Single Rate Commission with Contract Term Multiplier

This uncapped commission plan is designed to incentivize reps to ask for longer contract terms.

When to use this plan?

Good when gross revenue retention (GRR) is a key focus

Why use a Sinfle Rate Commission with Contract Term Multiplier plan?

Reps need to be incentivized to ask for multi-year deals, and this plan does that

Customize the Single Rate Commission with Contract Term Multiplier Plan

Like this plan? Sign up for QuotaPath for free to add your business inputs and adjust the variables.

Forecast earnings & plan performance

See potential earnings based on your inputs and goal attainment progress.

Check the health of your Quota:OTE ratio

Use the calculator to quickly measure how realistic, attainable, and healthy your OTE to quota ratio is.

Streamline plan management

Assign the plan to your team and automate sales commission calculations. Be confident your team is being paid fairly and accurately.

How to adjust this compensation plan template

How to adjust this compensation plan template.

On-Target Earnings (OTE)

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.

Pay Mix

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.

Company Revenue

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.

Quota:OTE Ratio

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.

Annualized Quota

An annualized quota is a sales goal that is set for a year.

Average Contract Value

Often abbreviated to ACV, this number represents the average deal size that your company sells.

Quota Period

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.

Frequently asked questions

What is a multi-year contract?

A multi-year contract is a signed commitment from a customer to purchase services from a vendor for a period that extends beyond the first year. In SaaS, multi-year agreements are typically between 2 to 5 years.

How should I pay sales commissions on multi-year contracts?

It’s ultimately your call to do this or not, but we strongly encourage you to pay higher commission rates or bonuses on agreements that go beyond one year. This motivates and incentivizes your reps to ask for longer commitments, which equates to customers agreeing to pay you more over time. If your reps don’t get paid more on them, why would they ask for longer terms?

Why would I use a single rate commission?

We consider the single rate commission plans the simplest variable compensation plan out there. The math is simple to calculate and since reps easily understand their sales commission structure, they focus on closing deals rather than wasting time thinking about how to maximize their sales commissions.

How to find commission rate

To calculate the commission rate, take the variable pay that a rep earns for hitting their target ($50k a year, for instance) and divide that number by their target ($500k a year). So it would be $50k/$500k, which gives you .10 or 10% commission. Great work!

How does this plan differ from the Commissions with Multi-Year Accelerators plan?

Great question! The key difference between this plan and the the Commission with Multi-Year Accelerators Plan is that the rates in the latter change based both on length of contract and the rep’s quota attainment. In this plan, the fixed rates depend only on contract length.

What if I have multiple products?

Then this plan might not be for you, but it’s probably in the ballpark! If each of your products go toward the same quota and you want to pay the same rate on all products, this works great for you! However, if that isn’t the case and you want a Single Rate Commission with Contract Term Multiplier Plan for multiple products, you would need to add additional paths for each product. To calculate the commission rate for each of those paths, determine how much of a rep’s total variable compensation you want to dedicate per product. Then, divide that number by how much you want your rep to sell of that product.

How can reps see how much more they’ll make on multi-year deals?

They can manually calculate it, or, you can give them QuotaPath’s commission tracking and sales compensation software to do it for them. Real-time integrations ensure the data is accurate the most recent available, and our forecasted earnings tool enables reps to see how asking for a longer contract term impacts their next commission check.

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What industry leaders say

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.

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