What percentage of annual gross revenue should come from new business?

I need benchmark data on what percentage of annual gross revenue should come from new business and should be allocated to sales force compensation. For example, if in insurance or other annuities there is a commission on first year premiums only and not on renewal business or a reduced rate on renewals. I assume that the 1st year budget for acquisition is higher than maintaining existing customers, but I am curious is that is really the case or if there are any good benchmarks to use as a reference. Can you help?

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I believe your question is about sales roles with a new business focus when the acquired business generally turns into a long-term annuity type relationship. Examples from my experience include insurance policies, ASP software offerings, software leasing, online test delivery contracts, EDI services, data and voice communication subscriptions. In all these cases, the company most values the acquisition of new business, and counts on the quality of the service delivered to retain it.

In these business models, new business sold earlier in the year contributes more to in-year revenue than that sold later in the year as the revenue is generally recognized monthly. For this reason, much of the incentive design effort may be aimed at rewarding those who acquire significant new business early in the year by measuring "in-year new revenue." Retention is sometimes the job of the new business sales person, but is often assigned to a different Account Manager or Client Services role. If the same person is doing both new business and account management, the total revenue from new business may be very small compared to the total revenue from the existing assigned book (5% - 20% of the total). Often the new business is commissioned (based on new in-year revenue or total contract value), and the retained business is handled more as a quota bonus, with the weight on each component proportional to the expected time allocation.

But to get to your specific question, the budgeted sales comp % revenue is likely all over the place, depending on industry and company stage of growth. In very high margin businesses (software, data services), you are likely to see a higher comp % revenue. Similarly, large deal sellers (deals in the millions, tens of millions and more) would see a smaller percent of revenue as their comp; and small deal sellers (I've seen deal sizes in the thousands of dollars) would earn a larger percent of revenue. And in earlier stage companies you are also likely to see higher comp % revenue. The right comp % revenue is really based on the market value of the job (numerator) and the selling model, which generates a reasonable sales productivity expectation per person (denominator).

How to handle compensating Territory Sales Managers who have additional responsibility to coach and train new hires or poor performers.

So just to summarize your previous company history, you have given base salary increases in the past, however, going forward, the duty will be held on a 1-year rotational assignment rather than an on-going responsibility, so you are seeking an appropriate alternative.

First of all, you are wise to avoid adding permanently to the base salary in recognition of a transient responsibility. My suggestion is to provide a separate incentive compensation opportunity based on the sales results of the person being coached. It should probably be about 20% of their total incentive opportunity if you want them to maintain focus on their primary individual selling job. And it should be structured simply. For example, earn 50% of the target incentive if the "coachee" is at least 80% of quota, 75% at 90%, 100% at 100%, 125% at 110%, 150% at 120% or better. I'm not at all sure the performance range here (80% to 120%) is right for your business - so you should adjust those depending on the aggressiveness of your quotas and the predictability of your business.

The next question is whether or not the coaching incentive opportunity should be in addition to their regular comp plan or carved out of it. If they receive a reduced personal quota in recognition of the time they will need to spend on this, there is an argument for a carve-out (reducing their regular comp plan incentive at target to offset the coaching incentive). But more likely they are top performers with typical/healthy quotas, and this is an added responsibility. If this is the case, then the incentive opportunity should be in addition to the regular variable pay plan.