What are Sales Splits?
A seller/salesperson reading this post about Sales Splits might not find it particularly insightful — it is the water one swims in daily, as natural as breathing air. But, I thought writing about sales splits might be helpful for those not in sales and wondering — what is a sales split? What has that got to do with sales deals?
I’ll cover three points:
1/ What sales splits are
2/ Why sales splits help
3/ Where sales splits are limited
What “sales splits” are
Imagine there’s a large business selling its software to a multi region business like Amazon, Bytedance, or Nintendo.
Chances are these large companies like Amazon have employees located all over the world. And more specifically, decision makers in different cities. Large deals require org mapping (please do not assume just because you said hello to the CEO, the deal closes — a topic for another day), deep org understanding, and cross functional alignment. For example, if XYZ company is selling a software deal to Amazon for the US and Japan, XYZ might have to involve both its US and Japanese sales teams, in order to win decision makers both in Amazon US and Japan.
In the above scenario, the deal credit is “split” 50–50 between two sales teams, like US and Japan. So if a deal worth $10M is split across two teams, then each sales person gets $5M attributed to their sales quota/target.
Why sales splits help
There are a few reasons that splits exist:
- The necessity of multi region deals
As alluded to earlier, large deals in big companies, especially multi-region ones will require experts in multiple regions to close the deal. Sales splits help to ensure that those who put in the work for the deal get the appropriate credit.
2. Encourage team collaboration
Incentives drive behavior. If multiple sales teams worked on closing the deal, it’s good to reward the collaborative behavior. Conversely, failing to do so would discourage teams from helping one another, which could result in a deal loss that is detrimental to the company.
Where sales splits are limited
- Assessing work done is hard
It is hard to assess if the work in a deal was truly 50–50. As someone who worked in sales operations, it hard to see if the work done was really 50–50, and sometimes you can just sense that one team is probably doing less work than the other. Eg both show up on a call, but one is likely putting in more effort to close the deal, and perhaps is more in need the deal for their quota. All being said, no one can truly tell.
2. Managing splits creates operational work
Split approval and execution requires additional sales ops work and arbitration. It is a issue that affects quota and compensation, so accuracy matters. A neutral party like sales ops can help mediate, but ultimately sales leadership has to be mature about the right attribution and driving a fair culture.
A interesting model I’ve heard of (have not experienced directly) is when sales credit is given beyond the deal signed amount, in order to encourage more collaboration. So for the previous two way split example of a $10M deal, imagine each sales person got 75% credit — $7.5M counted towards their quota. I don’t know how this works for finance and accounting actuals, but theoretically this could be a way to encourage more collaboration.
Sales splits ensure some fairness
The reality is that sales splits themselves don’t create a collaborative culture. It is a helpful tool in the toolkit to ensure some fairness in incentives and to encourage cooperation between sales teams, especially for enterprise deals. It is likely more relevant for companies with sales people in multiple regions, targetting enterprise customers, vs companies selling to smaller organizations (startups/SMBs).
