Whether you’re a startup looking to hire your first official salesperson or a seasoned commission-based business reconsidering your current commission structure, how to set up sales commissions aligned with your business model is crucial.

There are several structures to consider, and we’ll highlight the most commonly used ones below. 

But as you think about which one to move forward with, remember to ask yourself, “Would I be incentivized by this structure?” Because if the answer is anything but a resounding “yes” then the likelihood of it being successful is slim to none.  

Read on for steps to create a sales commission structure, best practices, commission structure examples, how to write a commission proposal, and getting your sales commission system off the ground. 

How to set up a sales commission structure

To begin setting up sales commission structures, you should start with defining the commission rate, determining the sales goals, establishing the commission formula, and communicating the plan clearly to your sales team.

The first question to address is your business’s North Star metric. What is most important in the coming year? Is net new business? Low customer acquisition cost (CAC)? Annual recurring revenue?

“Every revenue organization chases a North Star metric,” said Able VP of Sales Jeff Kirchick. “And everyone aligns around it and understands it. For us, we’re looking at a metric largely because we don’t know much about our churn right now and we don’t want to make any assumptions that’s key to our lifetime-to-value calculation.” 

From there, pick a commission structure that drives the metric while considering:

• Product or service: The type of product or service you sell will have a big impact on your commission structure. For example, if you sell a high-ticket item, you may want to have a lower commission rate but a higher base salary. If you sell a low-ticket item, you may want to have a higher commission rate but a lower base salary.
  
• Target market: The type of customer you’re targeting will also have an impact on your commission structure. For example, if you’re targeting businesses, you may want to have a different commission structure than if you’re targeting consumers.
  
• Sales process: How you sell your product or service affects your commission structure. Longer sales cycles, for instance, typically follow a different commission structure than short sales cycles.
  
• Budget: Think about your quota to OTE ratios and CAC costs. If a rep hits quota, do they pay for how much it costs to have the rep on your team? What is the profit margin on your average deal size and commission cut to your revenue team?
  
• Sales goals: What are your sales goals for the year? Your commission structure should mathematically get your company to its financial goals.
  
• Sales pipeline: How many potential customers are in your sales pipeline? This will help you determine how much commission you can afford to pay.
  
• Team performance: How have your salespeople performed in the past? Even if your founder was the sole seller previously, look at the history of the deals. What was the average deal size? How long did it take? What would the founder have earned from variable compensation based on the deals the founder brought in?
  
• Industry benchmarks: What are other companies in your industry doing? This can give you a starting point for setting your own commission structure.

So, find a starting point and be prepared to iterate over time as you add more personnel to the organization. Evaluate and plan ahead as much as you can, while leveraging market data and industry trends. 

Types of sales commission structures

100% Commission

A 100% commission structure pays salespeople solely based on their sales performance. This means that they do not receive a base salary, and their earnings depend entirely on the number of sales they make.

This type of structure can be very motivating for salespeople, as they know that they can earn more money by selling more products or services. However, they can also be risky for businesses, as salespeople may be more likely to take on risky or unethical sales practices in order to make a sale.

Check out Asher Mathew’s interaction Commission Only with Accelerators compensation example. 

“100% commission is the fastest way to learn sales, customer success, and marketing. Small companies and startups are doing this. You get a lot of exposure,” Asher said. 

Base Salary + Commission

The most common structure in SaaS is the base salary + commission structure that pays salespeople a base salary plus a commission tied to sales performance. This type of structure is more common than a 100% commission structure, as it provides salespeople with some financial security while still motivating them to sell more.

The amount of base salary and commission that salespeople receive will vary from company to company. Some companies may offer a 50/50 split, while others may offer a 60/40 or 70/30 split. The amount of commission that salespeople earn will also vary depending on the type of product or service they sell, the size of the sale, and their sales performance.

To find an OTE ratio that works best with the amount of revenue your team generates and your average team attainment, use our free Quota:OTE Ratio Calculator.

Tiered Commission

A tiered sales commission structure, also one we see frequently utilized, incentivizes top performers. 

Under this model, sellers earn increases in commission rates as they pass a pre-determined number of deals or revenue benchmarks.

Also known as “multiple rate,” accelerators, escalators, or multipliers, this structure might pay 10% on deals up to $50K in booking, then increase to 12% after passing $75K. 

Check out our guide on multiple rate structures for more examples, or input your own numbers in the following Compensation Hub templates:

• Commission with Accelerators
• Commission with Accelerators & Decelerators
• Commission with Multi-Year Accelerators
  

Single-Rate Commission

A single-rate commission structure is one in which salespeople earn the same commission rate on all sales. This type of structure is the simplest to understand and administer and is perfect for a first-time compensation plan at a startup.

We’ve got this template to experiment and test your numbers with Single Rate Commission.

Gross-Margin Commission

A gross-margin commission structure is one in which salespeople earn a commission on the gross profit from a sale. This type of structure can be a way to motivate salespeople to sell products or services that are more profitable for the company.

You could also incentivize reps to sell more profitable services or products over other ones by paying higher rates over those less profitable. 

Commission Draw

A commission draw is a type of loan that is given to salespeople against their future commissions. This type of loan can be helpful for new salespeople who are not yet generating enough commissions to cover their expenses.

