LEARNING CENTER
Glossary
A
Accelerator
An accelerator in sales is a type of commission structure that rewards salespeople for exceeding their sales goals. It is a way to motivate salespeople to sell more products or…
Account Manager
An account manager in SaaS manages the post-new biz relationship between the company and the customer, similar to a customer success manager role. They are primarily responsible for ensuring that…
Amortization
In accounting, amortization refers to the process of gradually expensing the cost of an intangible asset over its useful life. Intangible assets are assets that do not have a physical…
Annual recurring revenue (ARR)
Annual recurring revenue (ARR) is a measure of a company’s subscription-based revenue that is expected to be collected over the next 12 months. It is a key metric for SaaS…
ASC 606
ASC 606, or Revenue from Contracts with Customers, is a newer accounting standard that was issued by the Financial Accounting Standards Board (FASB) in 2014. The standard is designed to…
Attainment
Attainment is the act of achieving or reaching a goal or objective. In sales, attainment refers to the achievement of a sales goal or quota. Salespeople are typically evaluated on…
B
Base pay
Base pay is a fixed amount of money that is paid to an employee on a regular basis, regardless of their performance. It is the foundation of a sales compensation…
Bonus vs commission
A sales compensation plan typically consists of commissions and bonuses, or components of both. But what’s the difference between a bonus vs. a commission? We define commissions as a percentage…
Business development incentive plan
A business development incentive plan is a type of compensation plan that rewards employees for generating new leads and business. It can be a valuable tool for businesses of all…
C
Capped commissions
Capped commissions are a type of sales compensation plan for salespeople in which there is a maximum amount of money that can be earned in commissions. This means that even…
Clawback
A clawback in sales occurs when a rep has received commissions from a sale, but then the customer ends the contract within a certain period of time. When the company…
Cliff
A cliff, or commission floor, sets a parameter that salespeople must meet a certain level of sales before they are eligible to receive commissions, as defined by the sales compensation…
Closed-won commission
A closed-won commission is a type of commission that is paid to a salesperson when a deal is closed. This type of commission is typically paid as a percentage of…
Commission
What is commission? A commission is a fee or incentive paid to an agent or employee for taking care of a piece of business. For example, a salesperson may earn…
Commission agreement
What is a commission agreement? A commission agreement is a contract between a company and an individual that outlines the terms of the individual’s incentive compensation, which is typically based…
Customer acquisition cost (CAC)
Customer acquisition cost (CAC) is the total amount of money that a company spends to acquire a new customer. It is calculated by dividing the total cost of sales and…
D
Draw
A commission draw is an advance against future commissions — think of it like paycheck protection. There are two main types of commission draws: Recoverable draw: A recoverable draw means…
E
Example compensation communication plan
An example compensation communication plan includes a framework of meetings and materials that inform leadership and their teams of sales compensation policies and structures. The communication framework should include: Below…
F
Fixed rate commission
A fixed rate commission, or a single rate, is a type of commission that is paid to a salesperson based on a fixed percentage of the sale price of each…
G
Gross revenue retention (GRR)
Gross revenue retention (GRR) is a measure of how much revenue a company retains from its existing customers over a period of time. It is calculated by dividing the total…
Guaranteed pay
Guaranteed pay is a fixed amount of money that a salesperson is paid, regardless of their sales performance. You will also hear guaranteed pay referred to as a rep’s “base…
I
Incentive compensation
Incentive compensation is a type of pay that is tied to an employee’s performance. It is often used in sales, but it can also be used in other areas of…
Incentive compensation management
Incentive compensation management is the process of designing, implementing, and managing an incentive compensation plan. An incentive compensation plan pays an employee based on performance and pre-determined measures. Sales most…
Incentive compensation plan examples
Here are 5 examples of incentive compensation plans: Commissions: Commissions are a percentage of the sales that an employee generates. They are a common type of incentive compensation, especially in…
Incentive pay
Incentive pay is a type of compensation that is tied to an employee’s performance most oftenly used in Sales. It provides a valuable tool for motivating employees and driving performance….
