Sales Commission Structures

Less than 23% of your reps are ACTUALLY money motivated. Read that again. Less than 23% are wired where money itself is the driver — where every behavior, every decision, every mindset choice comes back to making as much as possible. Those people are honestly easy to manage. You never have to talk them into activity or skill work. They just go. (just make sure they aren't cutting corners!) But the 77%? Money doesn't motivate them. But what does REQUIRES money. The vacation requires money. The car requires money. Retiring their mom requires money. The ring they want to buy? Money. Then you have the fully intrinsically motivated folks - Mastery, Helping, Autonomy, Creation, Purpose, etc - They need motivation too! The problem is the top 5% of sellers generally ARE (over 70%) money/extrinsically motivated, and often top sellers become leaders and so what kind of comp/motivation plan do they put in place? the same that worked for them And if you don't know what those things actually are for each person on your team — if you've never sat down and mapped their personal goals to their professional ones — you are pulling a lever that doesn't work for most of your people. Here's what this looks like in practice: Your rep shares their real goals with you in a 1:1. You write them down. Then you connect the dots every single week. "Remember Bali? This commission check gets you 40% of the way there." Drop a picture of Bali in their Slack when they close a big one. Mention it when they're grinding through a hard stretch. Celebrate the goal — not just the quota. And when they actually hit it — the car, the ring, the trip — that moment is yours too as their leader. That's the whole point of leading people. Most managers track quota attainment. What we should really track is: goal attainment rate. How many of your people hit what they were working toward this year? That number tells you whether you're leading — or just managing a spreadsheet. If you can help people leverage their professional goals to hit their personal goals. That's how everyone wins.

Halfway through 2025, and your revenue goals feel impossible? Here's the worksheet that turns wishful thinking into an actual plan. Most people set ambitious revenue targets in January, then spend the year hoping something magical will happen. But here's what works. The Revenue Reality Formula: → Take your remaining revenue target → Divide by 6 (months left) or 2 (quarters left) → Then divide by your product weight (which service/offer will carry the load) → Now you know exactly what you need to sell Example: Need $60K more this year? $10K per month OR $30K per quarter If your main offer is $2K, you need 5 sales per month or 15 per quarter. If it's $500, you need 20 monthly or 60 quarterly. Suddenly, that "impossible" goal becomes a clear action plan. This isn't about working harder. It's about working with actual numbers instead of hoping for the best. What is the difference between businesses that hit their targets and those that don't? The successful ones know their math. If you would like the actual worksheet I use with clients to map this out, please message me directly.

Your sales commission philosophy and structure help you create a healthy sales culture-- and a profitable organization. Use this checklist to determine strengths and weaknesses in your current plan. 1. Do you have clear pricing and profit models? Review current pricing and profit models, and also ensure that your sales team understands pricing and profit models. When they understand the why and the how of your models, they will be more engaged in exceeding their quota. 2. Is your commission plan simple and transparent? Any commission plan should be easy for a sales professional to calculate the commission on their opportunities. Transparency includes clarity around why a commission plan was created in a certain way, along with the terms and conditions of the plan. 3. Is your commission plan consistent? Commission plans that have consistency over time related to calculations, accelerators, and payout timing will build trust. 4. Is your plan based on reliable growth in the market? A plan based on inflated growth percentages won’t create an environment for the right behaviors. If anything, it will deflate the sales team and can cause goal regression. If you’re incenting high levels of growth, consider a forecasted goal and a stretch goal. Behind the scenes, understand your organizational health at both levels to prevent organizational spending based on the stretch goal. 5. Are you clear with revenue and profit guidelines? If your commission structure is based on revenue, confirm that there are protections in place to prevent selling at unprofitable levels. If your commission structure is based on profit, watch for areas where sellers don’t control profit variables (recent examples are product costs, freight increases, and labor demand) and may be unfairly penalized. Additionally, team quotas and incentives are mistake prone; they also need to be clear, simple, and easy to calculate. 6. Do you focus on growth areas without de-incentivizing core areas? For organizations with diversified offerings, or trying to capitalize on an industry trend, take care not to over-focus on those areas at the expense of core offerings. You may find yourself needing to course correct and make up for erosion in core markets. 7. Do you incent solid decision making at any time of the year. Quarter-end and year-end shouldn’t be triggers to discount. That trains our customers how to treat us (waiting to receive a discount), and it erodes a seller’s commission check. Your commission structure isn’t something you can afford to ignore. A commission structure that reinforces the right behaviors and incentivizes sustainable growth is something worth investing in. #modernseller #sales #salesleadership

