Recently, in partnership with RevOps Co-op, we hosted the webinar Mastering Retention, AI, and Sales Optimization to discuss 2024’s trends and best practices.

Our panel included HubSpot’s Director of CS Daphne Costa Lopes, Carabiner Group CRO Cliff Simon, and QuotaPath VP of RevOps Ryan Milligan.

Together, they examined:

• Retention strategies
• AI & advanced analytics across revenue teams
• Sales process and compensation trends
• Product signal optimization
• Tooling & technologies

Now, let’s dive into the five key insights we gained from this insightful webinar.

5. Customers must see results. 

Daphne pointed out how difficult maintaining and growing customer retention is right now. 

“Companies could afford to have tools in their stack that went under-utilized. Now, companies can no longer afford that. Every spend goes through the magnifying glass,” Daphne said.

As such, it’s on customer-facing teams to show results.

“If you claim your product enables leaders to be more productive, what is the time and dollar savings tied to that?” Daphne said.

She offered suggestions on how to tackle that.

“I’m a big fan of the ‘Jobs to be done’ framework. This framework asks, ‘What are the jobs we’re doing for the customers?’” Daphne said.

By applying this mentality, you align your customer metrics to the metrics the customer tracks for that job. If you can capture that within your system, you can prove the ROI and results of using your tool, strengthening the likelihood of renewal and upsell.

“The CFO has a massively bigger stake at the table,” Cliff added. “It has to come down to dollars and cents.”

4. Manage upsells like sales leads

On top of retention, the trio unpacked upsell opportunities and various ways to approach this strategy.

At HubSpot, Daphne has successfully implemented a “success-qualified lead” strategy. This strategy involves the CSM teams finessing their skills to identify growth opportunities with existing customers. Once they determine an opportunity, they hand off the “lead” to sales or the account managers, depending on how the organization is structured.

“In that way, the CSM can continue to retain their status as their trusted advisor,” Daphne said. “Then sales takes over that qualification and leads the sales convo with the customer.”

That’s not to say she is against CSMs running upsells, however.

“It’s a matter of maturity and complexity,” Daphne said.

Cliff, who said he’s a big fan of this setup, stressed the importance of setting up a solid operating cadence that allows the AMs, CSMs, and AEs to walk in lockstep.

“Look at product data and identify the green field opportunities,” Cliff suggested.

3. Blend GRR + NRR for CS compensation structures.

To expand on that, Ryan offered some best practices for structuring compensation plans to drive retention.

“If you’re selling completely different products within an organization, pulling in someone else can be extremely helpful,” he said. “But if you’re a smaller org., it’s optimally efficient to have your CS run upsells and renewals.”

He suggests compensating on two major drivers, gross revenue retention (GRR) and the upsell, which backs into net revenue retention (NRR).

“I like to split them because NRR can hide bad behavior,” Ryan said. “If you have one big whale customer that keeps growing, your NRR rate can hide the fact that you have all these other customers churning.”

Remember, it’s easier to sell to the customers you have. You don’t want the number of customers to be shrinking.

2. Win retainable customers from the sale.

Another way to master retention is by winning customers who are most likely to renew from the jump.

Ryan pointed out that this is a slight shift in mindset and strategy from a few years ago when teams were most concerned with signing up customers who would sign up today rather than those who would stay a while.

That’s where ideal customer profiles (ICP) come in. 

“Identify characteristics down the funnel that make them a good customer,” Ryan said. “This could be types of roles, sizes of businesses, industry, for example.”

Then, move that definition up the funnel and compensate everyone who brings those conversations to the door.

“If you give BDRs $50 for every demo that occurs, give them another $25 if it’s an ICP demo,” Ryan said. “Reward higher commission rates for your sales team if it’s an ICP account.”

This will help incentivize your team to bring on great customers.

1. Complement AI with personalization.

Lastly, as organizations continue to introduce AI into their practices, it’s worth noting that personalization remains the key to delivering good experiences.

“Everyone is learning and playing with the same playbook,” Cliff said. “You have to create excellent customer experiences, show up consistently, and do what you said you would do. That’s how you stick out.”

So, instead of using AI to create generic messaging, consider using it as Ryan does for quick categorization and classification of high volumes of text (think: churn, win, and loss reasons, understanding key features, or summarizing long transcripts or notes).

“I think people care most about that you know the problem they are facing and how you can solve it,” said Ryan. “If I use AI to read one of your quarterly reports and pull key findings from it, then I can personalize my messaging based on that problem.”

Conclusion

That’s some excellent advice from our three experts. 

Visit our Resources page for more content supporting RevOps professionals and ways to run your business more efficiently. We’ve got free commission calculators, compensation plan templates, reports, and guides to help.

And if you’d like to see how QuotaPath can align your compensation strategy with your business objectives while tracking and predicting its performance and cost, schedule time with our team today. 

The lifeblood of any sales organization is a motivated and well-compensated team. But crafting a sales compensation plan that incentivizes top performance and checks commission costs can seem impossible.

Here’s the dilemma: offer transparent and attractive commissions to drive sales, but risk excessive payouts eroding your profits. 

Ever heard of a bluebird deal in sales? 

These whale-sized deals often break compensation plans, leading to excessive payouts. While we think the organization should pay the rep under the compensation plan terms (and structure next year’s plans to mitigate these), some will try to cap payouts to avoid huge commission effective rates. 

Conversely, a stingy compensation plan might demotivate your team, leading to stagnant sales growth and increased employee churn.

Compounding this challenge is the issue of data visibility.  

Many companies rely on clunky commission spreadsheets and manual calculations, creating a blind spot for commission cost forecasting and identifying areas for optimization.

In this blog. we’ll unveil the secrets to taming the sales commission cost monster with the help of QuotaPath’s sales compensation management software. 

We’ll explore strategies to balance transparency and cost efficiency while diving into the importance of data-driven insights for informed decision-making.  We’ll equip you with the knowledge and tools to design and predict the performance and cost of a robust compensation plan. 

The Importance of Cost Predictability in Sales Compensation

First, let’s talk about the importance of cost predictability in sales comp. 

Imagine navigating your business with a blindfold regarding sales commission costs, which usually account for 50% of a company’s customer acquisition cost (CAC). 

Unpredictable payouts, such as an 8-figure bluebird deal that leads to a mid 5 to 6-figure commission check, can wreak havoc on your financial well-being, leading to a cascade of challenges such as: 

• Cash Flow Issues: Unexpected spikes in commission payouts can disrupt your cash flow, making it difficult to manage daily operations and meet short-term financial obligations. This is especially painful at early-stage companies that often lack cash flow predictability. 
• Budgeting Challenges: Without a clear understanding of future commission costs, it’s nearly impossible to create accurate budgets. This can lead to overspending or under-allocation of resources in other areas.
• Difficulty Forecasting Profitability: Accurately forecasting your company’s profitability becomes a guessing game when commission costs are unpredictable.

Fortunately, there’s a path to financial clarity.  

By achieving cost predictability in your sales compensation plan, you unlock benefits like improved financial planning, better resource allocation, and an ability to scale effectively. 

How QuotaPath Helps You Achieve Cost Predictability

Now, let’s examine how QuotaPath is crucial in helping your revenue time predict total compensation costs.

At the start of 2024, our team released a series of tools that enable leaders to scenario plan and model compensation costs within the app, including sales compensation reporting.

So, in place of creating a series of compensation Excel sheets that report according to manual inputs of deal earnings and attainment data, leaders can test and predict plan performance in QuotaPath. 

This unlocks the ability to compare performance between your most senior and junior reps to determine whether the former’s higher on-target earnings packages are worth the cost.

When it comes to attainment, leaders can visualize deal distribution by rep and period to determine seasonal changes that may impact future compensation strategies. For instance, if a RevOps director notices a slump in sales during Q2, this might indicate the need for lowered quotas or extra incentives to drive deals. 

Then, when it comes to adjusting compensation plans or rolling out one for a new team, product, or territory, QuotaPath’s modeling tab powers leaders to estimate how much the comp plan would cost the business according to various attainment scenarios. 

This means you could do so if you wanted to see how much your company would pay on a specific plan if your team hit 80% attainment. What about 150%? Same thing. 

Using Draft Plans, you could also build a plan proposal and test it against last year’s sales numbers to see how much you would’ve paid out, making it easier to identify and predict the costs of outlier deals.

Optimizing Your Sales Compensation Plans for Cost Efficiency

In addition to using QuotaPath to model and test for compensation plan cost efficiencies, you can leverage QuotaPath to identify areas for optimization or hidden costs in your existing plan.

For example, you can use QuotaPath to analyze your existing commission structures, quotas, and payout triggers in granular detail. This helps pinpoint areas where your current plan might be bleeding money unintentionally.

You can also use QuotaPath to answer:

• Are overly generous commission rates for lower-value deals impacting your margins?
• Are quotas set too low, leading to payouts without significant revenue generation? 

QuotaPath empowers you to identify these inefficiencies and pave the way for cost optimization.

But aside from the help of Quotapath, remember to follow these five best practices to optimize sales compensation plans for cost efficiency:

1. Align Compensation with Business Goals: Don’t just reward reps for closing deals, ensure they’re closing the right deals.  Structure your plan to incentivize behaviors that drive high-value sales, customer retention, or other strategic objectives aligned with your overall business goals. This helps ensure you’re not paying commissions for activities that don’t contribute significantly to your bottom line.
   
2. Implement Tiered Commission Structures:  A one-size-fits-all commission rate can be costly. Tiered structures reward high performers progressively as they exceed targets. This motivates top performers and keeps costs in check for lower sales volume. You could also consider cliffs or commission floors to guarantee a percentage of performance before rewarding total base commission rates. 

Read: Should I have a commission floor in my sales compensation plan? (Blog)

3. Set SMART Quotas:  Specific, Measurable, Achievable, Relevant, and Time-bound quotas are crucial.  Ambitious yet attainable quotas encourage reps to strive for higher sales without incurring excessive commission payouts for quotas that are too easy to achieve.
   
4. Utilize Data-Driven Insights: Don’t rely on gut feeling. Analyze historical sales data and compensation trends to identify areas for cost optimization. Tools like QuotaPath can help you pinpoint inefficiencies and make data-driven decisions about your plan.
   
5. Leverage Strategic Incentives: Bonuses and accelerators can be powerful motivators. Use them strategically to incentivize specific behaviors, like closing larger deals or acquiring new customer segments. This allows you to focus your incentive spending on activities that contribute the most value to your business.

Ready To Use Quotapath To Optimize Your Compensation Strategy? 

Above, we’ve reviewed the challenges of managing sales compensation costs and how QuotaPath empowers you to achieve cost predictability. 

By providing data-driven insights and powerful optimization tools, QuotaPath helps you design a compensation plan that incentivizes top performance without breaking the bank. But the benefits extend beyond cost control.

 QuotaPath can also help you:

• Create transparent and aligned compensation plans that fuel sales motivation and drive peak performance.
• Streamline administration by automating commission tracking and calculation, scheduling payouts, and surfacing administrative tasks necessary to run payouts seamlessly.

Learn how QuotaPath can help you achieve cost predictability, boost team motivation, and streamline sales operations. Schedule your tailored demo with our team today.  

How do you understand the true impact of your sales commission strategy? Do you know what deals you’ve paid the largest percentage of commissions on and why? (Spoiler: It’s not always your biggest deals that yield the highest effective rates.)

What about your growth team’s consistency over time? How are you measuring that?

At the beginning of 2024, QuotaPath released new compensation reporting to measure the business value and performance of the GTM team’s compensation plans and performance. 

Our new reports pull your deals and earnings data, transforming it into easy-to-understand visuals. This empowers you to optimize your sales strategy and drive performance like never before.

Here’s what you can achieve:

• Spot hidden trends: Analyze changes in attainment over time and identify seasonal fluctuations impacting your quota.
• Benchmark performance: Compare earnings across various periods, teams, and commission plans.
• Identify performance gaps: Discover the distribution of attainment levels and see if you have a healthy mix of performers.
• Optimize product strategy: Understand which products are easier or harder to sell and how they impact attainment, allowing for targeted adjustments.
• Maximize profitability: Uncover if high-performing products are the most profitable for your organization and reps.
• Reward top performers: See if your high-achievers consistently close larger deals, helping you develop effective reward structures.