Incentive vs commission
An incentive is a reward or benefit that is given to an employee for achieving a desired outcome while a commission is a percentage of the sales that an employee…
K
Key performance indicator (KPI)
A key performance indicator (KPI) is a measurable value used to evaluate how successful a person or organization is at reaching a target. KPIs help organizations identify strengths and weaknesses,…
Kicker
A kicker in sales is a type of incentive offered to salespeople in addition to their base salary or commission. Kickers are typically used to motivate salespeople to achieve specific…
L
LTV
Customer lifetime value (LTV or CLV) is a measure of the total revenue a company can expect to generate from a customer over the course of their relationship with the…
M
Management by objectives (MBO)
MBO stands for Management by Objectives. It is a performance management system that focuses on setting specific, measurable, achievable, relevant, and time-bound goals for employees. In Sales MBOs can be…
Milestone bonus
A milestone bonus is an incentive mechanic that pays a bonus after a rep meets a pre-determined stipulation. This type of bonus does not vary if the rep is above…
Multi year contract
A multi-year contract is a contractual agreement between a buyer and a seller that outlines the terms of a product or service for a period of more than one year….
Multiple rate bonus
A multiple rate bonus involves earning various bonus amounts determined by factors such as quota attainment, length of contract, deal size, and more. Examples of multiple rate bonuses: We like…
Multiplier
A multiplier, or accelerator, in sales compensation is a factor that is used to increase the amount of commission that a salesperson earns. Multipliers are often used to incentivize salespeople…
Multitier
A multi-tier sales compensation structure is a type of sales compensation plan that uses multiple levels of commission rates to reward salespeople for their performance. In a multi-tier structure, salespeople…
N
Non-recoverable draw
A non-recoverable draw is a guaranteed minimum payment that a sales representative receives, regardless of their sales performance. This payment is typically paid out on a monthly basis and is…
O
On-target earnings (OTE)
On-target earnings (OTE) is the total amount of money a sales representative can expect to earn in a year if they meet or exceed their performance goals. OTE includes the…
Override
Commission override is a sales compensation mechanism in which a manager receives a portion of the commission earned by their subordinates. This is typically done as a way to incentivize…
P
Pay mix
Pay mix in a sales compensation package refers to the percentage of a salesperson’s total compensation that is made up of base salary, commission, and other incentives. The pay mix…
Period cost
A period cost is a cost that is incurred in a particular accounting period but is not directly associated with the production of goods or services. Period costs are typically…
Q
Qualified lead
A qualified lead is a prospect who has expressed interest in your product or service and has the authority to make a purchase decision. Qualified leads are the most valuable…
Quota
A sales quota is a target amount of sales that a salesperson or sales team is expected to achieve in a given period of time. Quotas are typically set by…
R
Ramp
A sales ramp period is the time it takes for a new salesperson to reach full productivity. It can take anywhere from 3 to 6 months for a new salesperson…
Recoverable draw
A recoverable draw is a type of compensation arrangement that allows sales reps to be paid a guaranteed salary or draw each pay period, regardless of their sales performance. The…
Retroactive
The word “retroactive” means “relating to or effective from a past date.” In the context of sales commissions, retroactive means that compensation plans or specific compensation plan mechanics, such as…
RevOps metrics
The top 5 RevOps metrics leaders should pay attention to include: These are just a few of the many RevOps metrics that leaders should pay attention to. By tracking these…
S
Sales compensation
Sales compensation is a type of variable compensation that is paid to sales representatives based on their performance. Sales compensation plans typically include a base salary, commission, and additional incentives….
Sales compensation philosophy
A sales compensation philosophy is a set of principles that guide how a company compensates its sales team. Sales compensation philosophies typically focus on three key areas: Our sales compensation…
Sales compensation plan
A sales compensation plan is a formal system for rewarding sales representatives based on their performance. It is designed to motivate sales representatives to generate revenue and achieve sales goals,…
Sales compensation plan effectiveness
There are a few key metrics that you can use to check for sales compensation plan effectiveness. These metrics include: In addition to these metrics, you can also look at…
Sales pipeline analysis
A sales pipeline analysis is a process of tracking and analyzing the progress of sales opportunities through the sales funnel. It helps sales teams to identify which opportunities are most…
Shared commission structure
A shared commission structure is a type of commission structure in which two or more sales reps share the commission for a sale. This type of structure is often used…
SPIF
A sales SPIF, or special performance incentive fund, is a short-term incentive that is used to motivate sales reps to achieve specific goals. SPIFs are typically offered in addition to…
T
Tiered commission structure
A tiered commission structure is a type of commission structure in which the commission rate increases as the sales volume increases. This type of structure is often used to motivate…
Total rewards
Total rewards is a term used to describe the total compensation package that an employee receives. It includes base salary, bonus, commission, benefits, and other forms of compensation. The total…
U
Usage based compensation plan
A usage-based compensation plan is a type of compensation plan in which employees are paid based on the amount of product or service their customers use. This type of plan…
V
Variable pay
Variable pay is a type of compensation that is tied to an employee’s performance or results. This type of pay is often used in addition to base salary, and it…
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