Small Business Corner – Leveraging Performance Based Pay

The life blood of any small business, or any business for that matter, is its customers.  Without customers, a business can’t exist.  Many businesses rely on outsourced solutions for sales, marketing and advertising, either because they don’t have the expertise in these areas, or simply don’t have the bandwidth.  While many of these functions have traditionally been paid on a project or hourly basis, many sales and marketing firms are moving towards a performance based pay model, and many business owners, especially small business owners, are demanding it.  The simple fact of the matter is that business owners can no longer afford to throw money at their marketing and sales efforts and cross their fingers hoping it will pay off.   Every dollar spent must be maximized, and making sure that you’re getting a solid return on your investment is smart business.  Here are a couple of key things that you need to do to leverage a performance based pay model in your business:

Key #1 – Get clear about the outcome that you want, and how you will know that you achieve it

Many business owners find themselves focusing on the latest hot marketing tactic to try and grow their business.  Social media is a great example of this.  With everyone talking about Facebook, Linked In, and Google+, many business owners jump into social media without identifying what the outcome is that they are trying to create.

No matter what tactic you are going to use, start with asking yourself, “what is the outcome that I want to create, and how will I know that I’ve achieved that outcome?”  By answering this question, you’ll have a solid understanding of what you want, and how you can track and measure whether you are getting it or not.

Key #2 – Determine what the value of your outcome is to your business

Once you have your outcome identified, the next step is to determine what that outcome is worth to you.  For example, if your outcome is to increase the amount of customers that you have coming through the door, what is that worth to you?  Putting a dollar amount to this will determine what you will be willing to pay for that outcome. 

In most cases, what you will be willing to pay to achieve an outcome is going to be less than that outcome is actually worth to you.  The difference between the value of the outcome to you and what you have to pay to get that outcome will determine your return on investment.  So, you need to figure out what ROI you are comfortable with, before you move to the next step.

Key #3 – Identify the best tactic to generate the outcome

Now that you have the outcome determined, as well as the value of that outcome to you and what you are willing to pay for that outcome, you can determine the best tactic to use.  Whether it’s a direct sales effort, a new website, a social media campaign, an ad in the local paper, a PR campaign, or a direct mail piece, choose the best option for your business objective based on your industry, what’s worked for you in the past, and the resources that you have available.

Key #4 – Choose your supplier and negotiate the deal

Now that you know what tactic or tactics you will use, you can find some options for professionals that can deliver to your expectations.  Look for firms that are already working on a performance basis, or negotiate with them based on the outcome that you want and what you are willing to pay for it.  You’ll probably pay a little more under a results based contract, but if the results aren’t achieved, then you won’t pay a dime. 

This is a much better option for you vs. the traditional model of paying per project or per hour, where the results are not guaranteed, and you have to pay one way or the other.  Solid professionals that get results usually won’t have a problem working on a performance basis, especially if they are making more to guarantee the results.

While every situation isn’t ideal for a performance based pay option, this option is becoming more and more popular, and gives the business owner more insurance that they will get a solid return on their investment, especially as it pertains to sales, marketing, and advertising efforts.  Enjoy leveraging this great tool to get the results that you want in your business, while creating a win-win situation for everyone!

Tom Kelly is a Professional Business Coach that specializes in working with small business owners, entrepreneurs, and salespeople. He can be reached at (630) 964-0112, or at

Copyright © Tom Kelly, Potential In Motion, Inc.TM2014

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