Residual Commission

A residual commission is a type of commission that is paid to salespeople on a continuing basis for sales that they have made in the past. This type of commission can be a way to reward salespeople for maintaining long-term relationships with their customers.

Territory Volume Commission or Team Commission Structure

A territory volume commission, or a team commission structure, pays salespeople based on the performance of their team within a specific territory versus individual performance. This type of structure can be a great way to motivate salespeople to work together and help each other succeed.

How to structure commission for sales: best practices

Once you have chosen a commission structure, it is time to tailor it to your business and build out a compensation plan. Here are some best practices to follow:

• Don’t do it alone. The best commission structures and compensation plans are the results of a team effort. Involve your revenue operations, finance, and senior sales representatives in the conversation. This will help to build alignment and ensure that the plan rewards reps and is aligned with your business goals.
• Keep it simple. If you can’t explain your commission structure to a colleague or friend, it’s too complicated. Your reps will likely struggle even more to understand it. Aim for simplicity so that leaders can easily reiterate what reps should be selling and reps can understand what the outcome of their efforts will be.
• Make sure it’s logical. Align it with the company’s overall goals and objectives and make sure it incentivizes the right behaviors. Meaning, you wouldn’t have a higher commission rate on a product you’re looking to sunset within the next 6 months. 
• Ensure that it’s equitable and fair. This can be done by standardizing your sales compensation plans for every person who shares the same title and making your territory distribution equitable. You can do this by giving every rep an equal size book of business (and the right book of business for their role) to make it easy for new hires to join the team and be successful early on.
• Communicate effectively. Outline your compensation program, make sure everyone has a copy, and review it with your team in a designated meeting. This is especially important if you are making mid-year changes to your commission structure or plan. Make sure reps understand the changes, the reasons for the changes, and how the company will support them under the new plan.
• Test it. Pull up historical compensation data and run it through your proposed commission structure. If you don’t have historical data, use random or expected data. Then, run extreme scenarios, such as what would happen if a rep achieved a 400% quota. Pressure testing will help you avoid a situation where you have to pay a rep more than 100% of their annual recurring revenue.

These tips may seem obvious, but you’d be surprised how often teams skip them. By following these best practices, you can create a commission structure that will motivate your reps and help you achieve your business goals.

Sample sales commission structure

Sales commission system

Now that you have a proposed structure in place, you’re ready to roll it out to your team. To ensure a smooth rollout and adoption from your sellers, make sure to have communication in place that provides plenty of opportunities for reps to ask questions.

This plan should include: 

• Sales-leader-driven workshops: These workshops should be led by sales leaders who are familiar with the sales commission plan and the company’s goals. The workshops should be an opportunity for sales reps to ask questions, learn about the changes to the plan, and provide feedback.
  
• Clear explanations of “the why” behind the changes and the math: Your leaders should be able to articulate why the changes are being made and how they benefit the company and the sales team. They should also be able to explain the math so that reps can see how you arrived at the numbers behind the plan.
  
• How the company will support the team with the new objectives: Share how the company will support the sales team in achieving the new objectives. This could include providing training, resources, or other forms of enablement, such as technology.
  
• A place of reference: Reps should have access to their commission structures, documentation, and resources to help them sell. Even better if there’s a virtual space for them to leave feedback or ask questions.

By following these tips, sales leaders can help to ensure that the sales commission plan is effective and that the sales team is supportive of the changes.

FAQ:

What is a sales commission schedule?

A sales commission schedule is a plan that outlines how and when sales representatives will be compensated for their sales. It typically includes the following information:

• The type of commission structure (flat rate, tiered, or quota-based)
• The commission rate
• The sales goals
• The payment terms (ie: does the rep become eligible for commissions at the time of the contract or upon the first invoice payment)
• The commission tracking and reporting process

What are sales commission tiers?

Sales commission tiers are a type of commission structure that pays sellers a different commission rate based on how much they sell.

For instance, a compensation plan might include a decelerator as well as an accelerator, like this comp plan template. Both the decelerator, a lower commission rate that applies to deals closed before reaching a specific attainment target, and the accelerator, a higher commission rate after passing an attainment threshold, represent sales commission tiers. 

Sales commission tiers differ from single-rate commission structures that pay a fixed rate on every deal regardless of underperformance and overperformance. 

Companies most often implement commission tiers to motivate sellers to overperform and reward those who do. Sales commission tiers can help ensure that you compensate sales representatives fairly by paying more to those who sell more.

Remember to keep the tiers realistic. They shouldn’t be out of reach, but they also shouldn’t be so easy that reps wonder why tiers exist in the first place. Your commission rates per tier should also be competitive with standard rates and differentiated enough to motivate certain behaviors. Meaning, if the difference between one tier and the other is only 1%, is the payout enough for sellers to care? 

What percentage is considered a good commission rate for sales?

The standard commission rate for SaaS is 10%. That’s why you’ll see most commission calculators and compensation plan templates start with a base rate of 10%. 

This number comes from two rules. The first rule ties to the variable compensation and base salary split, which most frequently comes down to a 50/50 split. 

The second rule is based on the sales quota to on-target-earnings (OTE)  ratio. The most frequently-used ratio is a quota 5x that of the seller’s OTE, but you’ll see a spread between 4 and 6x.

