- You sell one product with consistent deal values
- Sole focus is new logos
We see this bonus plan frequently implemented in solar and telecom, where they see consistent deal values. Be aware that this plan does not account for discounting.
Easily explained, widely understood, and you can implement changes quickly by increasing or decreasing the bonus
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Use the calculator to quickly measure how realistic, attainable, and healthy your OTE to quota ratio is.
Assign the plan to your team and automate sales commission calculations. Be confident your team is being paid fairly and accurately.
To customize this plan, you will input these 7 variables.
OTE combines base salary with variable pay and represents the total amount of money your reps can expect to earn if they hit 100% of quota.
Refers to the percentage of a salesperson’s total compensation, made up of base salary, commission, and other incentives. The most common pay mix in SaaS is 50/50.
Revenue is the total amount of income that a company generates from its primary operations. In SaaS, annual recurring revenue is one of the most important metrics.
This ratio quantifies how much larger a quota is to a sales rep’s OTE. The most common multiplier in SaaS is a quota 5x that of the OTE, but this will vary based on size and stage of the company.
An annualized quota is a sales goal that is set for a year.
Often abbreviated to ACV, this number represents the average deal size that your company sells.
Your quota period sets the frequency at which your team’s quota resets. In SaaS, the most common quota period is quarterly. However, this number will vary based on your sales cycle.
A quantity-based compensation plan is one of the easiest to understand for reps in sales compensation. You get a set bonus for every single deal you close, no matter how big or small the deal is, the bonus is the same. There are two major reasons why companies use this plan. First, because they have a consistent contract value with minimal variation in contract size. The second reason is that the company is trying to close as many logos as they can, regardless of how big the deals are. This is done occasionally as companies are first starting out and want to make a splash in the market.
In sales comp, a quantity-based single rate bonus plan means that reps earn the same bonus amount on every single sale. A bonus pay example might include earning $250 per booked deal.
The quantity-based bonus is tied to every deal closed, whereas the Revenue Based Single Rate Bonus depends on the rep’s quota attainment progress. So, under the first, a rep is paid $200 on every sold deal. Under the latter, the rep receives a set bonus amount for each point of quota attainment, for example a $50 bonus for each point of quota attainment.
A milestone bonus is earned when the rep meets designated stipulations and is paid a set amount, as a result. These bonuses do not vary if the rep is below or above these requirements. Meaning, anything less than the quota, and the rep earns nothing. Additionally, the rep is not eligible for additional bonuses within the same quota term after earning the first bonus. With a single rate bonus plan (quantity), however, the rep receives the same, predetermined flat rate on every deal sold within the quota period. No cap.
Sales bonuses differ from commissions in that bonuses are based on a set amount of money for completing a task. Meanwhile, commissions consist of a percentage of the total revenue from a deal. For example, If a rep gets 10% of every deal closed, that’s commission. If a rep earns $300 for every deal they close, that’s a bonus — a single rate bonus!
When it comes to sales compensation and commissions calculations best practices, the best thing you can do as a leader is clearly communicate the methodology behind your sales compensation model to your team. A close second would be to provide every stakeholder tied to commissions with a single source of truth that democratizes the often siloed commission process.
If you’re looking to incentivize consistency and have higher velocities of sales, then this is the plan for you.
This comp plan works great for businesses with quotas that change throughout the year but the variable remains, like those that sell into education.
Works best paired with another compensation plan, but you can run it on its own when you need to throttle growth, such as limited inventory.
I want the simplest plan there is. This one is very easy to understand, and you won’t spend hours analyzing it or trying to game it. This plan could be a great starting point for a lot of people.
My company is less than a year old. We're building out our sales team as we speak while changing pricing, so we're on a very fluid spectrum. Because of that, we pay a higher base to get quality enterprise reps here and pay 10% on every deal.
“I use fixed commission rate for our AE comp plan for two reasons. It’s easy for my reps to understand and it allows me to add in SPIFs or complexity later on if I need.
Deliver visibility, automation, and seamlessness across the entire compensation process.