A bonus is an amount of money earned for doing something specific. In sales, bonuses typically pay based on the employee’s performance, such as meeting or exceeding sales goals. For example, a rep might earn $100 for every deal closed or $50 for every demo set.
Bonuses can be a powerful motivator for salespeople as they can lead to increases in sales and employee retention, as well as improvements in employee morale
There are a few things to keep in mind when designing a sales bonus program:
- The bonus should be clearly defined and easy to understand.
- The bonus should be based on realistic and achievable goals.
- The bonus should be fair and equitable.
- The bonus should be aligned with the company’s overall goals.
For sample compensation plans that include bonuses, check out the following comp plan templates: Single Rate Bonus (Revenue), Multiple Rate Bonus (Revenue), Commission with Accelerators and Milestone Bonus, Single Rate Bonus (Quantity), and Milestone Bonus.
For milestone bonuses, which is a type of bonus that pays an employee when they achieve a specific goal or objective (ie: they hit quota, closed a major deal, brought in a new client), determining the rate is pretty easy.
Take the total variable compensation for your reps and divide it by the number of quota periods you have throughout the year.
Example: rep has a $36K variable to their OTE and a quarterly quota. Divide 36 by 4 (quarters), which equals a milestone bonus of $9K per quarter.