If you put these two rules together, the 10% standard rate becomes more clear. 

For example, a rep’s OTE is $120,000, split between a $60,000 salary and expected earnings of $60,000 if they hit their quota. Their quota is $150,000 per quarter or $600,000 for the year. Their annual quota, $600,000, is 5x their OTE.

So, if hit their annual quota, they earn $60,000 in commissions, and the annual quota ($600,000) divided by their total earnings ($60,000) equals 10%. 

What is a team commission structure? 

A team commission structure is a compensation plan that rewards salespeople based on the performance of their team, rather than their individual performance. This type of structure can be a great way to motivate salespeople to collaborate and help each other succeed.

There are different ways to implement a team commission structure. One common approach is to set a team quota and then divide the commission evenly among all team members. Another approach is to set individual quotas and then award a bonus to the team if all members meet their quotas.

To pick which model is most appropriate for your team, think about the specific needs of your sales team. If your team is made up of experienced salespeople who are already motivated to succeed, a simple structure that divides the commission evenly may be all you need. However, if your team is new or inexperienced, you may want to consider a more complex structure that provides additional incentives for team members to work together. 

What are the steps to building a commission-based sales team?

To build a commission-based sales team, follow these steps.

Define your sales goals. What do you want to achieve with your sales team? Do you want to increase revenue, grow market share, or launch new products? Use historical data to align your goals. If no historical data is available, source industry-specific data and ask peers within your network to share their experiences. Then, once you know your goals, start developing a sales and compensation strategy that will help you achieve them.

Hire the right people. When hiring sales representatives, find people who are motivated, have a strong work ethic, and are good at closing deals. Consider the type of product or service you sell and the industry you’re in when making your hiring decisions.

Train your sales team. Once you’ve hired your sales team, train them on the sales process, culture, and value of your products or services. Have them research the industry, competitors, and more for a full picture. 

Set clear goals and expectations. Set clear goals, expectations, and responsibilities for your sales team. Document it and make this available to your team to access at any time.

Provide your sales team with the tools and resources they need. Your sales team needs the tools and resources they need to be successful. Create a sales tech stack with a CRM system, a lead generation system, commission tracking, and access to your products or services.

Motivate your sales team. Sales representatives need to be motivated in order to be successful. This can be done through a variety of means, such as providing them with incentives, celebrating their successes, and coaching.

Track your sales performance. To see how your sales team is doing and to make adjustments, track your sales team’s performance. Keep a tab on the number of sales leads, sales opportunities, sales closed, and commissions earned. 

Analyze your results. Once you’ve tracked your sales performance, it’s important to analyze your results. Then you can see what’s working and what’s not. Did you achieve your goals? What percentage of your team hit quota? What was the gap between your lowest performer and your highest performer? These questions can help you determine how effective your compensation structure, as well as your sales motion. 

Is commission typically based on sales or profit in a commission-based compensation structure?

Commission is typically based on sales, however, we also have seen it based on profit. 

Sales-based commission, the most common type of commission, is a percentage of the total sales price that the salesperson earns. It’s both easy to calculate and understand.

Profit-based commission, on the other hand, occurs when the seller earns a percentage of the profit. This type of commission is more complex to calculate, but it can be more motivating for salespeople to focus on selling high-margin products or services.

To help decide which compensation strategy is most suitable for your business, weigh the following: 

Sales-based commission models make it easier for your team to calculate earnings and understand how they are paid. It’s applicable to any type of product or service and encourages reps to sell as much as possible.

However, this compensation structure can lead to salespeople discounting products or services in order to make a sale. Nor does this structure rewards sellers for closing deals with high-margin products or services. 

Profit-based commission should motivate your sellers to pitch high-margin products and services over other offerings that aren’t as profitable. You’ll also likely see less discounting. 

The cons with this structure are that it’s hard to calculate and might not be appropriate for all your products and services. Reps unfamiliar with the company’s financials may also struggle to understand which item to sell to optimize their earnings. 

Ultimately, the best way to determine which type of commission is best for your company is to experiment and see what works best for your sales team.

This is a guest blog on sales data quality written by Lee Moskowitz, Director of Growth Marketing at SetSail.

Your sales data is the foundation for future growth. 

You use it to: 

• Coach your reps
• Improve your sales process
• Forecast your quarter 

But if you have incorrect, incomplete, or missing sales data, you have a problem. 

You don’t have the full picture of what your reps are doing. You can’t see the gaps in the prospect journey. Your forecasts are routinely off base. And you lack insight into why certain accounts close while other deals are lost.

How can you tell if your organization has a sales data quality problem? 

Here are eight questions to help diagnose signs of CRM quality issues: 

Question #1: Does your CRM update sales data automatically?

Think about all the tools your sales team uses on a daily basis. 

Is every action appropriately logged and tracked in the CRM? 

If your tech stack isn’t synced to accurately write data to your CRM, you’re going to run into missing data problems. And it’s a major roadblock for sales rep productivity: almost half of sales professionals say their biggest challenge with selling is incomplete CRM data. 

Question #2: Do all your tools sync properly to your CRM?

If you answered “yes” to question one, that’s positive – but it doesn’t mean you’re in the clear. 