I made my fair share of mistakes when building commission plans for sales reps. One of the biggest: I only paid SDRs for generated revenue from their opportunities, not for booked meetings or sales accepted opportunities. Not smart. I failed to recognise one key principle: People have to be in control of their own commission. 100%. In the case above, SDRs were dependent on AEs. Which caused a lot of friction in the team. And was frustrating for SDRs. The other key principles of sales commission plans: 1/ Sales reps have to be able to calculate their commission for every opportunity in their funnel. From their head. If you have a salary of 200k, 100k variable and 100k fix (50:50 split). And the target is 800k a year. Write on the commission sheet: 12.5% for every dollar of generated revenue. That is easy to calculate. 2/ No cap and no minimum amount to get commissions. Both of these lead to really stupid behaviour. If you have a minimum amount to reach commissions, reps will stack up deals and make sure they get all of them in one quarter. If you have a cap, reps will make sure deals are prolonged to another quarter in case they already reached that cap in a given quarter. Both make no sense for the business. The one additional benefit that makes sense are accelerators: If reps reach 100% of their commission, they get 15% (instead of 12.5%) on any additional deal. This way, people will speed up to get more deals in. Makes sense for all. 3/ Payments should be as immediate as possible. For SDRs: Monthly. For AEs quarterly. 4/ Commissions are the key tool to change behaviour of reps. Fast. You key strategic goal has to be the core of the plan. If you need ARR, you have to pay for ARR. If you need any revenue, pay for any revenue. If you need to expand into a different market, pay double for that market. Here is an example of a commission sheet: Anything I missed?

Top-down quota has destroyed more sales orgs than you think. BoomerangAI just published a comp plan breakdown from Series A to IPO. Check this quote out: "Set quota from bottoms-up attainment history, then hire to the gap." They called it out because too many founders do the opposite. Board wants $12M ARR added, you have 10 AEs, so you set $1.2M quotas regardless of whether any human on your team has ever come close to hitting those numbers. That kind of quota pisses everyone off. I asked a guy once why he wanted to hit his number. He said "I want to buy a car." I said what kind. He didn't know. We sat there and mapped it out. What kind, what color, how much, what he had saved, what he'd need each month. Then I showed him exactly how many deals he'd need to close to get that specific car from that dealership on that date. Money is motivating only in so much as what you're going to do with it. A quota that came from a board meeting and got handed down like an impossible commandment motivates nobody. This is what happens: Your top rep was earning $400K. Now she gets a quota 40% higher, but her patch is the same and she's still selling the same product with the same level of support. She's now effectively making $250K for the same job. So she leaves. For $800 a month after tax in base salary difference. You lost a top performer over what amounts to a family grocery bill because you set a quota the board wanted instead of one a rep could attain. There are only three comp levers: base, commission, equity. Longer cycle with bigger deals, you pay more in guaranteed cash because that rep isn't earning commission for ~12 months. Transactional SMB motion, you can run a lower base because commission comes faster. Design for what your team can actually sell, not for what your investor spreadsheet says should happen. And if you're the founder who gets nervous about writing a big commission check to the rep who closed a monster deal, FFS don't fire that rep so you don't have to pay them. You'll end up settling out of court and burn your reputation at the great AE water cooler in the sky. I hear these horror stories constantly. Someone closes a multi-million dollar deal through a grueling RFP and then worries they'll get fired before getting paid. If you brought me a $10 million deal, I'm not sure how to even articulate the level of my gratitude. Build a culture where people want to sell for you. Set quota from what reps can actually attain. Pay what they earned. Don't be stingy. It's not complicated. It's just discipline most founders don't have because they're staring at a board target instead of looking at the floor.

Most reps don’t miss quota because they’re lazy. They miss because they don’t know their numbers. Not revenue. Not pipeline. Outreach. If you don’t know how many people to contact every day… Your results will always be inconsistent. Here’s how to fix it: — 1. Define your target ⇢ Set your revenue goal (monthly, quarterly, or yearly) ⇢ Know your average deal size (last 10 deals ÷ 10) ⇢ Understand your conversion rates: ↳ Reply rate = Replies ÷ Total outreach ↳ Meeting rate = Meetings ÷ Replies ↳ Close rate = Deals ÷ Meetings — 2. Calculate your daily outreach Use this formula: (Sales Target ÷ Avg Deal Size) ÷ (Meeting Rate × Reply Rate) That gives you total outreach needed. Divide by working days to get your daily number. And be real - account for sick days, vacations, and any days you won’t be prospecting. — 3. Lock in your routine ⇢ Stick to the number - prospecting is a daily commitment ⇢ Track progress weekly and adjust based on data ⇢ Protect your prospecting time like your income depends on it (because it does) — Success doesn’t have to be a gamble. Do the math. Then do the work. 📬 Subscribe for proven sales frameworks, daily insights & 21 free resources: SalesDaily.co/subscribe _________________________________________ Get my best infographics as printable PDFs for free: ⇢ 72 top sales books on prospecting: https://buff.ly/3ZUJAOZ ⇢ 100 Communication Tips: https://buff.ly/42n47NC ⇢ Time Management for Top Performers: https://buff.ly/3EuNTbm ⇢ Slack Efficiency Hacks: https://buff.ly/mk46BRV