While the number of reports you can create is nearly limitless based on your inputs and filters, here are a few of our favorites:

• Total earnings by rep
• Quota attainment by rep
• Deal earnings by plan
• Earnings by rep by path
• CAC layer cake

In this blog, we’ll delve into four key reports:

• Deal Earnings vs. Deal Value: Identify outlier deals with higher-than-expected payouts and analyze the reasons behind them.
• Attainment Over Time: Track seller consistency and pinpoint any fluctuations in performance.
• Earnings vs. Attainment: See who’s consistently hitting targets and earning the most commissions.
• Top Commission Rates Per Deal: Gain transparency into the effective commission rate when multiple commissions are paid on a single deal.

By leveraging these reports, you can gain a deeper understanding of your sales compensation plan’s effectiveness, identify areas for improvement, and ultimately optimize your sales team’s performance and profitability.

Reports in QuotaPath

Now that we’ve explored the core functionalities of our custom compensation reports let’s delve a little deeper. Here, we’ll showcase advanced reports designed to unearth valuable insights you might miss.

Deal Earnings vs. Deal Value

This report allows you to easily signal deals with extreme payouts so that you can research them to see why the payouts were so high.  

Ideally, all deals would appear as dots in a line. But that’s hardly the case, especially when you factor in accelerators and milestone bonuses.

In the example above, you can see three outlier deals that yielded a much higher payout, at nearly 4x the amount of the other deals. By clicking on the deal and opening a new tab, we can look behind the deal (in this case, Herbdew) and see that the rep hit their quarterly quota bonus milestone. As a result, the rep earned an additional $3,000 to the deal payout. 

Attainment Over Time

Our Attainment Over Time report shows which seller is most consistent across a set amount of time. 

So, for a year-long quota, leaders can examine the team’s trend over the year and identify its consistency across periods. 

In the example above, you can see that Marty (the brown line) is consistently at 100% quota versus the rep in blue, who spiked at 250% above quota, only to fall to 50% of the goal the next month. 

For leaders interested in identifying seasonal trends, a report like this visualizes it clearly. 

Earnings vs. Attainment

This report helps you identify who is selling and earning the most. It can also flag issues where someone might be making a lot of money but selling less. 

Now, in a vacuum, this isn’t super interesting. However, comparing people, you can see above that Ben sells almost twice as much as Arwen, yet Arwen earns more commission.

Why is that? 

This could indicate that Ben consistently sells a product with a lower commission rate or that Arwen hit her accelerators in Q1 and now earns an accelerated rate on every deal the rest of the year. 

Top Commission Rates Per Deal 

Our fourth report reflects the top commission rates per deal. 

This enables you to answer how much commissions you pay across multiple people who touch a deal, like a marketing person, account executive, sales engineer, sales manager, and director. 

We recommend that your collective rate sits at 25% or below, but your hidden commission cost could exceed 35% if you’re not attentive.

Conclusion

By leveraging QuotaPath’s sales commission reports, you can move beyond guesswork and gain a data-driven understanding of your sales compensation strategy.  These insights empower you to identify top performers, optimize commission structures, and drive long-term sales growth.  

To learn more about QuotaPath, schedule time with our team today. 

Creating the best sales manager comp plan is crucial to attracting and retaining top candidates. 

These pros play a key role in hiring, tracking performance, training, coaching, and motivating sales reps to ensure they successfully meet or achieve their goals. These actions directly impact your ability to reach broader business objectives.

What makes a solid sales manager compensation plan? Their comp plan, like many, includes a base salary plus variable pay.

Base salary is a preset amount of money the sales manager receives each pay period regardless of performance. Sales manager base salaries should be market- and industry-competitive and reflect the individual’s experience and responsibilities.

Variable pay, on the other hand, is pay that is based on performance.

For instance, the more a sales manager’s team sells, the greater the variable pay they will receive in their paycheck.

Variable pay can reward various types of performance and offered in different forms like bonuses, accelerators, and decelerators.

Some examples of sales manager bonus options include a team performance bonus and a coaching and development bonus.

The team performance bonus is tied to achieving the collective team quota, which is rewarded when exceeding 100% of the target.

Meanwhile, the coaching and development bonus rewards effective coaching and development of sales reps triggered by high rep satisfaction or designated quota attainment by new hires.

Another type of variable pay is long-term incentives in the form of stock options or profit sharing to align manager goals with long-term company success.

Sales Manager Comp Plans Key Considerations

When building a sales manager compensation plan, key considerations include plan clarity, alignment with business goals, scalability, fairness, and motivation.

Clear and transparent communication of the plan and how performance translates to rewards is essential to the success of any compensation plan. The plan will not motivate the right behaviors if employees don’t understand how they earn incentives.

The plan must also incentivize behaviors that drive overall business objectives, such as customer retention or profitability. Lack of alignment makes business goal achievement less likely.

Scalability ensures that the plan accommodates growth, team size, and structure changes.

Fairness and motivation in a plan motivate managers and foster a healthy team environment.

This blog discusses how manager compensation plans differ from rep plans, offers comp plan examples, and outlines how to create a sales manager compensation plan.

Let’s get started.

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How a Manager Comp Plan Differs From a Rep Plan

“The core difference between a manager plan and a rep plan is that a manager doesn’t actually do the selling,” Graham Collins, QuotaPath Head of Partnership, said. “Managers are paid for improving the work that salespeople do with coaching, guidance, and training.”

It makes sense that manager and rep plans differ in focus, metrics, and structure.

Rep plans focus on individual performance areas like quota achievement, deal size, and activity metrics including the number of meetings or demos scheduled.

By contrast, the manager’s plans focus on team performance, such as achieving the collective quota, team development, and coaching effectiveness.

Metrics used to track plan attainment are different for reps than managers too. For instance, rep plans leverage quantifiable sales metrics, including revenue generated, deals closed, and win rate. However, the manager plan considers a combination of sales metrics plus team health metrics such as rep motivation, turnover rate, and coaching frequency.

Finally, rep and manager plans are distinctly different in structure. 

Rep plans typically have a more straightforward structure and are often commission-heavy, consisting of a combination of base salary plus commission on sales. Yet, manager plans commonly have a more complex structure, including a mix of base salary, bonuses, and potential long-term incentives such as stock options.

Comp Plan Examples

There are many ways to approach sales manager compensation plans. The best option depends partly on your stage of business growth and market and economic factors.

For example, a single-rate sales manager compensation plan, as described in this blog, is perfect for a startup with its first sales manager. It is easy to understand and scale as the business grows.

Below are two additional sales manager comp plan options to consider.

Sales Manager Compensation Plan: Commission with Accelerator

The Commission with Accelerator structure is a commonly adopted comp plan for sales managers. 

In this commission plan, the manager receives a fixed commission rate for each sale made by their team. Once the team exceeds 100% of its quota during the quota period, the manager’s commission rate increases for each additional deal.

Remember that the commission rate should be adjusted based on the team’s size. Therefore, the commission rate should change as new reps are hired or leave the team.

Generally, management regulates the commission rate in monthly or quarterly intervals based on team changes. Neglecting to make these changes can substantially affect the manager’s income potential.

Think about including a “cliff” in this plan. A cliff, also known as a commission floor, guarantees that the sales manager does not receive a commission until the team achieves a designated milestone, such as 50% in the example below.

Sales Manager Compensation Plan Example: Accelerators

• Commission Tiers:
  0-100%: Base rate: 3.1%
  100%+: 1*5 base rate 4.63% (non-retro)
• Annual OTE: $200,000
• Base:variable: $100,000 / $100,000
• Pay mix ratio: 50:50
• Annualized Team Quota: $3.6M Annually
• Quarterly Team Quota: $900,000
• Manager Buffer: 90%
• Manager Quota: $3.24M Annually

Sales Manager Compensation Plan: Bonus

The subsequent compensation plan for sales managers is based on bonuses. 

Under this structure, managers receive a designated bonus for each attainment point linked to their team’s overall quota achievement.   

It resembles the Single Rate Bonus Plan for account executives, but it applies to leadership.

The Sales Manager’s bonus percentage in this compensation plan aligns with their team’s quota attainment percentage. For instance, if the team achieves 93% of the quota, the Sales Manager will receive 93% of their bonus (calculated at $250 per percentage point), irrespective of the quota size.

Similar to our other compensation plan templates, this structure incorporates a manager buffer of 90%.

Nevertheless, the manager’s bonus remains consistent within this sales leadership compensation plan, irrespective of team size. While the team may grow or scale back, the per-attainment bonus remains unchanged. 

Sales Manager Compensation Plan Example: Bonus

• Single-rate bonus: $250 per percentage point of attainment
• Annual OTE: $200,000
• Base:variable: $100,000 / $100,000
• Pay mix ratio: 50:50
• Rep Quota: 150,000 Quarterly
• Annualized Quota amount: $3.6M Annually
• Quarterly Team Quota: $900,000
• Manager Buffer: 90%
• Manager Quota: $810,000 Quarterly
• Manager Quota: $3.24M Annually

Steps to Build a Sales Manager Comp Plan

“When building any comp plan, I always ask the three steps or questions,” Graham said. “How much, for what, and how?”

1. The first step involves asking, ‘How much will you pay the manager total?’ For example, you might decide to budget $200,000 per year total pay for the sales manager.

The other part of this question is ‘How will they get paid?’ This is where you designate a variable pay split or pay mix.

“For managers, pay mix is typically 50/50 or sometimes 60/40,” according to Graham.

A pay mix of 50/50 is 50% base salary and 50% commissions or bonuses. Likewise, a 60/40 pay split is 60% is base and 40% is commissions or bonuses.

2. The second step answers the question, ‘For what?’ This is where you designate a quota for the manager.

For instance, you could create the quota by adding the sum of the quotas on the manager’s team. For a team of five reps, where each team member’s quota is $100,000, the manager’s quota would be $500,000. You would calculate this by multiplying the number of reps times the quota, or 5 x $100,000 = $500,000.

It’s common for the manager’s quota to be set at 90% of the team’s quotas to accommodate new hires and underperforming reps.

3. You work through the ‘How?’ question in the third step. How do you want to pay?

“There are two major ways that managers get paid. They either get paid commissions or bonuses,” said Graham.

For instance, a manager is paid 1% of everything their team sells. Then you may have accelerators that increase the amount paid as milestones are attained or decelerators to limit commissions before a certain threshold is achieved.

An example of bonus-style incentives could be a predetermined reward sum whenever a specified percentage of quota is reached quarterly or monthly.

Quota frequency is another consideration. It is typically the same frequency as their team’s, monthly or quarterly. “It would never be shorter,” according to Graham, “but there are times when it may be longer. For example, a manager’s reps are on a monthly quota, and the manager is on a quarterly quota.”

Conclusion

A solid sales manager compensation plan enables you to attract and retain top talent that helps your sales team achieve its goals and, ultimately the broader organizational objectives. Sales manager comp needs to be competitive and reflect the specific role’s experience and responsibilities.

These plans typically include a base salary, variable pay, and bonuses or other incentives. A properly designed plan must be easy to understand, aligned with business goals, scalable, fair, and motivational.

The steps for building a manager comp plan answer the questions, ‘How much,’ ‘For what,’ and ‘How.’ Once you work through them, it’s time to assess them for market and industry competitiveness and align them with the individual’s experience.

To build, test, model, and track the performance of your manager comp plans, schedule time to chat with our sales team. 

Mental health struggles among salespeople are on the rise. The State of Mental Health in Sales reports revealed that 43% of sellers struggled in 2019, 58% in 2021, and 70% of sellers suffered from mental health issues in 2023.

We wanted to learn more about these mental health struggles, specifically what’s behind the psychology of sales. 

To help, we interviewed Jeff Riseley, Founder of Sales Health Alliance, a team dedicated to supporting sellers with mindset, mental health, resilience, and stress-management support.

“If you think about what you need to buffer stress as a sales leader, there are two buckets to focus on,” Jeff said. “The first is creating a safe environment. How do you build and create a safe internal environment for your team? Do you have it as a leader? The second, does everyone on your team have an individual toolkit to develop good habits to build a resilient mindset?”

“You need both to perform better,” Jeff said. 

Below, we’ll explore both of those. But first, let’s learn more about our featured expert.

Introducing Jeff Riseley

Jeff started in sales 15 years ago as a top performer in a role where he watched his colleagues be immediately terminated for missing their metrics. 