It’s essential to check to see if this automatic data writeback functionality is actually working the way it should. 

A common problem with automated sales activity tracking is duplicate data pumped into the CRM, which ends up being just as much of a problem as missing data. With too much clutter, it’s just as difficult to see what is actually happening and spot trends. 

Question #3: Do you have a standard process for filling out open fields? 

Are your sales reps allowed to write in their own shorthand in the CRM? That’s going to make life difficult for you. 

Side question: how many free-form fields do you have? How many do you need? Simplifying is step one. Documenting a clear process for the type of manual data you’re looking for is next. 

This process should provide clear direction on how to handle open fields, including rules and recommendations for how to collect and input data. Some fields may have their own requirements, so make sure to include specifications for each field as needed.

Question #4: Is your sales data regularly updated?

Let’s say you do have accurate, complete data in your CRM. It’s only going to stay accurate for so long.

How often is it updated? Stale data is another problem that creeps up on you week after week, month after month. 

In fact, Salesforce estimates that 70 percent of data deteriorates every year. 

Question #5: Is it easy to spin up an accurate report? 

When an executive asks you for a new report, do you have to send it over with a bunch of asterisks based on data inaccuracies? Do you spend an inordinate amount of time cleaning up the CRM before you feel comfortable presenting a read-out? Do you have to sift through multiple dashboards to try and find an answer?

Ensuring your data is clean, complete, and centralized makes it easier for measuring accurate reports to inform data-driven GTM strategies.

Question #6: Does everyone use the CRM?

One-quarter of sales reps said updating the CRM frequently takes time away from selling, and 95% said they’d be more likely to hit quota if they spent less time on non-revenue generating activities. 

A clear sign a CRM isn’t useful to your team: no one wants to spend any time entering data into it, because they don’t think it will be useful to them.   

Pro tip: tie commissions to your CRM by syncing QuotaPath to show reps how their pipeline translates to their earnings potential. You can sign up for a free 30-day trial to try it yourself.

Question #7: Are conversion rates trending up? 

Clean, complete CRM data means you have the information you need (as a holistic revenue team) to make an impact on the pipeline. 

If win rates are declining, it’s highly likely low-quality sales data could be part of the problem. 

Question #8: Is your forecasting usually accurate or close to accurate? 

An accurate forecast sets the entire revenue team up for success. 

Tired of a forecast that no one trusts? That’s another sign your CRM data quality needs a revamp. 

How to find and fix your worst CRM data challenges 

Did you answer “no” more often than “yes?” Chances are, your CRM data quality is suffering. 

But just how severe is the problem? Is it tied to clear actions you can take to fix it? 

SetSail built a free tool you can use to grade your Salesforce CRM and get answers. Try it here. 

About SetSail 

With SetSail, B2B revenue teams use their sales data to do what wins. SetSail centralizes, enriches, and interprets sales data across go-to-market teams and tools so leaders see what’s happening, know what’s effective, and drive winning behaviors. No more missing, duplicate, or incorrect Salesforce data – all sales activity is tracked and recorded accurately within the CRM. Complete visibility improves coaching, deal management, and rep performance.

At QuotaPath, we believe that automated sales compensation management should be efficient and drive toward your financial goals. You should be able to quickly see value and have a holistic view of your sales team’s attainment and commissions. That is why we have released two new features, Home and expanded self-serve integrations.

Our new Home experience offers clarity through a comprehensive view that provides performance insights into the most important compensation metrics. Home also surfaces high-priority tasks.

Upon logging in, you’ll see what deals await your approval or have flags or discrepancies. You can also view payouts that are owed. This allows you to efficiently manage and stay on top of your commission program.

Home is also where you can get a pulse on your team’s financial goals.

You can view your teams’ totals earnings, payouts and effective rates and identify trends by filtering by month, quarter or year.

To see value more quickly for customers setting up a trial with QuotaPath, Home will direct you through the steps to get a plan fully up and running in QuotaPath.  This includes how to build your first plan from scratch or from our library of free compensation plan templates, integrate your CRM and invite team members.

Additionally, Home features direct links to our resources, chat, and robust help site for further support.

For our second feature, we unlocked new data connections in app to your commission’s source of truth. Now, you can integrate with several new CRM sources, including Copper, Pipedrive, ZohoCRM, and Google Sheets, as well as invoicing systems such as Quickbooks and Stripe. That’s in addition to our existing integrations with HubSpot, Salesforce, Maxio, and more.

Plus, it will only take 3 steps to sync your CRM deal data and invoicing systems.

That’s right — 3 guided steps. 

About QuotaPath

QuotaPath rallies revenue organizations around their financial goals. Through expert guidance on compensation design and an intuitive platform that automates sales incentive management, QuotaPath is the smart solution for growing GTM teams looking to run commissions more effectively. Sign up for a free 30-day trial, sync your CRM, and invite your team members to see how you can uplevel and operationalize your sales com processes.

This is a guest post on how to keep reps motivated written by RevPartners, a management and consulting firm that designs and executes revenue engines to supercharge their customers’ growth with services such as HubSpot Onboarding, RevOps as Service, and SEO/PPC. The RevPartners team orchestrates, optimizes, and reports on their client’s marketing, sales, and operations processes through automation and tools. RevPartners’ mission is to democratize revenue operations by making it accessible, consumable, and actionable in HubSpot.