Run some quick discovery on yourself - you're not actually chasing quota. That's surface level pain. There are multiple levels beneath that, which encapsulate your 'why.' The most consistent performers see commission as progress toward personal goals. One of my top-performing teammates had her eyes set on a dream wedding. Every single deal wasn't just "hitting 120% of target" - it was "I'm $12,000 closer to my down payment." 𝐓𝐡𝐞 𝐩𝐬𝐲𝐜𝐡𝐨𝐥𝐨𝐠𝐢𝐜𝐚𝐥 𝐬𝐡𝐢𝐟𝐭 𝐢𝐬 𝐩𝐨𝐰𝐞𝐫𝐟𝐮𝐥: "I need to hit $100K this quarter" becomes "I need 3 more deals to fully fund my son's first year of college" "I'm at 85% to target" becomes "I'm 85% of the way to that Italy trip I've been dreaming about" "I'm behind on my number" becomes "I need to make 5 more calls today to stay on track for my down payment" The problem? Most reps have ZERO visibility into exactly how much each deal will earn them until it hits their bank account. Commissions are confusing, poorly communicated, and impossible to track in real-time. This is why I'm so bullish on what Everstage is doing. When reps can see the exact dollar impact of each deal in real-time, it transforms how they approach their pipeline. Imagine your team being able to say: "This $50K deal isn't just 5% of my quota - it's literally my family's summer vacation." Leaders: What are you doing to help your reps visualize their commission as progress toward their personal goals? Sellers: What's the dream you're chasing with your commission check? 💬 💬 💬

Your sales rep signed a $2M deal, but your company collected $0. This is happening with you. You might feel that your company is growing on paper, but not actually. You'd think revenue is growing because your sales team is closing deals. But have you checked if the money actually arrived? Here’s what happens behind the scenes: • A sales rep closes a $2M contract. • They get their commission. • The customer never activates the product. • The company never gets paid. Later, the rep walks away with a bonus, and your company walks away with nothing. This is not rare, it happens all the time. Sales teams get rewarded for bookings, not collections. The fix to this problem is to tie commissions to collected revenue, not signed deals. Revenue on paper means nothing if it never hits the bank.

😬 One of the things that sales leaders definitely struggle with is setting up the comp plan for their BDRs. A lot of people get it wrong. And getting it wrong will most likely mess up your system of incentives and get your BDRs to underperform. I spent some time writing out ours deeply thinking about what I wanted to optimize for, and validated it with 5 sales leaders. We created a nice system that incentivizes our BDRs to get as many qualified pipeline as possible. And it works so far! 🚀 But also, they're incentivized on the medium term (leads that close with great ACVs), and the longer term (through equity). So this is how we pay Jake and Rory: Base -> straightforward. It's a function of seniority and location. Commission: this is the interesting part. Each company with less than $20k ACV counts as 1 lead Each company with a $20k-$30k ACV counts as 2 leads Each company with a $30k-$40k ACV counts as 3 leads Each company with a $40k-$50k ACV counts as 4 leads Each company with a $50k+ ACV counts as 5 leads Commission per lead: $50 per lead generated. $120 per lead that progresses to a demo. If over 110% quota achieved, qualified leads are paid $150 instead of $120. Additional commission: 2% of the total deal value once the deal is closed. If over 110% quota is achieved, commission on deals is 4% instead of 2%. Performance requirements: 50% of generated leads must be qualified (progress to demo). Ramp: they need to get a minimum of 40 leads by month 4. And we actually expect them to outperform that quota by 150%. Equity: they receive stock options. If they outperform their quota 3 months in a row by 200%, they get a one-time boost of an extra 33%+ of their stock options. It could sound aggressive, with high rewards behind these targets, but so far it's working. Am I missing anything? Would love to get your thoughts!