Despite his position atop the leaderboards, behind the scenes, Jeff dealt with anxiety, insomnia, and panic attacks. When he landed in the hospital with his third panic attack, Jeff focused on uncovering coping mechanisms to buffer stress and manage the ups and downs of sales.

He advanced to sales leadership roles at different startups. Then in July 2018, he hit a turning point when he was diagnosed with testicular cancer. 

This marked a pivotal moment in his life and career and acted as a true test to utilize the tools he learned to manage his anxiety and stress. 

“Everyone in sales talks about how stressful and high-pressure it is,” Jeff said. “But for whatever reason, we don’t talk about the mental performance side of things and what we can do to keep ourselves healthy.” 

This inspired Jeff to start sharing content, his story, and practices that have helped him. He began on Linkedin, which evolved into a blog, speaking engagements, and coaching and training.

Since then, Jeff has helped over 10,000 sellers adjust their mindset, mental performance, and stress management through his company, Sales Health Alliance. 

Today, he focuses on helping top performers with mindset and stress management through his mental performance community, Project Mamba.

Our conversation with Jeff highlighted this rapidly growing mental health crisis in sales, issues that are making it worse, and what sales leaders can do to help their team overcome mental health struggles.

We learned that extrinsic motivators, such as quotas, targets, and incentives — historically designed to drive desired sales behaviors — can backfire. 

According to Jeff, the negative consequences of focusing too heavily on extrinsic motivators tend to squash salespeople’s intrinsic motivation and mental well-being. This is a significant reason why your team misses quota.

The Growing Mental Health Crisis in Sales

With external factors like layoffs, market uncertainty, ambiguity at work, and a recession, it’s little wonder that mental health struggles are on the rise.

When the first State of Mental Health in Sales report ran in 2019, 43% of sellers were struggling with their mental health. In 2021 that number rose to 58%, in 2022 63%, and the latest report shows that 70% of sellers are now struggling with mental health issues. 

“There’s this massive trend in the wrong direction,” Jeff said.

The most frustrating thing is that sales leadership isn’t taking responsibility for addressing this trend. 

Instead, they’re blaming external factors like COVID or remote work. 

During COVID executives recognized that their team was struggling and addressed the problem by providing support. However, “since May of 2022, the B2B investment into these types of initiatives has switched off like a tap,” said Jeff.

And while sales leadership acknowledges the stress and burnout present on their teams, they often fail to take accountability as a core part of the problem, Jeff said. 

For instance, Jeff found that leadership blamed remote work last year and invested their efforts in getting everyone back to the office — foregoing mental health, which is the root cause. 

But to address mental health, it’s important first to understand what motivates people. 

Intrinsic Motivation‘s Role in the Psychology of Sales

“Intrinsic motivation is so important for buffering stress. It’s a piece of armor you can put on to stay motivated in sales,” said Jeff. 

Defined, intrinsic motivation is when we connect emotionally to our work, believe we’re making a difference, and feel proud. This form of motivation is essential to help sellers curb stress when they face roadblocks and adversity.

Being intrinsically motivated drives success and resilience in sales. It allows reps to keep going, push through, and remain persistent when deals fall through or the market changes.

Almost every rep starts intrinsically motivated when they begin a new job. 

When people start a new job, they’re excited to work at the company. They are intrinsically motivated to be there, to impress people, and to make a difference. 

Over time, however, they begin to lose that connection to their job. 

Sales leaders pick up on this. 

The best ones look into what transpired or what’s changed between the rep’s first day and current day. 

“Leaders should be asking, ‘Why isn’t my rep motivated in the first place,’ since humans are naturally motivated to grow and develop. What’s blocking that now?” Jeff said. 

What actually ends up happening, though, is that most sales leaders tend to over-prioritize “How do I motivate my team?” which leads them toward incentives, rewards, and extrinsic motivators.

Now, they’ve backfilled the now vacant intrinsic motivators with extrinsic motivators, which often backfire and reduce intrinsic motivation even further. 

Extrinsic Motivators and Traditional Sales Management

Now, let’s explore extrinsic motivators, which fall more in line with traditional management. 

Extrinsic motivators are external rewards or punishments that drive someone to take action, like quotas and incentives. 

“I think a lot of people misuse incentive plans,” Jeff said. “A rep hits quota, then it’s the norm at the beginning of every month to reset them back to zero? To erase all the progress from their perspective is totally nonsensical.”

Instead, Jeff suggests a more effective approach by keeping lifetime revenue visible when resetting the quota to zero. 

“If you leave lifetime revenue visible, and a rep that closed $2 million over the past year only closes 60% this month or quarter, then both the rep and the leader can see that this period is just a minor setback,” said Jeff. 

But that’s not usually how go-to-market teams approach quotas. Instead, they favor resetting to zero, which Jeff classified as fear-based management. 

“There’s a really good book written by Amy Edmondson, who is sort of the pioneer for psychological safety,” Jeff said. “In the book, she essentially identifies that fear-based management started in the early 1900s.”

Amy references how Ford, the biggest company at the time, used fear management techniques (to great success) over workers on the assembly line. 

“Using fear or rewards when the task is monotonous with low complexity work extremely well,” said Jeff. 

However, fear-management tactics work less effectively for high-complexity tasks like selling. 

“The part of our brain responsible for empathy, creative thinking, problem solving,  which manages more complex thinking, goes offline when we feel unsafe, and when we’re operating in a state of distress,” Jeff said. 

Leadership’s Role & Mental Fitness

Senior leaders are also struggling with their mental health.

 In fact, according to Jeff’s research, frontline managers are struggling the most. 

“If you think about this from a purely physiological standpoint, and the changes that happen in your body when stress starts to become unmanageable, this makes sense,” Jeff said. 

You shut down.

You point to other things as the problem versus being willing to look internally, which clouds the path right in front of you. 

To further exacerbate the situation, the blame game continues to worsen.

For instance, Jeff recently had a frontline manager who wanted to invest in mental health support for their team. 

“The response that she got from her director was, ‘We can’t invest in this because we can’t admit that our team is burnt out. We can’t give Project Mamba as an excuse for people to go on stress leave and to take mental health leave.’”

Wow. Take that in. 

“It’s a complex problem that I’ve been trying to solve for five years,” said Jeff. “But it’s getting a little better. 

10 Ways Sales Leaders Can Support Mental Fitness

So, what can you do as a leader to buck this trend?

We asked Jeff what sales leaders can immediately put in place to help support their reps from a mental health standpoint. 

• Create a safe internal evironment
• Give your reps a toolkit to manage stress effectively

“These are levers that a leader and an organization can pull daily to make a difference and create this safe space where people feel like they can be their authentic selves,” said Jeff.

To create a safe environment, Jeff suggests these 10 actionable strategies:

1. Create an environment that gives your reps autonomy and control
2. Set achievable sales targets and goals
3. Clear Career Pathing
4. Connect their work to something meaningful
5. Foster collaboration and connection amongst their peers
6. Offer support and resources as the leader
7. Give recognition
8. Have a clear company vision
9. Be vulnerable and empower your team to be vulnerable
10. Set boundaries

Then, the toolkit should include resources and access to communities such as Project Mamba to teach reps how to develop long-term habits that strengthen mental health on a daily basis. 

Reducing Mental Stress with Comp Plans 

What’s more, leaders can reduce stressors regarding reps’ paychecks, specifically their variable pay.

“A compensation plan is one lever that a leader can lean on to reduce stressors,” Jeff said. “Having a clear understanding into their comp plan, and how they make money, is so important.”

If a comp plan is consistently changing, and the rep is in a position where they don’t know how much money they will bring home, these leads to external stressors that can creep into their day-to-day performance. 

“When they start thinking about how they’ll be able to pay bills this month or take care of their family, they’re not going to sell with empathy,” said Jeff. “You end up being pushy.”

So, having clarity about where your commission check comes from is essential to this whole idea of peak mental performance and keeping reps focused on the right things, including serving the buyer. 

Support Mental Fitness to Boost Sales Performance

Sales involve a multitude of external and internal stressors, including market and economic changes, micromanagement, and buyer ghostings, which constantly challenge reps’ mental health.

It requires more than sales, product training, and coaching to drive desired outcomes.

Sales leadership needs to acknowledge the continually increasing mental health struggles that are hindering performance and address them by creating a safe environment for their reps. Then, take the next step by providing salespeople access to a resource like Jeff’s Project Mamba community to help them learn how to manage their mental health more effectively.

Learn more about Jeff’s work and mental health resources for salespeople by visiting the Sales Health Alliance website.

Sales commission accounting is a critical, yet often complex, aspect of managing your sales force. 

From crafting transparent commission structures to navigating tax implications and ensuring GAAP compliance, sales commission accounting requires a keen understanding of accounting principles. 

We put together this comprehensive guide to optimize your sales commission accounting practices.  Below, we’ll explore best practices for record-keeping, calculating commissions accurately, and integrating data seamlessly with your accounting system.

Read on if your organization should improve commission transparency concerns, audit preparation, and technology adoption for more efficient reporting.

We’ll guide you through crucial topics like setting up transparent commission structures that are clear for your sales team and the accounting department. Also, we’ll outline different methods for calculating commissions with confidence and ensuring accuracy every pay cycle.  

Discover efficient ways to automate processes and ensure smooth data flow between your sales and accounting systems. From a business perspective, grasp the tax burden associated with commissions and how to handle them correctly. Prepare for audits and ensure your commission accounting adheres to regulations. 

Explore how accounting technology can simplify calculations, reduce errors, and improve reporting accuracy, keeping you ahead of the curve as sales models and accounting standards evolve.

Understanding Sales Commission Accounting Fundamentals

Sales commission accounting is the process of recording and reporting the financial transactions associated with your company’s sales compensation plan. 

Your commission record-keeping practices should ensure transparency for your sales team and your accounting department while also adhering to tax regulations and accounting standards in line with ASC 606. 

Here are some key fundamentals:

• Commission Structure: This defines how salespeople earn commissions, including factors like commission rates, tiers, bonuses, and qualifying criteria (e.g., closed deals, revenue generated). Well-defined commission structures foster clarity and avoid misunderstandings.

• Recognition Methods: This determines when commission expense is recognized in your financial statements. Common methods include Earned When Earned (EWE), where commission expense is recognized proportionally as the sale progresses, and Paid When Paid, where the entire expense is recognized when the commission is paid to the rep.

• Record-Keeping: Maintaining accurate and detailed records of sales activities, commission calculations, and payments is essential. This includes data on individual sales reps, deals closed, commission rates applied, and taxes withheld.

• Integration with Accounting Systems: Streamlining the flow of commission data between your sales and accounting systems can save time, minimize errors, and ensure timely and accurate reporting. Integration allows for automated calculations and reduces manual data entry.

• Tax Implications: Commissions are considered taxable income for salespeople. Employers are responsible for withholding and remitting payroll taxes associated with commissions paid. Understanding these tax implications is crucial for accurate financial reporting and compliance.

Mastering these fundamentals can lay the groundwork for a robust sales commission accounting system. This fosters trust with your sales team and ensures your financial statements accurately reflect your company’s performance and profitability. Stay tuned for upcoming sections, where we’ll delve deeper into these areas and provide practical tips for optimizing your sales commission accounting practices.

The Role of Sales Compensation Software in Commission Tracking

Managing sales commission calculations and tracking can be a significant burden, especially for companies with intricate commission structures or large sales teams.

That’s because earning commissions becomes more difficult the more avenues you have, such as commission tiers, milestone bonuses, and multi-year accelerators.

And, when that happens, organizations risk incorrect payouts which can impact employee retention. For instance, our compensation report found that 9% of reps have quit their role over commission disputes. 

Plus, manual calculations take time. A lot of time.

One of our customers, Katie Cooper, used to dedicate nearly five business days to running commissions for a pay cycle for a team less than 20. Today, it takes her five hours with the help of QuotaPath (and integrated with HubSpot) to run payouts for more than 100 reps. 

Sales compensation software streamlines the sales commission accounting process and minimizes errors.

Software like QuotaPath can automate many of the tasks involved in commission tracking, leveraging integrations to deal with sources of truth and setting pre-defined rules and commission structures. This eliminates the need for your sales or accounting teams to calculate manually, saving valuable time and reducing the risk of human error.  

Furthermore, sales compensation software automates calculations, ensuring consistency and accuracy in commission tracking. This fosters trust with your sales team, who can rely on receiving accurate commission payouts.