In the 2011 film Margin Call, a tense scene takes place toward the end when a high-ranking manager tells the traders “a decision has been made to unwind a considerable portion of the firm’s holdings in several key asset classes.”  

Get ready for a fire sale.

That particular day was going to be the last day of employment for all of the traders. On top of that, they were tasked with selling off as much as they could, at whatever price they could, to whomever they could. (The manager even mentioned their mothers as an option.)

If they could sell off 93% of the assets they were responsible for, they would receive a $1.4M bonus. If they couldn’t, they would miss their bonus and be blocklisted from getting another trading job anywhere for their participation in the selling of damaged assets with no swaps.  

Although this is an extreme example the likes of which 99.999% of salespeople will never experience, the scene captures how powerful of a tool motivation can play in the field of sales.  

With that, let’s dive into exactly what motivates salespeople, whether it be a title, money, or just to deliver a good product to other people, and how companies should respond.

Types of motivation

Two types of motivation exist across sales, sports, academics, and really anything else:  extrinsic and intrinsic.

Extrinsic

If a person is extrinsically motivated, then they primarily value external sources or outside influences.  When a salesperson works harder because they know the result is a higher commission rate, they take an action, in large part, because they want to achieve a particular outcome.  This also includes taking action to avoid negative outcomes.  

Intrinsic

As a counter, when someone is driven by inherent satisfaction, enjoyment, or personal interest, they are said to be intrinsically motivated. For example, when an athlete plays a sport simply because they love the game, they take action to fulfill an internal desire.  Any outside, tangible benefits that are received would simply be considered a bonus.

How to keep reps motivated in Sales

Extrinsic vs. intrinsic motivation

The world of sales is a great example of how both types of motivation often exist side-by-side and produce varying results depending on how they are handled.

Extrinsic

When salespeople are extrinsically motivated, they are motivated by external factors such as monetary rewards, commissions, bonuses, and recognition from peers or superiors. The upside of this is that it will usually lead to a focus on achieving sales targets and closing more deals, especially when you tie in accelerators in your compensation plan to reward overperformance.

On the flip side, although extrinsic motivation can be effective in driving short-term performance, it may not necessarily lead to long-term job satisfaction when the inevitable slow month or bad quarter arises.

Intrinsic

According to a survey, most salespeople are actually intrinsically motivated to succeed at work.  These are people who are driven by internal factors such as personal interest, passion for the product or service, and a sense of accomplishment from closing deals.  The upside here is that even when a certain commission threshold is not reached, the salesperson is still motivated to take on new challenges and continue improving.

Companies can best support these individuals by providing opportunities for skill development, recognition, and a positive work environment that promotes a sense of purpose and accomplishment.

The vast majority of salespeople are neither fully intrinsically nor extrinsically motivated, but rather some combination of the two.  Also, some salespeople also cite helping the customer at all costs, even putting them above company and personal interests, as their chief desire.  These people are said to be “altruistically motivated”.

Individual vs. team compensation

In the scene from Margin Call referenced earlier, the senior manager also states that beyond the individual goal of selling off 93% of the assets in their personal portfolios, if the team as a whole sold off 93%, then each trader would gain an additional $1.3M one-off bonus. This highlights the fact that in sales, there are both individual and team compensation plans.

Individual-based compensation systems

When an organization relies on individual-based compensation systems, salespeople have a high level of autonomy and control over their own performance and earnings, as their compensation is directly tied to their individual efforts and results. This can help foster healthy competition and drive team members to excel and outperform their peers.

The downside is that when this is taken too far it can lead to behaviors such as undermining colleagues and creating a toxic work environment.  Also, when compensation is solely based on individual performance, there will naturally be less collaboration (e.g. hoarding leads).

Team-based compensation systems

This commission structure tends to promote collaboration, knowledge sharing, and mutual support among sales team members as they work together and support each other in reaching targets.  

The downsides here are fairly obvious as some sales team members may rely on the efforts of others and not pull their weight, leading to free-riding behavior. Also, high-performing salespeople may feel demotivated if their efforts are not directly rewarded and recognized in a team-based compensation system, as their individual contributions may be diluted.

The role of perceived equity

In psychology, there is a concept known as the “equity theory” which suggests that individuals compare their inputs (e.g., effort, skills, experience) and outcomes (e.g., compensation, rewards) in relation to those of others to assess whether they are being treated fairly in the workplace.

If a salesperson’s perception is that their compensation is fair and equitable, it can positively impact their motivation, engagement, and job satisfaction, leading to increased performance and effort in their sales role.  On the other hand, if a salesperson perceives that their compensation is unfair or inequitable compared to their efforts and contributions, it can negatively impact their motivation, leading to decreased performance, job dissatisfaction, and potentially even turnover.

Companies can mitigate problems in this area by emphasizing transparent and clear communication about compensation plans, providing regular recognition and rewards to salespeople who meet or exceed performance expectations, and regularly evaluating and adjusting compensation plans to ensure they are perceived as fair and equitable.

Different types of compensation structures

One of the biggest motivational differentiators is sales compensation structures.

