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BDO Compensation: Strategies That Pay

Updated: Dec 11, 2023

Let me take you on a little journey into the wild world of BDOs. You might be surprised to learn that I've been there, done that, and even got the T-shirt!

I had the opportunity to cut my teeth in the highly competitive world of RIAs. And guess what? I didn't just dip my toes in—I took the plunge from a cushy base + bonus (pretty safe, right?) to the exhilarating world of variable compensation. It was the "eat what you kill" zone!

Now, I can almost hear you thinking, "Why in the world would anyone willingly choose this rollercoaster of a pay structure?" Well, I had a taste for risk, an appetite for uncapped earning potential, and I'd already been flexing my business development muscles elsewhere. Plus, as it turns out, I'm all about that high D and high I profile on the DISC assessment, which basically means I thrive on developing relationships and making things happen.

But I get it—employers often view the BDO role as a mysterious unicorn. Sometimes, it's like trying to catch lightning in a bottle. It's not for the faint of heart, and not everyone can master it. However, there are people out there that would be a perfect fit.

One way to attract top talent, is to offer enticing compensation packages.  BDOs are driven by results and money!  Of course, we care about other parts of the business, but the first two are results and money.  Additionally, BDOs should provide at a minimum a 3X return on your investment so its worth it! Lets explore various compensation models and strategies that a business can employ to reward and motivate top sales drivers

Base Salary with Commission:

The most common compensation structure for BDOs combines a base salary with commission-based incentives. This model ensures that BDOs have a stable income while providing them with the motivation to pursue new business opportunities aggressively. The commission can be a percentage of the revenue generated, encouraging BDOs to focus on results.  These percentages can vary but typically range between 5-30%.

Tiered Commission Structure:

In a tiered commission structure, BDOs earn higher commission percentages as they achieve predefined sales targets or milestones. This approach encourages BDOs to strive for continuous improvement and reach higher sales goals. It aligns their compensation with the company's growth objectives.  As the BDO hits defined targets, they could stair step into high percentage payouts.

Performance Bonuses:

Performance bonuses are one-time rewards for meeting or exceeding specific performance metrics. These bonuses can be tied to various key performance indicators (KPIs), such as revenue targets, customer acquisition numbers, or market expansion goals. Performance bonuses offer a short-term incentive to drive results.

Profit Sharing:

Some companies opt for profit-sharing arrangements, where BDOs receive a portion of the company's profits based on their contributions. This model fosters a sense of ownership and alignment with the company's overall success. Profit-sharing arrangements can be structured annually or quarterly.

Equity or Stock Options:

Offering equity or stock options to BDOs makes them stakeholders in the company's success. As the business grows, the value of their equity or options increases, creating a long-term incentive for them to work towards the company's prosperity. Equity compensation is often used by startups and high-growth firms.

Retainer Fees:

In some industries, BDOs may receive retainer fees for maintaining relationships with key clients or partners. This model guarantees a steady income stream while allowing BDOs to focus on nurturing existing relationships and ensuring client satisfaction.  For example, if the client is retained long term and generates reoccurring revenue, the BDO could get a 5%-10% ongoing trail.

Deferred Compensation:

Deferred compensation plans involve delaying a portion of the BDOs' earnings until a specified future date, such as retirement. This encourages loyalty and long-term commitment to the company, as BDOs have a vested interest in the organization's ongoing success.

Performance Reviews and Salary Adjustments:

Regular performance reviews can lead to salary adjustments based on a BDO's contributions and achievements. This approach allows for continuous feedback and fine-tuning of compensation to ensure it remains competitive and motivating.

Non-Monetary Rewards:

Sometimes, non-monetary rewards can be just as effective as financial incentives. Recognizing and celebrating BDOs' accomplishments through awards, public acknowledgment, or career advancement opportunities can boost morale and motivation.

Choosing the right compensation model for your Business Development Officers is a crucial decision that can impact your company's growth and success. Consider your company's industry, culture, growth stage, and the specific goals you want your BDOs to achieve. A well-designed compensation package will not only attract top talent but also incentivize them to drive your business forward. Remember that a flexible approach, which can adapt to changing market conditions and individual performance, is often the most effective in rewarding and motivating BDOs in the long run.

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