Integrating Commission Data With Accounting Systems

Sales compensation software also offers advantages in data management.  

The software can integrate with your CRM and accounting systems, allowing for seamless data flow. This eliminates the need for manual data entry and ensures all relevant data (sales activity, commission rates, etc.) is readily available for commission calculations.

The enhanced reporting and visibility that come with automation provide additional benefits.  

QuotaPath, for example, provides up-to-date insights and detailed reports on commission activity, including forecasted commissions. This empowers managers (and reps) to track individual and team performance, analyze trends, identify areas for improvement in the commission plan, and, most importantly, drive sales revenue. 

Plus, QuotaPath empowers finance operations teams to test, model, and predict the total cost of compensation to next year’s hiring and financial plan.

Finally, sales compensation software frees up valuable time for your sales and accounting teams by automating calculations, data management, and reporting. 

They can focus on strategic tasks like sales coaching or financial analysis rather than manual commission tracking.  

Overall, sales compensation software is crucial in streamlining commission tracking and ensuring accurate and efficient management of your sales compensation program.  In the next section, we’ll explore best practices for record-keeping within sales commission accounting.

Best Practices for Sales Commission Record-Keeping

Now, whether you implement a tool that automates commission record-keeping for you or not, there are a few best practices to follow.

Accurate and detailed record-keeping is the backbone of a robust sales commission accounting system. Vital records ensure transparency for your sales team, facilitate accurate commission calculations, and support compliance with tax regulations and accounting standards. 

Here are some essential best practices to consider:

• Establish a Standardized System:  Develop a consistent and well-defined process for capturing and storing all relevant sales commission data. This could involve implementing a dedicated software solution, using standardized spreadsheets, or creating clear filing procedures for paper records.
• Maintain Detailed Sales Activity Records:  Capture all sales activities that factor into commission calculations. This includes data like individual sales reps involved, deals closed, revenue generated, and qualifying factors for commission payouts (e.g., achievement of sales targets).
• Document Commission Calculations:  Maintain a clear audit trail for commission calculations. This could involve storing electronic records of calculations or creating paper documentation that outlines the applied commission rates, calculations performed, and resulting commission amounts for each salesperson.
• Retain Supporting Documentation:  Keep copies of any supporting documentation that justifies commission payouts. This might include sales contracts, invoices, customer purchase orders, or emails confirming deal closures.
• Automate Where Possible:  Leverage technology to automate record-keeping tasks whenever possible. Many sales compensation software solutions can automatically capture sales activity data from your CRM, reducing manual data entry and minimizing errors.
• Set Retention Periods:  Establish clear policies for how long you need to retain sales commission records.  These retention periods should comply with your region’s relevant tax regulations and accounting standards.
• Maintain Easy Accessibility:  Ensure your sales commission records are easily accessible to authorized personnel, such as your sales and accounting teams, for reference and reporting purposes.
• Regular Reconciliation:  Perform regular reconciliations to ensure your sales commission records match your accounting system and payroll data. This helps identify and rectify any discrepancies.

Following these best practices, you can establish a robust record-keeping system for your sales commission accounting. This will foster trust with your sales team, ensure you have the documentation to support your calculations and maintain compliance with regulations.

Be audit-ready

Learn how QuotaPath can help you close the books faster with accurate and automated commission reporting and amortization.

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Auditing and Compliance in Sales Commission Accounting

While sales commissions are a powerful tool for motivating your sales force, ensuring their proper accounting treatment requires careful attention to auditing and compliance procedures. Failure to comply with regulations or maintain accurate records can lead to hefty fines, penalties, and reputational damage. 

To navigate auditing and compliance regarding the proper amortization of sales commissions, consider the following:

By proactively considering these factors, businesses can confidently navigate the auditing and compliance landscape within sales commission accounting.  This minimizes the risk of audit findings and fosters trust with auditors and simplifies the audit process, allowing your sales team to focus on driving revenue and achieving their sales goals.

Leveraging Technology for Accurate Commission Reporting

Sales commission accounting is vital in motivating your sales force, accurately reflecting your company’s profitability, and ensuring compliance with regulations. You can build a robust system that fosters trust and empowers your sales team by establishing a transparent commission structure, implementing efficient record-keeping practices, and adhering to auditing and compliance standards.

Remember, navigating the complexities of sales commission accounting doesn’t have to be overwhelming.  QuotaPath offers a comprehensive suite of tools to streamline your processes, ensure accuracy, and empower data-driven decision-making.

Here’s how QuotaPath can help:

• Automate Calculations: Eliminate manual calculations and errors with our automated commission engine.
• Simplify Record-Keeping: Consolidate all your sales commission data in a central, easily accessible location.
• Generate Real-Time Reports: Gain valuable insights into sales performance and commission payouts and identify areas for improvement.
• Ensure Compliance: Stay on top of evolving regulations and ensure your practices adhere to accounting standards.

Transform your sales commission accounting by scheduling a customized demo of QuotaPath. Experience the power of a streamlined and data-driven approach. Focus on what matters most — creating sales strategies that drive revenue — while QuotaPath handles the complexities of commission accounting behind the scenes.

Your sales compensation plans, namely your quota, should match and complement the average length of your sales cycles. 

So, if your sales cycle typically runs 60 to 90 days, your quota frequency should run quarterly. Similarly, if your team’s cycles come in much faster, ie, less than 30 days, you’d typically set your quota cycles on monthly terms.

This ensures you align and incentivize your reps with your sales motion and adds fairness to your quota targets. 

But what happens if your sales cycles lengthen despite no significant changes to your market and buyers? This could indicate a seller problem, so you may need to consider implementing levers that expedite quick sales. 

The same holds for seasonal slowdowns when your team could use a bit of motivation to bring deals in sooner rather than later. That’s when it might be time to consider a few tactics to decrease the time it takes to secure that closed/won. 

Below, we explore when it’s appropriate to incentivize shorter sales cycles (and when not) and a few tactics to consider.

When NOT to Shorten Sales Cycles

First, we’ll start with when not to try to shorten a sales cycle proactively. 

A shorter sales cycle seems beneficial at first glance, as it can lead to faster revenue generation and improved efficiency. However, before you make any changes, you must evaluate what data and information indicate that a shorter sales cycle will lead to optimized lifetime value and revenue for your organization. 

Here are some reasons to avoid pushing faster cycles: 

• Quality over Speed: Sometimes, rushing a deal can compromise the quality of the client relationship or the thoroughness of the solution provided. This can lead to a poor buyer experience and miscommunication over the value your product can deliver.
• Complex Sales Require Time: In B2B environments, especially where solutions are complex and expensive, decision-making processes involve multiple stakeholders and require careful consideration. Shortening the sales cycle in such contexts might not be practical or beneficial, as stakeholders need adequate time to assess, deliberate, and align internally.
• Focus on Customer Lifetime Value (CLV): Rushing a customer through the sales process can sometimes jeopardize long-term relationships. Building a solid foundation can lead to more upsell and cross-sell opportunities, referrals, and a longer, more profitable relationship, which increases your CLV. 
• Strategic Alignment and Buy-in: Ensuring the customer’s strategic goals align with the product or service offerings might require a longer nurturing process. This alignment is crucial for long-term success and satisfaction for both parties, especially in today’s market, when retention often matters most. 
• Market Positioning: For companies positioning themselves as premium or consultative partners rather than transactional vendors, a longer sales cycle often reflects the deep, advisory nature of the sales process. This approach can differentiate a company in crowded markets, appealing to clients looking for tailored, high-touch engagement rather than quick, off-the-shelf solutions.

While efficiency in the sales process is crucial, a strategic focus often extends beyond mere speed to encompass quality, alignment, and long-term value. The decision not to focus on shortening the sales cycle is typically a deliberate choice aimed at fostering sustainable growth, deepening customer relationships, and ensuring the strategic fit between the customer and the company.

But, of course, some occasions call for an expedited sales flow. 

When to Shorten Sales Cycles

Now for the flipside.

Focusing on shortening the sales cycle can be a strategic move for RevOps and Sales leaders under certain circumstances.

These include:

• When the Market Demands Speed: In highly competitive markets where speed to close can be a significant competitive advantage, shortening the sales cycle can help secure market share and outpace competitors. This is particularly relevant in industries where products or services are rapidly commoditized.
• To Improve Cash Flow: Improving cash flow might be critical for startups or businesses in early-stage growth phases. Shortening the sales cycle can lead to quicker revenue recognition, supporting operational needs, and investments in growth initiatives.
• High Volume, Low Complexity Sales: In scenarios where the product or service is relatively straightforward and the sales process does not require extensive education or customization, streamlining the sales cycle can increase efficiency and lead to a higher volume of transactions.
• To Meet Short-Term Goals or Quotas: If a business is pressured to meet specific short-term goals, such as quarterly sales targets or investor expectations, efforts to shorten the sales cycle can help achieve these objectives more quickly.
• When Data Supports a Change: If sales data analysis indicates that deals are stagnating at certain stages or that the length of the sales cycle is out of step with industry benchmarks, this can signal an opportunity to streamline processes, remove bottlenecks, and shorten the sales cycle without compromising the quality of engagements.
• Leveraging Technology for Efficiency: Adopting advanced sales technologies, such as CRM systems, automation tools, and AI-driven insights, can significantly reduce time-consuming tasks and sales cycle lengths. When these technologies are underutilized or newly available, focusing on integrating them into the sales process can make shortening the sales cycle both feasible and beneficial.
• Customer Preference for Speed: In some industries, customers may prioritize quick purchasing decisions and implementations. Improving efficiency can improve customer satisfaction and competitive positioning by aligning the sales process with customer expectations.
• Scaling Operations: As a business grows, efficiently managing an increasing volume of leads and deals can necessitate shorter sales cycles to maintain or improve sales productivity and ensure that growth targets are met.

So, when external market dynamics, internal business needs, customer preferences, or the nature of the product or service support a faster sales process, consider making the adjustments below to drive a quicker cycle. 

Just remember, the key is to balance the benefits of speed with maintaining high-quality customer engagements and long-term value creation.

7 Ways to Shorten Sales Cycles

Shortening the sales cycle, when strategically appropriate, can significantly impact a company’s growth and efficiency. 

Here are some effective tactics to look into: 

SPIFs

QuotaPath generally has a relatively quick sales cycle, averaging 60-90 days. However, to help distribute deals across quarters and not just our “busy season,” we occasionally implement a sales performance incentive fund or special performance incentive fund, aka, a SPIF.

For instance, you could offer a SPIF contingent on closing a deal within “X” days between the demo and the close date at the opportunity level.

We’ve also seen “Fast Start” SPIFs, which pay a flat-rate bonus for deals that close within the first weeks of a new quarter to offset the deal traffic that comes in the last two weeks of a quarter. 

A third SPIF to consider is a contact-threading SPIF that rewards a dollar amount for getting the final decision makers involved in the process earlier (think: calls/demos booked within X days following the initial demo). 

RVP Cassidy Macias added that she’s seen success with quarterly amplifiers, monthly spiffs (usually pull-ins or closing certain-size deals), and participation metrics (the specific amount expected of an AE every quarter, even on an annual number).

Identify inefficiencies in the funnel 

SaaS Sales Leader Paul Munro called out that SPIFs should only be used for extra pushes around a KPI that might be falling a little short and that the core components of your comp plan should align to the ideal sales cycle length. 

Instead of adjusting compensation, Paul suggests evaluating inefficiencies within the sales funnel. 

“What data/information convinces you that shorter cycles equal optimized LTV/revenue for the business?” Paul said. “In many cases, there are ways to shorten cycles by finding inefficiencies in the funnel (driving higher inbound intent, optimized and simplified pricing/packaging, ironclad ICP, etc.) without negatively impacting NRR and LTV, whereas sales incentives (particularly short-term incentives) might have the opposite effect.”

Look at reps with the shortest sales cycles 

In addition to looking into funnel efficiencies (or lack thereof), you should also review who on your team has the fastest and longest sales cycles. This will enable you to identify patterns and coaching opportunities to duplicate the practices of the most efficient reps. 

“I’d look at the deals with the short sales cycles and figure out what they have in common. It might be that they’re inbound, an industry, or that one AE is executing discovery or follow-up process better,” said Head of Sales Derek Jankowski.