Commission-based compensation

This arrangement, in which compensation is directly tied to performance, provides high motivation for salespeople to maximize sales, and tends to attract and retain highly motivated salespeople who thrive on financial incentives, a sense of autonomy and control over earnings.

On the negative side, it can lead to a “feast or famine” mindset, resulting in salespeople focusing solely on high-commission products or customers.  It may also create a hyper-competitive environment, leading to potential conflicts and unhealthy competition.

Salary-based compensation

When salespeople receive a fixed salary regardless of their sales performance, it will often promote a more collaborative and team-oriented sales environment, as they are not solely focused on individual commissions.  It may also encourage a long-term perspective and relationship-building with customers, as salespeople are not solely driven by immediate sales results.

As for the bad, it will often lead to complacency or lack of motivation as there may be no financial incentives for exceeding performance expectations. 

Summing it up 

Everyone in the sales field wants to do a good job, just not always for the same reason…

• Some are motivated by money and some by an internal drive for daily improvement.
• Some enjoy competing against peers in a healthy way, and some would rather collaborate on everything.  
• Some are only willing to put forth effort if they feel everyone is being rewarded in the same exact proportion.  
• Some desire to be rewarded based solely on wins and losses, and some want a guaranteed income regardless.

In the end, companies need to structure their plans as fairly as possible (Hello, QuotaPath!) and  make every effort to adjust to the individual needs and motivational preferences of their team members if they want to achieve long-lasting success.  

To learn more about RevPartners, visit revpartners.io.

This blog includes the most commonly used software sales commission percentage with multiple compensation plan templates to explore for your own use.

The “Great Resignation,” a nickname for the millions of employees who voluntarily left their jobs in 2021 and 2022, has shifted. 

Now, we sit amid a “Great Restructuring,” as tech layoffs continue to mount. In March 2023, for instance, Layoffs.fyi tracked another 30,000 layoffs from 79 tech companies with four days left in the month.

As these layoffs have piled, so have chatters of lower on-target earnings for SaaS sales reps.

However, in our experience partnering with hundreds of growing SaaS companies, we haven’t noticed major changes to compensation packages or with the standard software sales commission percentage.

What is the standard software sales commission percentage?

We define the standard software commission percentage as the amount of money a software company pays its salespeople for each sale they make.

This percentage often varies depending on the type of software, product, size of the company, and role. But in general, the standard software commission percentage is 10% for account executives.

As such, that’s why you will see most of our commission calculators begin with a 10% rate, or a base rate of 10%. 

Below we look into some of the factors that can impact your software sales commission percentage.

The type of software and subscription

The type of software sold can affect the commission rate. For example, software that is sold on a monthly subscription basis, such as cloud-based software, typically has a lower commission rate than software that is sold on an annual basis.

This is because monthly subscriptions have a higher probability of churning since they aren’t committed to 12-month terms. As such, a company might pay a lower commission rate for monthly subs and a higher one on annual ones to encourage reps to sell the latter.

The size of the company

Additionally, the size of the company can also affect the commission rate. Larger companies typically have lower commission rates than smaller companies. That’s because larger companies have more resources going into the deal which increases the cost of the deal. Think marketing, research and development, sales engineering, and more. For smaller-stage companies, reps typically earn a higher rate because companies aren’t spending quite as much to win deals.

Role of salesperson

If your AE earns 10% on each deal they bring in, would you expect the sales development rep to earn the same once the deal closes? We hope not. Paying that much would impact your gross profit margin and effective rate. 

As such, SDRs typically have a lower commission rate than salespeople who are responsible for closing deals. For instance, our SDR compensation plan template that pays the SDR a percentage on Closed/Won deals that began as leads generated by the SDR pays 4%. 

Account managers also typically receive a lower commission rate on upsells and renewals, such as 5%.

However, early signs of an AM commission rate shift have begun unfolding in 2023, and with good reason.

Since the venture capital world has changed over the last 20 months, now investors are looking for risk-free companies. And one of the best business metrics that indicate a healthy company includes gross revenue retention (GRR). So if, you’re focused on GRR, consider increasing the software sales commission percentage on renewals and upsells. 

Product lines

The products sold can also affect the commission rate. Products that are high-value, such as enterprise software, typically have a higher commission rate than products that are low-value, such as consumer software. This is because high-value products are more likely to generate a significant amount of revenue for the company, which means that the company is willing to pay a higher commission rate to salespeople who are able to generate sales.

You might also see compensation plan examples that pay lower commission rates on products that do not generate as much revenue for the company, or products that the company plans on sunsetting. We recommend this tactic when looking to motivate your reps to sell more lucrative offerings. 

Highest commission rates and lowest

In general, the highest SaaS commission rates you’ll see are around 20%. That’s very high though, and we would only recommend this commission structure for companies that have low customer acquisition costs or on products and services with high gross margins. 

Benefits of a standard software sales commission percentage

A standard commission rate in SaaS can provide a number of benefits, including:

• Creates a more equitable sales environment. When all salespeople are making the same commission rate, it can help reduce competition and create a more collaborative sales environment. This is because salespeople are not competing against each other for higher commission rates but instead are focused on working together to close deals.
  
