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 or below those parameters. So, if you hit a milestone, you receive a set bonus. If you fail to hit the milestone, you receive no additional compensation.
We like milestone bonuses the most when paired with another compensation mechanic, such as the Commission with Accelerators and Milestone Bonus commission structure.
Examples of milestone bonus plans
- A rep has a monthly quota of $20,000. Upon hitting their $20,000 quota, the rep receives a $2,000 bonus.
- Business development rep earns $1,000 after setting 25 demo appointments. They also earn an additional $1,000 bonus if they set 40.
- Sales Manager earns a $1,000 bonus after someone their team wins a deal more than $50,000.
Benefits of milestone bonus plans
Your CFO will love this plan because milestone bonuses have a low financial risk. You know the maximum amount that you’d have to pay a rep for the year, so it eliminates the risk of the unknown that some other commission plans have.
This plan also encourages consistency as you’re likely to see reps more eager to hit their targets regularly.
Cons of milestone bonus plans
This type of plan may lead to sandbagging, which is when reps intentionally hold a deal in order to game the compensation plan in some form. For instance, if a rep already hit their milestone bonus this month, then they might push a deal to the next month in order to unlock next month’s milestone.