Develop ideal customer profiles

Developing your ideal customer profile (ICP) also affects your sales cycles. These customers or accounts often find value in your product the fastest and typically have sales cycles to match.

That’s because your ICP aligns with your product’s core value proposition. 

They understand the problem your product solves and are already looking for a solution. This leads to a smoother sales process with less education on the potential customer’s end. Your ICP usually comes with the tech specifications that require fewer resources to get up and running. 

Create ROI Tools

Another way to impact the length of the sales cycle is by providing prospects with tools or calculators that help them understand the potential return on investment (ROI) from purchasing your product or service. 

Making the value proposition clear can expedite the decision-making process.

At QuotaPath, for instance, our VP of RevOps built this ROI calculator that shows the cost of QuotaPath compared to the savings and improvements of implementing QuotaPath. 

Reduce friction throughout the approval process

Friction within the approval process is just as important to the inefficiencies within the funnel. 

Identify common hurdles in the prospect’s buying process and find ways to mitigate them. For instance, offering legal document templates or preparing mutual NDAs in advance can speed up the administrative aspects of deal closure.

Scheduled follow-ups 

Lastly, a strategic follow-up process should be implemented to keep deals moving forward. Use automation to remind sales representatives to follow up at critical moments and personalize communication to maintain engagement.

Should you shorten your sales cycle?

There are advantages to shortening your sales cycle, but the time may not always call for it. But when the time does call for it, now you have seven best practices to consider when doing so.

Schedule time with our team to learn how QuotaPath can help you run your GTM strategy more efficiently. 

Measuring the effectiveness of sales commissions involves analyzing key metrics like conversion rates, revenue growth, and quota attainment. It also requires tracking individual and team performance against targets and KPIs and conducting regular reviews to identify trends and areas for improvement.

Businesses can optimize commission structures and incentive programs to drive growth and performance by leveraging data analysis.

When done correctly, you can learn data points like:

• Who are my most (and least) efficient sales reps
• Are the reps earning the most also selling the most
• What seasonal trends do we face
• Am I paying too high (or too low) of total commissions per deal
• What parts of my comp plan are driving selling behaviors?
• Are high-attaining products also the most profitable?
• Identify quota consistencies and inconsistencies across performers
• Which products or services are easier or harder to sell, what is their impact on attainment levels, and does this change over time?
• The health level of our commission structures

This blog explores commission effectiveness, offering insights into essential data, alignment with overarching business goals, and the tangible impact on team performance metrics and operational efficiencies. 

Buckle up, and let’s move mountains using sales commission data. 

Understanding Commission Effectiveness

For individuals in RevOps, Finance, and Sales Leadership, understanding commission effectiveness is crucial for several reasons:

Key Metrics

Analyzing key metrics related to commission effectiveness can provide businesses with valuable insights into sales performance, operational efficiency, and financial planning. 

We recommend tuning in to the following data points regarding commission calculations:

Business goal alignment: 

• Attainment over time: Measures how well sales commissions align with overall business goals by tracking the attainment of sales targets over periods to identify seasonality and show how consistent your reps are across periods. 
• Revenue growth rate: Evaluates the impact of sales commissions on driving revenue growth and achieving business objectives.
  • To calculate revenue growth rate:
    • Revenue growth rate = (  Current revenue – previous revenue) x 100
        Previous revenue
• Earnings by comp plan component: To determine if your comp plan is driving your key business objectives or North Star metrics, look at which elements of your comp plan you’re paying the most amount of commissions on.
  • Example: If your North Star metric is raising your ACV to $20K, and you pay an extra 3% commission rate on any deal >$40K, you’d look into how much in total commissions are you paying along that compensation path

Budgeting and financial planning:

• Commission expense ratio: Compares commission expenses to total revenue or gross margin, helping to ensure commissions are within budgetary constraints.
• Commission payout ratio: Tracks the proportion of revenue allocated to commissions, aiding in accurate financial forecasting and planning.
• Effective rates: Collective commission percentage per deal when factoring in every role that earns a commission of one deal.
  • TIP: This should be under 25%

Sales performance optimization:

• Sales conversion rate: Indicates the effectiveness of sales efforts in converting leads into customers, reflecting the impact of commission structures on sales performance.
• Average deal size: Measures the average value of sales transactions, revealing how commission incentives influence sales representatives’ focus on high-value deals.

Operational efficiency:

• Sales cycle duration: Evaluate the efficiency of sales processes and how commission structures impact sales cycle length.
• Time to quota attainment: Indicates how quickly sales representatives reach their targets, reflecting the efficiency and effectiveness of commission plans.

Data-driven decisions:

• Commission payout variance: Tracks deviations from expected commission payouts, enabling data-driven adjustments to commission structures based on performance trends.
• Sales performance analytics: Utilizes data on individual and team sales performance to inform commission adjustments and optimize incentive structures.

Regulatory compliance and fairness:

• Commission payout accuracy: Measures the accuracy of commission calculations to ensure compliance with regulatory requirements and fairness in compensation
• Commission dispute resolution time: Tracks the time taken to resolve commission disputes, ensuring fairness and compliance with regulatory standards.
• Discrepancy/resolution count: Shows number of pay inconsistencies or questions per pay period to show how well your reps understand how they are paid and how accurate (or inaccurate) your compensation calculations and data are. 

Motivation and Retention:

• Sales team turnover rate: Indicates the rate at which sales representatives leave the organization, reflecting the effectiveness of commission structures in motivating and retaining talent.
• Employee satisfaction with commission plans: Gauges the level of satisfaction among sales representatives with their commission structures, which correlates with motivation and retention levels.
• SPIF success: Measures the impact of sales performance incentive fund or special performance incentive fund (SPIF) to see how well these drive selling behaviors and if it’s worth considering implementing full-time in your compensation plan
  • Read more: Learning Center article on implementing successful SPIFs in sales

By monitoring these key metrics, organizations can assess the effectiveness of their sales commission plans in driving business goals, optimizing sales performance, ensuring financial stability, maintaining operational efficiency, making data-driven decisions, complying with regulations (ASC606), and fostering motivation and retention among sales teams.

Aligning sales commissions with business goals

Sales commission effectiveness begins with how you structure your sales compensation plan. 

Aligning your commission strategy to business goals is the most important foundational piece. 

“Compensation plans should be the caboose, not the engine,” said Pablo Dominguez, Operating Partner, Sales & Customer Success at Insight Partners.

Most revenue leaders would agree.

However, in our 2024 Compensation Trends Report, more than 450 Revenue, Sales, and Finance leaders reported that alignment to business goals was the most needed improvement in sales compensation management. 

The result of this mismatch? 91% of companies reported that less than 80% of their sales reps achieved quotas. 

Moreover, leaders pointed to misaligned sales activities as a leading factor in these significant misses, which fall to poorly designed compensation structures. 

Steps to align comp plans to business goals: 

1. Clearly define the overarching business goals and objectives. These may include revenue targets, market share expansion, customer acquisition, or product penetration goals.
   
2. Identify key performance indicators (KPIs) that directly correlate with those goals.These may include metrics such as sales revenue, profit margins, customer retention rates, or new product adoption rates.
   
   “Then ask, can any of those priorities be reinforced with sales compensation design?” said Mark Roberge, Managing Director at Stage 2 Capital.
   
3. Design a commission structure that incentivizes behaviors aligned with those objectives. Determine which sales activities and outcomes are most critical to achieving the desired business results and assign appropriate commission rates or incentives. For example, if increasing market share is a crucial goal, structure a higher commission rate to reward acquiring new customers or expanding existing accounts.
   
4. Monitor the effectiveness of your sales compensation plan using the metrics listed above to ensure ongoing alignment between sales commissions and business goals. You can do this by regularly reviewing sales performance data against KPIs to assess the effectiveness of the commission structure in driving desired outcomes.
   

Lastly, identify areas where incentives may be misaligned or adjustments are needed to better align sales activities with business objectives. By maintaining flexibility and adapting the commission structure as business goals evolve, you can ensure sales incentives align closely with the company’s overarching strategic priorities.

The impact on team performance

Sales commission effectiveness is pivotal in shaping team performance within a sales organization. 

This is because the commission structure directly influences the behavior and motivation of sales representatives. When you design commissions to reward desired actions and outcomes, such as closing high-value or multi-year contracts, salespeople are incentivized to focus on activities that contribute to those goals. 

This alignment between commissions and desired behaviors fosters a high-performing sales culture and motivates your revenue teams to overachieve. Moreover, sales commission effectiveness impacts team morale and cohesion. 

When commission structures are perceived as fair and transparent, they cultivate a sense of equity among team members and minimize potential conflicts or resentment. 

Read Report

Conversely, if commissions are perceived as arbitrary or inequitable, it can lead to demotivation, disengagement, and even discord within the team. In fact, our trends report revealed that 9% of reps quit because of compensation errors or disputes. 

Therefore, sales leaders must ensure that commission plans are carefully crafted to incentivize desired behaviors while fostering a collaborative and supportive team environment.

Additionally, sales commission effectiveness directly influences overall team performance and productivity. A well-designed commission structure can drive higher levels of sales activity, improve sales conversion rates, and ultimately contribute to achieving or exceeding revenue targets. 

By continuously evaluating and refining the commission structure based on performance data and feedback from the sales team, sales leaders can optimize sales commission effectiveness and maximize team performance, driving sustainable growth and success for the organization.

Best practices for setting up sales commissions 

What are the best practices for setting up sales commissions? Automate the process by using commission tracking and commission management software. 

Doing so does more than just streamline the process for your team, which we’ve found typically dreads commission payout periods because of the onslaught of rep questions that follow. Automating it with a tool like QuotaPath increases calculation accuracy visibility into compensation (and accountability across your team as a result), and makes it easier to measure the efficacy of your compensation strategy.

With QuotaPath’s new modeling tool, you can also predict the performance and cost of your incentive structures by running attainment scenarios to see how much you would pay before implementing a plan.

However, if you’re not ready to automate this process yet, here are some best practices for setting up sales commissions that anyone can benefit from.

• Align with Business Objectives: Support your commission structure directly to your overarching business objectives and sales strategy. Identify specific goals such as revenue targets, market share expansion, or product penetration, and design commission plans that incentivize behaviors aligned with these objectives. 
• Maintain Transparency and Clarity: Communicate the commission structure, including the calculation methodology, payout thresholds, and any performance metrics or KPIs used to determine commissions. Avoid ambiguity or complexity that could lead to confusion or misunderstandings among sales representatives.
• Fairness and Equity: Ensure commission plans are fair and equitable across the sales organization. Avoid favoritism or bias in commission allocation by establishing consistent criteria and performance metrics for all sales representatives. Consider factors such as territory size, account complexity, and sales cycle length when determining commission rates to ensure fairness in compensation. 
• Regular Review and Adjustment: We don’t recommend changing your plan every quarter, but you should monitor and evaluate the effectiveness of commission plans based on sales performance data and feedback from the sales team. Identify areas where the commission structure may be misaligned with business objectives or adjustments are needed to optimize incentives. Review commission rates, payout thresholds, and performance metrics to ensure they remain relevant and competitive in the evolving market landscape. Then, don’t be afraid to adapt once you’ve got the data that demands changes. 
• Incentivize Desired Behaviors: Design commission plans to incentivize desired behaviors that contribute to long-term sales success and customer satisfaction. Consider incorporating incentives for prospecting, lead generation, customer retention, and upselling to encourage a holistic approach to sales excellence. Rewarding behaviors that align with the sales process and customer-centric values drive short-term results and foster sustainable growth and customer loyalty over time. 

To learn more about QuotaPath, schedule time with our team or tour the platform with a free trial. 

A recent study found that of 450 revenue leaders surveyed, 14% reported that their sales compensation plans fail to drive customer acquisition costs (CAC). Another 10% noted that their comp structures are too easily obtained. 

Both challenges represent the side effects of a non-optimized compensation plan, which can lead to a cascade of negative consequences.  