• Simplifies sales compensation. When you have a standard commission rate, you don’t need to worry about different commission rates for different salespeople or different products. This can make it easier to track sales commissions, communicate variable compensation to your team and gain buy-in from your team.
  
• Improve sales performance. When salespeople know that they are making a fair commission rate, they may be more motivated to close deals.
  
• Reduce sales costs. When you have a standard commission rate, you don’t need to worry about overpaying salespeople.

Overall, a standard commission rate can provide a number of benefits for both salespeople and companies. If you are looking to improve your sales team’s performance, a standard commission rate may be a good option to consider.

Drawbacks

One of the only drawbacks regarding standard commission rates is that they can deter top performers who exceed quota. 

Salespeople who are highly motivated and experienced may be looking for a commission rate that is higher than what you are offering. 

So, to absolve that concern, consider a compensation plan template that includes a base rate on all deals that close up to 100% of the quota and an accelerated rate for all deals thereafter. For inspiration, check out the Commission with Accelerators example. 

“When I worked in a public company and a private company, I never had accelerators less than 2x, and then I bumped to 3x,” said  Inside Partners Operating Partner, Sales & Customer Success Pablo Dominguez. “I love to pay those top 10% of reps a shitload.”

Sales compensation plan examples with 10%

For additional sales compensation plan examples that feature a 10% software sales commission percentage, check out:

• Single Rate Commission Plan
• Single Rate Commission with Contract Term Multiplier
• Commission with Accelerators & Decelerators

Interested in automating sales compensation management and commission tracking? Start a 30-day free trial with QuotaPath and sync your CRM to uncover the benefits of commission transparency and accuracy.

This blog unpacks the MBO meaning in sales and ties them to sales enablement.

According to Celeverism, some of the more successful companies that implemented management by objectives (MBOs) goal frameworks include Hewlett-Packard, Xerox, and Intel. 

Pretty impressive. 

Management by objectives (MBO) involves a process of assigning employee tasks based on company goals. 

Marketing departments, for example, typically adopt MBOs by aligning their goals with company objectives. 

In practice, say a marketing goal involves doubling its email list in one year. Following an MBO approach, employees gather performance data to determine how well the team can perform with current resources. Then they define everyone’s role in the marketing team and create a list of objectives for each team member to complete in order to reach the larger goal. 

Management then researches which step to take to double their email list, apply new information to each employee’s individual goals, and determine whether to hire more people to manage the workload. 

According to Hubspot, this approach gives employees an understanding of how their job functions relate and add to company success. 

The origin of MBO and who it’s best for

What are MBOs and where did they come from? Author, consultant, and educator Peter Drucker first introduced the MBO term in his 1954 book,  The Practice of Management by Peter Drucker. The concept grew in popularity throughout the 60s.  And, by the 80s and 90s, MBOs had become a regular practice in the workplace.  

Any business model could benefit from MBO goals, but for fast-paced work environments with quickly scaling benefits, MBOs are a must, according to Adobe.

Think SaaS sales teams. 

MBO meaning in sales doesn’t change too much from its original definition, only that it is directly tied to sales performance in revenue and enablement.

MBO meaning in sales revenue examples

• Expand sales abroad by 10%
• Achieve new bookings target of 50 per month
• Achieve an average deal size of $150,000

Sales enablement MBO examples

• Decrease sales cycle to three months
• Build teamwide quota attainment to 80%
• Provide sales asset management that saves sellers 90 minutes a week
• Train and ramp new sellers faster to competence following a defined set of criteria
• Increase win ratio by 10%
• Achieve a payback period of 1.5 years for new products

Now that you have a better idea as to how MBOs work for a company from a management and team member’s perspective, here are five ways to put MBOs into practice. 

1. Define objectives: First, determine objectives for the entire company. Once you determine those goals, then each department should come up with department goals and how each individual will help to achieve these.
2. Share objectives with employees: Use the SMART acronym when sharing with the team (specific, measurable, acceptable, realistic, time-bound) to define the objectives. 
3. Encourage employees to participate: Invite your employees to help determine the department and individual goals. This will motivate them beyond company achievements. 
4. Monitor progress: Consistently check on the progress of goals and share updates regularly with the team. Based on what’s achieved or not achieved, teams may need to redefine goals and objectives.  
5. Evaluate performance and reward achievements: This step requires honest feedback from upper management. Leaders should meet one-on-one with individuals, review their progress, achievements, or lack thereof toward their individual MBOs for those who hit their MBOs, and reward them accordingly. For those who didn’t, provide coaching, support, and possibly a new  MBO, or path, to achieve those goals. 

MBOs pros and cons

Just like everything else, there can be pros and cons. MBOs are no exception.

According to Investopedia, boosting employee participation and loyalty happens when MBOs align with company objectives. 

However, some critics say MBOs encourage employees to achieve goals by any means necessary, even at the cost of the company. 

Here are a few pros and cons to consider.  

Pros

1. Employees understand their goals and take pride in working toward them and accomplishing achievements. 
2. Creating one-on-one time with an employee to assign tailored goals will increase output and long-term happiness within the company. 
3.  One-on-ones increase communication between the manager and the employee.
4. Management creates goals that directly impact the success of the company.

