured a piece of business that on its own made up a pig part of our sales target. Obviously a great thing. For the rep who owned the account, it meant overachieving on his sales quota by 3x and a big potential commission. This would have normally presented a challenge for my company in terms of funding the commission, were it not for the fact that I had pre-negotiated a “bluebird” clause in the sales comp plan for my reps which effectively allowed me to negotiate the commission for any large and unusual sale. Here are some of the things that I considered in negotiating a fair commission for my rep.
What is Windfall Sales?
A windfall sale is when a product or service suddenly sells a lot more than expected. This usually happens because of things outside of the business’s control. This sudden surge in sales can lead to a substantial increase in revenue and profit for the company.
While windfall sales can provide a financial boost to a company, they are often temporary in nature and may not be sustainable in the long term. Businesses must carefully handle windfall sales and find ways to make the most of the increased revenue. They should also plan for when sales return to normal after the windfall ends. Additionally, businesses should be prepared to meet the increased demand and ensure customer satisfaction during these surges in sales.
Effort and Fairness
In typical sales deals for our company, the rep would play the lead role, with minimal or no support required from management or others in the company. In the case of this large win, there was significant involvement by senior management and other members of the team to develop, negotiate and close the deal. While the sales person was credited with the win, many team members invested considerable energy to help win the business but would not normally receive commissions or any other type of bonus. Would I share the full commission to those involved or adjust the commission to compensate for the opportunity cost of pulling others out of their normal roles?
Precedent
Sales people dream of big commission cheques and because we had a well designed compensation plan, when they were earning well, the company was doing well. Whatever we decided to do with the commission to be paid on this large sale, I didn’t want to discourage this rep or any others from pursuing deals that are good for the company and a large profitable deal is definitely a good thing.
The Bluebird Clause or Windfall Profit Clause
A windfall profit clause (or bluebird clause) addresses how unexpected or unusually high profits will be distributed to the sales representative.
A windfall profit clause was critical when navigating the windfall sale mentioned above. In the end, we worked out a split and spread the commission amongst those involved with the majority going to the sales rep. We also worked out a timeline for the commission to be paid over time as we were a small company and the cash flow from the contract didn’t support the commissions to be paid on the normal schedule. The rep was comfortable with all of this because we had identified in their comp plan how we would deal with kind of a situation and we negotiated a fair deal.
To your success!
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Eliot Burdett
Eliot received his B. Comm. from Carleton University and has been honored as a Top 40 Under 40 Award winner.
He co-authored Sales Recruiting 2.0, How to Find Top Performing Sales People, Fast and provides regular insights on sales team management and hiring on the Peak Sales Recruiting Blog.
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