Additional downsides from a failure to focus on compensation plan optimization include: 

• Low Employee Morale and Motivation: Unfair or unclear compensation structures can demotivate employees. If reps feel they can’t reach their targets or that their efforts aren’t rewarded fairly, it can lead to decreased engagement and productivity.
• High Turnover: Disgruntled employees are more likely to leave for companies with more attractive compensation packages filled with sales performance drivers. This can be costly for businesses, as recruiting and training new hires takes time and resources.
• Focus on Short-Term Gains: A poorly designed comp plan might incentivize short-term, unsustainable behaviors. For example, reps prioritize quick sales over building long-term customer relationships.
• Alignment Issues: If the compensation plan doesn’t align with your overall business goals, it can lead to a misalignment of priorities. For instance, a plan emphasizing pure sales volume might not encourage reps to sell higher-margin products or provide excellent customer service.
• Administrative Headaches: Complex or poorly designed comp plans can be a nightmare for HR and payroll departments to administer, leading to errors and delays in payouts.

By optimizing your compensation plan, you can address these issues and create a system that incentivizes the behaviors that drive long-term success.

This blog examines success-proven tools and methodologies that foster revenue and finance alignment, drive sales team engagement and performance, and maintain compensation plan simplicity.

Introduction to Compensation Plan Optimization

We’ll start with an introduction to compensation plan optimization.

Imagine a sales compensation plan that:

• Drives down customer acquisition costs (CAC), ensuring you acquire new customers profitably.
• Presents clear goals and rewards that are attainable, motivating for your sales team, and profitable for your button line.
• Aligns perfectly with your overall business objectives, incentivizing behaviors that drive the results of your key targets.

That sounds pretty good, right? Unfortunately, many companies struggle with non-optimized compensation plans, leading to the abovementioned issues.

This guide dives into the world of compensation plan optimization. We’ll explore success-proven tools and methodologies that can help you achieve the dream scenario outlined above. You’ll learn how to foster revenue and finance alignment, maximize sales team engagement and performance, and maintain compensation structure visibility.

Gaining Visibility Into Your Compensation Structure

To optimize your compensation models, start by introducing a process or tool like QuotaPath that gives you and your revenue organization visibility into how commissions are tracked, calculated, and paid.  

Compensation plan automation and commission tracking software provide a clear window into your entire compensation structure. This newfound visibility empowers you to:

• Identify Inefficiencies: Unearth areas where your current plan might be overly complex or have unintended consequences.
  • Look up total effective commission rates per deal to see if you’re overpaying commissions across the collective roles tied to a deal without manipulating a spreadsheet
  • Easily lookup large commission rate payouts to see if it’s a problem with your comp plan or that the rep earned an accelerated rate due to plan rules
  • Check the efficiencies and inefficiencies of sales reps to measure your most profitable reps by evaluating Sales: Earning ratios
• Run Simulations: Test different compensation scenarios before rolling them out to your team. This allows you to identify potential issues and fine-tune the plan for optimal impact.
  • “Pressure test a few things,” said Stage 2 Investor and GTM Advisor Liz Christo. “Most models have broad-based assumptions. But what if every rep hits quota? What if every rep hits 120% of quota? Will we all be super excited about this, or will we see that this math doesn’t work when the accelerators kick in?”
  • Account for outliers and estimate total compensation costs at various team-wide performance levels. 
  • Learn more about QuotaPath’s plan performance modeling in-app. 
• Foster Transparency: A clear view into the compensation structure builds trust with your sales reps. They can see exactly how their performance translates to rewards, keeping them motivated and engaged.
  • Our 2024 survey found that it takes reps 3 to 6 months to understand how they earn commissions. This is due to overly complex plans, lack of access to their comp plans and progress, and poor communication and plan rollout from leadership. 

By gaining visibility, you lay the groundwork for a data-driven approach to compensation plan optimization.  The next section will explore the power of modeling and testing different plan variations.

Modeling and Testing Plan Performance

When it comes to modeling and testing compensation plan performance, we’ve found that many leaders will run models using last year’s data to see what they would pay this year.

“But they’re doing this from the core plan and not layering in SPIFs,” said QuotaPath VP of RevOps Ryan Milligan. “If I SPIF Everyone on my team, and my close rates go up, and the outbound pipeline grows by 40%, then what?”

QuotaPath can effectively model these scenarios so that you can go to your board and show your reps’ performance and the dollars in and out the door. 

“It allows you to see if you’d be happy to pay these commissions based on what’s coming in and team attainment,” Ryan said. 

Plus, modeling and testing are essential tools for RevOps and finance leaders who want to ensure their compensation plans drive the desired sales outcomes while remaining cost-effective and aligned with the business strategy. 

Customizing Compensation Plans By Role

Another way to optimize your compensation plan is by customizing compensation plans according to role.

For instance, you wouldn’t offer variable pay to a customer experience (CX) rep that only focuses on upsells. Doing so suggests that you want your CX team focused only on selling the customer more versus delivering value so that they renew and grow their account.

Different sales roles have unique objectives, challenges, and responsibilities. Consider customizing your compensation plan by role to motivate and reward your team. 

Here’s how:

Identify Key Performance Indicators (KPIs): Not all salespeople are created equal. For example, an Account Executive (AE) might focus on closing new deals, while a Customer Success Manager (CSM) prioritizes customer retention and upsells. Define the specific KPIs that matter most for each sales role.

Align Incentives with Objectives: Once you’ve identified key metrics, tailor the compensation plan to incentivize the behaviors that drive success in each role. For instance, AE’s plan might emphasize commissions tied to new customer acquisition, while CSM could reward upsells and renewals.

Account for Experience Level: Junior reps might require a higher base salary with a lower commission structure, while seasoned veterans might thrive on a performance-heavy commission plan. Consider experience level when designing compensation packages.

Address Regional Variations: Cost of living and market dynamics can differ significantly across regions. Factor these variations into your compensation plans to ensure fairness and competitiveness in attracting and retaining top talent across your geographical footprint.

Doing so should increase motivation because you’re tailoring their pay structure specific to their job function, improving alignment toward the right objectives, and fostering both customer and employee retention.

By customizing flexible compensation plans by role, you can create a system that motivates your team, aligns with your business goals, and fuels long-term sales success. The next section will explore the power of forecasting and experimentation in compensation plan optimization.

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Use our free sales funnel resource to see how many meetings your team needs to book to hit quota.

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Forecasting and Experimenting

Compensation plans are not static documents.  

They should be living, breathing entities that evolve alongside your business strategy and market conditions.  

This is where forecasting and experimentation come into play:

Forecasting Future Needs

Predicting Revenue Growth: You can forecast future revenue growth by analyzing historical sales data and market trends. This allows you to tailor your compensation plan to incentivize behaviors that will drive the desired revenue outcomes.

Proactive Pipeline Management: You should design compensation plans to keep your sales pipeline healthy, such as incentivizing outbound deals. Forecasting can help you anticipate future pipeline needs and adjust your plan accordingly. 

• For example, if you foresee a dip in new opportunities, you might temporarily increase commissions for closing existing deals.

Budget Planning & Cost Management: Forecasting future compensation costs allows you to effectively budget for payroll and ensure your plan remains financially sustainable.

Experimentation for Continuous Improvement

A/B Testing Different Structures: Don’t be afraid to experiment with different compensation models. A/B testing allows you to compare the effectiveness of various plan structures on a small scale before rolling them out to the entire team. This data-driven approach helps you identify the optimal plan for driving sales performance. You could also implement a SPIF for a period of time to test to see if it should be a long-term fixture in your comp plan. 

Adapting to Market Changes: The sales landscape is constantly evolving. By regularly testing and iterating on your compensation plan, you can ensure it remains relevant and effective in a changing market. For example, you might need to adjust commission rates or quotas based on new competitor offerings or customer buying behaviors.

Optimizing for Long-Term Success: Through continuous forecasting and experimentation, you can refine your compensation plan to drive long-term sales growth and achieve your overall business objectives.

By embracing a dynamic approach incorporating forecasting and experimentation, you can transform your compensation plan from a static document into a powerful tool that continuously adapts to fuel long-term sales success.

How To Ensure Your Team Understands Their Comp Plan

The more reps understand how they are compensated, the more likely they are to be incentivized by your plan.

Read Blog

Maintaining Clear Compensation Expectations

A well-designed compensation plan is only effective if everyone understands it. Unclear expectations can lead to confusion, frustration, and ultimately, a demotivated sales team. 

Here are five best practices to ensure clear compensation expectations throughout your organization:

By following these best practices, you can maintain clear compensation expectations and create a more engaged and motivated sales team.  A well-understood compensation plan fosters trust and transparency, leading to a more successful sales organization.

Success Story: Everview’s Record Sales With QuotaPath

Looking for a real-world example of how compensation plan optimization can drive sales success? 

Look no further than EverView’s impressive results after implementing QuotaPath.

EverView wasn’t just tinkering around the edges – they achieved record sales in just 3 months with QuotaPath. 

This dramatic improvement can be attributed to several key factors:

• Transparency and Trust: QuotaPath’s clear visibility features helped EverView create a culture of understanding and trust around compensation plans and commissions. No more confusion or frustration – sales reps have a clear line of sight into how their efforts translate to rewards.
• Scalability and Ease of Use: QuotaPath’s user-friendly design ensured a smooth implementation at scale. The system is easy to adopt and navigate, eliminating the complexities that can often bog down traditional compensation management processes.
• Boosting Efficiency: EverView cut their monthly commission calculation time to three hours for 80 sellers. 
• High User Adoption: EverView achieved an impressive 95% team-wide daily user adoption rate for QuotaPath. This widespread engagement demonstrates the system’s value and user-friendliness for the sales team.
• Record-Breaking Performance: The impact on sales performance is undeniable. EverView achieved their highest sales year to date, with a staggering 70% of the team hitting quota. QuotaPath empowered reps to see the direct connection between their efforts and earning potential, leading to a significant boost in motivation and results.

EverView’s success story is a powerful testament to the potential of compensation plan optimization. 

Leveraging QuotaPath’s visibility, ease of use, and scalability, EverView transformed its compensation plan from a potential roadblock into a powerful tool that fueled record-breaking sales performance.

To learn how QuotaPath can support your complex commission structures and make your process more efficient, schedule time with our team. 

This is a guest blog from Convoso that covers customer segmentation models.

In any business, success relies on your ability to understand your customers. What they want, how they feel, and the different ways they might view your brand. Sure, you might be able to get by marketing things at random, based on gut instinct. However, your odds of success will be far higher if you start leveraging customer segmentation models to fully understand your target market.

What is customer segmentation?

Customer segmentation means looking at all your customers and organizing them into groups based on relevant traits. For example, International Women’s Day might trigger email marketing from your brand, primarily targeted at your female customersThe above is an example of demographic segmentation focusing on gender. But there are several different types of customer segmentation models which all focus on different areas and trends. These include:

• Demographic segmentation.
• Geographic segmentation.
• Behavioral segmentation.
• Psychographic segmentation.
• Technographic segmentation.
• Firmographic segmentation.
• Needs-based segmentation.
• Value-based segmentation.

What is a customer segmentation model?

A customer segmentation model is a framework businesses use to divide their customers into distinct groups based on shared characteristics. This segmentation allows companies to tailor their sales, marketing, and product strategies to different customer needs, improving engagement and revenue outcomes.

Segmentation models can be based on various factors, including:

• Demographic segmentation: Categorizing customers by age, gender, income, or occupation.
• Firmographic segmentation: Grouping businesses by industry, company size, or revenue (common in B2B sales).
• Behavioral segmentation: Analyzing purchasing habits, product usage, or brand loyalty.
• Psychographic segmentation: Considering lifestyle, values, and motivations that drive buying decisions.
• Geographic segmentation: Dividing customers based on location, region, or market density.

A strong customer segmentation model helps businesses prioritize high-value prospects, personalize outreach, and optimize pricing and sales strategies to drive growth.

Why it’s important to use a customer segmentation model

Understanding the people who frequent your business is essential for making informed marketing decisions. Blind marketing, on the other hand, is liable to alienate otherwise loyal customers from your brand.

There’s no point in a private therapy practice advertising couples counseling to single people, for example. Just like you wouldn’t advertise B2B subscriptions and services to a non-professional, family-oriented market.

That said, lots of businesses cater to vast ranges of people. It’s rare to find a business with one sole target demographic. Hence the need to perform segmentation in the first place.

The benefits of customer segmentation models include:

• Enabling personalization.
• Improving your effective customer retention strategy.
• Increasing return on investment (ROI).
• Better informed decision-making equals less risk.
• Optimizing your customer experience strategy for a more tailored and impactful approach.

Now that we’ve hopefully won you over, let’s look at some of the different customer segmentation models you can use.

The different categories of segmentation models

There are so many different customer segmentation models it can be hard to know which one to go with. You’ve also got to choose the best approach to processing that data and minimize vendor management risk. Don’t worry, though, as this section breaks down how each model functions.

Demographic segmentation

Demographic segmentation is one of the most commonly used models. That’s because it focuses on population characteristics. As such, focusing on demographics offers a lot of flexibility. There are so many ways you can organize your customer base.

Different types of demographic characteristics include:

• Age.
• Race.
• Gender.
• Income.
• Employment.
• Nationality.
• Education.
• Marital status.

Take employment, for instance. If you know the professional demographics you’re catering to, you can include that information in, say, call center scheduling tools. Based on profession, you have some idea of when you’re more likely to reach a customer with marketing efforts. A self-employed freelancer might be accessible whenever, but a 9-5 secretary will likely be unreachable for much of the day.

Geographic segmentation

Geographic segmentation is another model that’s fairly self-explanatory. There are all kinds of reasons to organize customers based on their locations. Especially if you’re running an international business. Some types of businesses likely to use geographic segmentation are:

• Holiday/travel companies.
• Estate agents.
• Companies marketing climate-specific products (like winter or beachwear).

But its use is hardly limited to them. Geographic segmentation helps to avoid unexpected sales data quality issues when expanding your business and target market. Any organization can benefit from understanding the differences between customers in different regions and countries.

For example, you need to be aware of cultural differences when you market your brand. What’s fun and engaging in one culture might be inappropriate or outright offensive in another.

Behavioral segmentation

Rather than focusing on external factors like demographics or geographics, behavioral segmentation focuses on personal habits. Their purchase history is one of the most common examples.

Any behavioral information about your customers can be useful, such as hobbies and interests. That said, it’s often best to focus on behaviors relating to how customers engage with your brand. Things like:

• Ad engagement: Which social media or other sites do your customers see more of your ads, and how do they interact with them?
• Purchase methods: How many customers shop online versus your physical locations? What payment options do people prefer?
• Browsing habits: The products people look at, and how they engage with sales and promotional offers.

Psychographic segmentation

Despite its name, psychographic segmentation doesn’t actually psychoanalyze your customers. It is, however, focused on their feelings and attitudes, like values, interests, and lifestyle. This information is useful for understanding the personality types and preferences of those engaging with your brand.

This information is as flexible as it is valuable. With it, you can double down on appealing to existing customers, or alter your strategies to try and reach new target markets.

Technographic segmentation

This form of segmentation focuses on your customers’ preferences and overall comfort level with technology. Such as:

• The devices they use.
• Browser or app preferences.
• The site or app features they engage with.
• Their general level of tech-savviness.

The good news is, you can gain a lot of this information passively through your website or app data. For anything more, you may need to survey customers directly.

Firmographic segmentation

If you’re part of a B2B organization, chances are that you’ll rely on firmographic customer segmentation models. Rather than analyzing individuals, this approach focuses on client or customer businesses.

By understanding how client businesses operate, their processes and ideals, you can anticipate their needs ahead of time. This helps you maintain favorable B2B relationships and peak standards of professionalism.

Needs-based segmentation

It may sound obvious, but don’t underestimate needs-based customer segmentation models. Understanding customer needs is essential for tailoring the most effective solutions. For example, home delivery services need user-friendly systems for organizing delivery windows.

Let’s say you deliver heavy assets like furniture, and you get a lot of business from the elderly, and customers with disabilities. It’s important that delivery includes options for set-up assistance.

In other words, needs-based segmentation is how you identify the practical realities of your business model.

Value-based segmentation

Value-based segmentation means organizing customers based on their estimated ROI. How loyal they are, which products or services they purchase, etc. It’s about separating your regular buyers and big-ticket purchasers from those who only occasionally or lightly frequent your business.

Every customer is valuable, but still. It helps to know which markets are the most valuable for you to focus on.

How to pick the right customer segmentation model for you

Selecting the right customer segmentation model depends on your business goals, customer base, and available data. Here’s how to approach it:

1. Define Your Objectives – Start by identifying what you want to achieve. Are you looking to improve sales targeting, refine pricing strategies, increase retention, or personalize marketing? Your segmentation model should align with these goals.
2. Analyze Your Customer Data – Review the data you have on customers, including demographics, behaviors, firmographics (for B2B), and purchase history. If you lack key data points, consider collecting more through surveys, CRM tracking, or analytics tools.
3. Choose the Most Relevant Segmentation Type –
   • Demographic/Firmographic – Useful for broad market targeting (e.g., selling to specific industries or income brackets).
   • Behavioral – Best for refining sales strategies based on purchase habits or engagement levels.
   • Psychographic – Ideal for businesses that need to understand customer motivations, such as lifestyle or values.
   • Geographic – Works well if location influences buying decisions (e.g., regional pricing, climate-based needs).
4. Validate with Testing – Before fully committing, run small tests by applying different segmentation approaches to your marketing and sales efforts. Measure engagement, conversion rates, and sales performance to see which model delivers the best results.
5. Refine and Iterate – Customer behaviors change, so continuously review your segmentation model and adjust it based on new data and market shifts.

Customer segmentation model examples

The right customer segmentation model depends on your business type and goals. Here are some common examples used across industries:

Demographic Segmentation
A SaaS company targeting small businesses may segment customers by company size, ensuring startups receive different messaging than enterprise clients. This approach is best for B2C and B2B businesses looking to personalize marketing and sales strategies based on age, gender, income, or business characteristics.

Firmographic Segmentation (B2B Focused)
A sales compensation software company segments customers by industry and annual revenue, tailoring features to tech startups differently than enterprise sales teams. This model is ideal for B2B companies that need to customize outreach based on company size, location, and industry type.

Behavioral Segmentation
An e-commerce platform tracks purchase frequency and segments customers into first-time buyers, repeat customers, and VIPs, offering targeted discounts accordingly. This approach works well for businesses optimizing loyalty programs, cross-selling, and retention strategies.

Psychographic Segmentation
A fitness subscription company segments users based on motivations such as weight loss, muscle gain, or general wellness and tailors workout plans accordingly. This model is effective for brands that focus on lifestyle, values, and emotional drivers in purchasing behavior.

Geographic Segmentation
A retail chain segments customers by climate region, promoting winter gear to northern states while marketing summer apparel in warmer climates. This is useful for companies with location-based pricing, shipping, or regional marketing differences.

Needs-Based Segmentation
A cloud storage provider segments customers based on data storage needs, offering different plans for individual users, small businesses, and large enterprises. This approach is best for businesses offering tiered products and services with varying use cases.

Value-Based Segmentation
A financial services firm segments customers by lifetime value (LTV), prioritizing high-value clients with dedicated account managers and exclusive benefits. This model is ideal for businesses focused on maximizing revenue from their most profitable customers.

How to start using customer segmentation models

It’s possible you may have particular customer segmentation models in mind, depending on the sort of business you run. Say, for instance, that you run a B2B comms company offering an AI answering service. You’re probably planning to run firmographic segmentation to get leads on potential client businesses.

It’s not always that simple, though. So, here are three simple steps for getting started with customer segmentation models.

Find the most valuable forms of data for your business

The kinds of data you’ll need depend entirely on your business goals. For many online businesses, the aim is simply to increase web traffic and click-through-rates. In that case, behavioral data is vital as you need to understand how people are engaging with your site and where its weak points are.

On the other hand, a B2B company trying to expand its client base might focus on individuals with a specific job title. Similarly, a company investing in social activism might focus on gender or sexuality. In both cases, demographic information would be very important.

Establish methods and tools for data collection

Once you’ve figured out which data matters the most, you’re ready to choose collection methods. Surveying customers directly can be useful, if you can promote the survey enough to get a decent response rate.

Polls are only the tip of the iceberg, however. A lot of information can be collected passively through your website or app. For example, with Only Domains, you can figure out the percentage of your website’s visitors are from specific countries like Canada by redirecting people to location-specific web addresses like .ca.

Identify your largest customer segment and then drill down

As simple as it may sound, identifying your most dominant customer segment is absolutely essential. After all, you want to avoid any potential shake-ups from alienating core customers. For example, it might be obvious even without segmentation that your business mostly caters to men.

It’s when you segment even further that things get really interesting. With demographic info, you might find your demographic split between males aged 18-34 and 58-65. Then behavioral segmentation might show that most people are buying online and opting for evening or weekend delivery slots.

Of course, it’s not enough just to have this information. Your marketing and sales people need to be able to access it. That means including systems in sales tech stacks that allow your teams to observe customer trends in real-time.

Mix and match customer segmentation models

While it’s important to figure out the best segmentation model for your business, you don’t have to stick with just one. So, don’t make the mistake of thinking you have your customers all figured out.

There’s always more insight to tap into. It’s worth taking the time to try out different models with your business and see what you learn. Plus, your organization’s goals are liable to shift over time. You might start out focusing on web traffic, only to end up worrying about product diversification five years later.

At times like this, it’s always worth revisiting your customer data and trying something new.

Every new software purchase requires a clear return on investment (ROI) in today’s business climate.

Incentive management software is no different.

While the qualitative benefits of sales compensation automation provide revenue teams transparency and enable business growth and goal attainment, what are the cost savings?

We’d argue that time saved spent calculating, scheduling payouts, and addressing pay discrepancies and flagged deals equals money saved, but it’s not always clear just how that translates to dollars.

So, to help, our VP of RevOps, Ryan Milligan, built this ROI calculator to prove the quantifiable return of purchasing QuotaPath. Our calculator uses variables like manual costs associated with reps tracking commissions, incentive management admin costs, and performance improvements when using QuotaPath.

This blog is intended to provide an intro to QuotaPath and its benefits, including ROI.

Let’s get started.

Understanding the Cost of Manual Processes

Manual commission calculations and data pulling cause you to incur hidden costs. These administrative tasks keep reps from focusing on selling the deals that make them the most money, which impacts rep productivity and often leads to frustration and demotivation.

Likewise, RevOps and Finance leaders get bogged down with these calculations at the end of the month. We have many admins who, before QuotaPath, “dreaded calculating commission” because of the influx of rep questions (and sometimes anger since it’s their money) that follow a commission pay period.

Some real-life examples illustrating the impact of inefficient processes on business operations can be seen in our customers’ experiences.

For instance, Muck Rack cut the time spent calculating commissions from 5 days to 6 hours as they scaled their team from 50 to 100 reps. Before automating with QuotaPath, they manually built a commission spreadsheet for each rep, a labor-intensive, error-prone, and unmanageable process as the team grew.

Blackthorn is another QuotaPath customer whose manual commission processes became a “formula frenzy” as they scaled. They leaned on Salesforce formulas to calculate commissions early on until they found, “Formulas could not handle the complexity and scale as we expanded our teams and departments,” Joe said. “Now I can do it myself and directly in QuotaPath without creating a formula. It’s saving us five to 10 hours of work for every new quota.”

Calculating Rep and Admin Costs

Ready to calculate your QuotaPath ROI?

Here’s a breakdown of the variables involved in calculating rep and admin costs:

QuotaPath cost

Annual QuotaPath cost = Users x Price/User/Year

Users: The number of workers using the platform

Price/User/Year: The annual cost for each worker that will be using QuotaPath

Rep cost

Annual Rep Cost = Reps x Hours/Rep/Month x Rep Hourly Rate

Reps: The number of non-administrative workers using the platform

Hours/Rep/Month: The number of hours each rep spends tracking and calculating their earnings.

Rep Hourly Rate: The average rep salary at a certain OTE, backed into an hourly fully burdened rate.

Annual rep cost: The cost associated with reps manually tracking their earnings.

Admin cost

Annual Admin Cost = Admins x (Pulling data + Calculating + Rep questions) x Admin Hourly

Admins: Number of Admins managing compensation.

Pulling data: Number of hours spent pulling data

Calculating: Number of hours spent calculating commissions

Rep questions: Number of hours handling rep earnings questions and discrepancies

Admin Hourly Rate: A fully burdened hourly rate for Admins based on average Admin salary.

Annual admin cost: The cost associated with Admins manually managing compensation processes.

Performance improvements

Performance increase = Reps x Annual quota x Attainment lift

Reps: The number of non-administrative workers using the platform

Annual quota: Average annual quota per rep.

Attainment lift: Percent increase in rep performance after giving reps increased visibility to their commissions, enabling them to select the best deals to pursue and helping them understand how they earn, driving overall attainment improvements.

Performance increase: the additional amount reps will produce with greater selling time and compensation transparency.

Qualitative Benefits of QuotaPath

QuotaPath offers other benefits that aren’t as easily measured, including:

• Motivating reps: 30% of revenue leaders admit their plans fail to motivate their teams. QuotaPath solves this issue by providing reps visibility into commissions and compensation plans. This enables sellers to understand how they earn commissions, track earnings progress, and identify the best deals to pursue.
• Builds trust and alignment across Sales, RevOps, and Finance: 75% of Sales Reps don’t trust they are paid fairly. With QuotaPath everyone can reference the same data source for compensation–Reps see breakdowns of how they are paid, and Finance has clear insight into deal data and commissions on each deal.
• Provides valuable performance insights: QuotaPath gives leadership access to actionable dashboards that can provide insights into performance and help them prioritize coaching.
• Compensation modeling and testing: QuotaPath enables revenue leaders to test future comp plan changes using past historical data from their deal data source (ie: CRM). It also enables them to model the compensation cost for the next year.
• Logs planning and audit data: QuotaPath creates a log of compensation data, disputes, resolutions, and more for planning and auditing purposes. This is particularly important for ASC 606 revenue recognition compliance.
• Fits into existing tech stacks: QuotaPath seamlessly integrates with your favorite tools including HubSpot, Salesforce, Pipedrive, Quickbooks, Stripe, NetSuite, Close, Zoho, Copper, Google Sheets, and Excel.
• Encourages rep ownership and accountability over commissions: Reps get greater visibility and understanding of how they earn commissions with QuotaPath. This gives them greater control and responsibility over commissions.
• Eliminates the “black box” that compensation info has historically lived in: QuotaPath provides compensation transparency across your organization, eliminating confusion and misunderstandings.
• Helps Finance teams avoid hidden commission costs: The adjustments you implement in your compensation structures can trigger cascading effects that might not be immediately apparent. Our comprehensive reporting equips you with the necessary data to swiftly identify issues before they adversely affect overall team performance in the long run.

Build a Sales Funnel

Use our free sales funnel resource to see how many meetings your team needs to book to hit quota.

Calculate Now

Success stories

Don’t take our word for it. Consider these testimonials from QuotaPath customers highlighting their experiences and ROI.

EverView is an excellent example of how sales compensation automation and transparency with QuotaPath enabled them to achieve record sales.

Before teaming up with QuotaPath, EverView had 35 compensation plans for a sales team of 80. Fifty percent of their sellers reported not understanding their comp plan and didn’t know how much they had earned until they received their paychecks.

After launching QuotaPath, EverView consolidated their 35 plans into eight and then to 1 in QuotaPath. Reps could track plan attainment and current or future earnings on demand. This led to EverView having its highest sales year, with 70% of the team hitting quota and 20% achieving 90%.

“The move to QuotaPath freed our sellers to do what they do best, which is build better relationships with our customers,” said Dennis.

“Our comp plan was easily measured and easily viewed by our sellers in QuotaPath, which drove positive selling behaviors,” Ron said, “We had the best sales year in the company’s history.”

Prefect is another great example of a client who benefited from QuotaPath’s sales compensation automation and transparency.

Before partnering with QuotaPath, Prefect’s Finance team managed compensation with spreadsheets. Their plans to triple the sales team necessitated a scalable compensation solution. They also wanted to provide their reps with greater visibility and understanding.  

“We cut our time spent on commission calculations by 50%+ and have enjoyed providing real-time transparency to our sales reps and technical pre-sales team,” said Tom Egbert, Head of Finance. “This platform has significantly upgraded our sales compensation process. From the time saved on the financial side to our reps fully understanding and feeling motivated by our incentive structures. QuotaPath saves days of time worth of unnecessary spreadsheets and emails.”

Conclusion

Sales compensation automation and transparency aid business growth and goal attainment.

Automation eliminates the hidden costs associated with manual incentive management while it boosts sales rep and compensation administrator productivity.

Transparency helps sellers understand how they earn commissions, identify which deals to prioritize, and motivate behaviors that drive quota and organizational goal achievement.

Explore QuotaPath and unlock the potential ROI for your organization with a free trial and schedule a demo with our sales team to see the ROI at their organization.

Increasing compensation structure complexities, a hyper-focus on revenue performance, and the rise of remote work trends have led to an explosion of organizations adopting sales compensation management tools. 

So much so that the worldwide sales compensation software sector is anticipated to exhibit a compound annual growth rate (CAGR) of 9.9%, reaching a market value of US$ 7,413.9 million by 2033. North America is expected to remain a key market for sales compensation software, presenting over US$ 2.6 billion in absolute dollar opportunity over the next decade. (Source) 

Choosing the right commission tracking solution in sales compensation management is paramount for driving sales performance and ensuring payout fairness. 

Competitors such as Xactly, Captivate IQ, Spiff, Commissionly, and Everstage are notable contenders among the myriad options. 

However, this blog delves into why QuotaPath is the superior choice in this landscape.

By conducting a comprehensive comparison with these competitors, we aim to highlight the unique features and strengths that set QuotaPath apart. 

Join us as we explore why our commission-tracking solution stands out.

Benefits of Commission Software

Implementing sales commission software offers a range of benefits, including: 

Accuracy: Sales commission software ensures accurate calculation and distribution of commissions, reducing errors and disputes. 

Efficiency: Automating commission processes saves time and resources, allowing sales teams to focus on selling. 

Transparency: Sales commission software provides visibility into commission structures and earnings, fostering trust and motivation among sales reps.

Scalability: As businesses grow, sales commission software can easily adapt to team size and structure changes. 

Compliance: Sales commission software helps ensure compliance with regulations and company policies, reducing legal risks.

Analytics: Sales commission software offers insights and analytics on sales performance, helping identify trends and opportunities for improvement. 

Motivation: Clear and timely commission payouts motivate sales reps to achieve their targets and drive revenue growth. 

Integration: Sales commission software can integrate with other systems such as CRMs and accounting software, streamlining processes and data management. 

Customization: Sales commission software allows businesses to tailor commission structures to align with their goals and strategies. 

Cost Savings: Sales commission software ultimately saves businesses time and money by automating manual processes and reducing errors. 

Comparing key features

Here’s how the key competitors stack up against each other.

Differences between the options

Several key elements should be considered when evaluating your sales commission calculation software options. Below, we review these elements, what they are, and why you should consider them as you make your decision.

Integration capabilities

Most commission software platforms integrate with the main CRMs, such as Salesforce and HubSpot. You’ll want to look at how easy it is to set these up, map and match fields from your data sources, and transform data so that your compensation management system creates less work for you than more.

Confirm that the cloud-based commission software you select offers native CRM integration options, like QuotaPath, with no manual refreshes or nightly updates, so data is automatically pulled. This ensures real-time analytics and accurate commission calculations.

Customization capabilities

The incentive management platform you move forward with should facilitate changes any time you need to update a team member, set payout eligibility, add a new plan, or adjust existing plans.

Select scalable solutions enabling compensation plan modeling to test new plans before implementation, as QuotaPath does.

Make sure your chosen platform allows you to create custom commission plans, including elements like tiered commission structures and various performance incentives, such as bonuses.

Pricing visibility

It should be easy to ascertain the cost of your commission automation software by visiting the supplier’s website. Simple and transparent subscription-based pricing should be easily accessible. Only QuotaPath has pricing visible on our website. You should not need to request pricing through a form, email, or phone call or be subjected to a demo.

Implementation periods

Consider the length of your chosen platform’s implementation period. Look for an easy-to-understand solution with a user-friendly interface so new users can use the application without training. How long it will take to train your team and use the system to run commissions determines your time-to-value.

Look for an efficient, quality-focused onboarding process that quickly gets you up to speed. We are known and recognized for fast implementation periods of 2 months or less. We’ve seen some sales come through because “it’s been seven months, and we’re still not up and running.”

Success Stories with Commission Software

Sales commission calculation software is effective. Here are several examples of organizations that have benefited from automated commission tracking.

runZero

runZero, a rapidly scaling company, started to outgrow commission spreadsheets. They integrated QuotaPath with HubSpot to automate commission calculations, boost earnings transparency, and eliminate errors. They started their implementation within four days of signing with QuotaPath and were fully onboarding and automating commissions in less than two months. 

Sales compensation errors are no longer an issue.

EverView

EverView had 35 incentive plans, with some consisting of up to 12 components, for a sales team of 80. They were tracking commissions manually at that time. Their reps spent 2 hours each week calculating commissions. Fifty percent said they didn’t understand their comp plan and had no idea how much they would get paid until they received their paycheck.

After QuotePath was implemented, EverView reduced their plans from 35 to eight and then to 1 in QuotaPath, allowing sellers to track attainment and earnings anytime. 

The comp plan transformation, seller visibility into earnings projections, and a new focused sales structure gave EverView its highest sales year. Seventy percent of reps met quota, and 20 percent met 90 percent.

Blackthorn

Blackthorn relied on Salesforce formulas to calculate commissions. 

As the sales organization expanded to include sales development, customer success, and partnership teams, the commission structures became too complex for Salesforce formula capabilities.

Blackthorn was fully onboarded with QuotaPath in less than two weeks. They reduced new quota implementation time by  5 to 10 fewer hours and recorded three months of record-breaking sales following implementation.

International Support

Wazoku streamlines international commissions and measures team attainment for revenue teams across continents with QuotaPath.

Read More

How to Choose the Right Commission Software for Your Business

The global sales compensation software sector is expected to triple its 2022 value by 2033. 

Despite the growing number of competitors in the marketplace, selecting the best commission software for your business doesn’t need to be overwhelming if you know what to consider during the selection process.

Here’s what to focus on as you choose the best commission software for your organization.

Sales commission reporting

Your solution should generate executive- and rep-level revenue forecasting and quota attainment reports. Select a platform that automatically creates accurate estimates based on CRM data so leadership can see their sales team’s projections.

Compensation plan modeling

When it’s time to adjust your existing plans or create a new one, your platform should allow you to outline a plan proposal and test it with prior sales data. 

Plan effectiveness tracking

Adjusting incentive plans in response to their effectiveness and market conditions is common. To gauge a compensation plan’s success, select a tool that facilitates compensation plan performance monitoring. Such a platform shows you how well your team is doing and displays sales performance metrics like total earnings, average effective rate, and plan attainment by rep.

ASC-606 compliant

Your chosen incentive management platform should allow your accounting team to track audit trails and recognize commission expenses to simplify compliance with the new ASC 606 regulations.

Easy support access

Partner with a vendor that is easy to contact after you sign up. 

Look for a short response time and continual customer support services for adding and designing new plans, adjusting comp plans, or running payouts.

Rep motivation

Find a solution that Finance, RevOps, and your Reps will enjoy using. The platform you select should have a user-friendly interface that’s easy to navigate. It needs to enable reps to understand their comp plans with reporting and dashboards that allow them to view goals, accelerators, and bonuses and track progress toward milestone attainment.

In-app communication

Team collaboration features in your chosen solution help streamline the commission discrepancy dispute resolution process. For instance, seek features that allow reps to escalate disputes through the platform, where Finance and Accounting can quickly respond.

Select the Best Sales Compensation Calculation Software

Increasingly complex compensation structures, revenue performance focus, and remote work have created the need for sales compensation tools. Selecting the best commission-tracking solution is essential for driving sales performance and fair, transparent, timely, and accurate payouts.

The benefits of commission software include accuracy, efficiency, earnings transparency, motivation, and cost savings.

Compared with key competitors, QuotaPath is easy to use and update, with transparent and low professional service fees. We offer free native, real-time integrations, a free trial, quick implementation, and superior dedicated support.

QuotaPath differs from competitors, with multiple native CRM integration options, compensation plan modeling, visible pricing, and short implementation times.

As you move through the commission software selection process, look for:

• Easy and accessible sales compensation reporting
• Compensation plan modeling and testing capabilities
• Plan effectiveness tracking
• ASC-606 compliance capabilities
• Easy support access
• A platform your reps will use and enjoy
• In-app team collaboration features

QuotaPath meets all these criteria and more, making us the superior choice.

Find out why QuotaPath is the best choice. Explore QuotaPath with a free trial or schedule time with a team member today.