Cons 

1. Although MBOs focus on company goals and output, they may create an environment solely focused on those targets. Other parts of a work environment can be just as important like having a healthy/work-life balance or areas of contribution, which MBO structures compromise. 
2. The risk of employee stress increases because deadlines have become more regimented in order to reach goals.
3. Employees may feel that they have to reach goals by any means necessary, which could mean cutting corners and compromising the quality of work. 
4. If management only relies on MBOs, then other responsibilities may fall off the radar if they don’t fit under the MBO. 

Measuring MBOs

All MBO goals can be measured using technology to monitor employee progress and track activity. This will allow managers to generate reports, track deal information and sales activities based on individuals, and set a specific timeline. 

QuotaPath’s commission tracking software can help. Our platform tracks revenue objectives so reps can easily see their quota attainment, commission progress, and their projected earnings forecasted based on their existing pipeline. It’s easy for reps to see how much they’re earning from every deal while keeping track of how close they are to hit their quota. That means management can track their team’s overall performance with the team leaderboard while also understanding some shortcomings, allowing them to test “what if” scenarios. To learn more, book time with our team. Or, get started for free with a 30-day trial.

We’ve shared downloadable AE compensation policy templates as well as a generic sales commission agreement. Next up: we have an SDR compensation policy template. 

Download the SDR comp policy template

Why use this template for your SDR policy

If you’re involved in sales, you know that one of the key components to success is having a solid commission policy. Yet, these can be tricky to write out for several reasons.

First and foremost, you need to tailor the policies to the company’s specific needs and goals and the sales teams that make up a revenue department. That leads to much back and forth between stakeholders involved in the process.

Additionally, sales compensation agreements consider various factors that can impact compensation, such as the type of product or service being sold, the length of the sales cycle, and the size of the deal. 

What’s more, sales compensation policies must be legally sound and compliant with any relevant regulations or laws, which call for specific language or clauses to ensure that it is legally binding and enforceable.

Finally, sales commission agreements involve money, and money is emotional.

Both the company and the sales team are vested in ensuring that the commission structure is fair and transparent, which can lead to detailed negotiations and complex calculations.

Inside the SDR compensation policy template

To help write your compensation agreement, we created a downloadable SDR commission agreement template. We designed this SDR compensation agreement template so that you can customize it to the unique needs of your SDR team. 

The default plan models the Qualified Opportunity Bonus & Closed Won Commission SDR comp plan example. This compensation plan (one of 20 free comp plan templates from Compensation Hub) pays a flat-rate bonus when the SDR qualifies. Additionally, for any deal the AE closes that the SDR generated the lead for, the SDR earns a commission percentage.

The template also includes sections on commission rates, payment terms, and performance metrics, as well as provisions for disputes and clawback. 

To automate the distribution and signatures of compensation policies, check out QuotaPath’s Plan Verification feature.

We believe that a strong compensation policy is key to building transparency and trust on your sales team, and we’re excited to share this resource with you.

Download our SDR commission agreement template today and take the first step toward maximizing your sales success!

About QuotaPath

QuotaPath automates sales compensation management and commission tracking for scaling GTM teams. Integrate your CRM for trusted and real-time earnings and forecasted earnings data. Simplify commission payouts and communications, and align your teams with a variable compensation source of truth. 

Sign up for a  30-day trial, or book time with our team for a custom demo. 

This is a guest blog from our friends at Sage that answers if sales commission is a period cost.

Is sales commission a period cost and, if so, what kind of period cost is it?

Period costs are expenses that only indirectly relate to the product development process, while product costs are those that directly relate to product development. So, period costs include expenses like marketing budgets, utility fees, business travel, and employee benefits. Product costs are expenses that are necessary to physically build the product being sold, such as raw materials, manufacturing supplies, and direct labor.

But what about sales commissions?

What is a sales commission?

A sales commission refers to additional compensation paid by an employer to a sales representative when they meet and exceed minimum sales targets. In most commission models, this compensation is added on top of the employee’s base salary as a monetary incentive.

Done right, a sales commission model can unlock your sales reps’ full potential, motivating them to outperform sales targets.

Industry-wide sales commission rates are generally believed to average around 20-30% of gross margins. However, this average is hugely influenced by commission structures. Using Glassdoor salary data, Mailshake estimates that architecture sales agents have the highest commission average at 37%, followed by the likes of retail, pharmaceutical, and telecommunication sales.

Why sales commission should be considered a period cost

Sales commission usually falls into the category of selling, general, and administrative expenses (SG&A) or operating expenses, both of which are period costs. However, it can also be classified as cost of goods sold (COGS), which is typically classed as a product cost.

Here are some reasons why sales commission should always be considered a period cost.

Financial reporting implications

Treating sales commission as a period cost simplifies the process of producing a comprehensive income statement. Period costs are included on your business’s income statement and should be categorized appropriately to glean insights into the costs incurred by each.

This serves to help your finance team calculate your company’s net income and analyze the impact of your expenses within the accounting period. Sales commission should be accounted for on an accrual basis (i.e., when the sales commission is billed to a rep rather than when it is received). This is in order to comply with ASC 606 regulations, which we’ll discuss shortly.

Tax implications

In order to file accurate business taxes and avoid financial audits, you need to meticulously document period expenses. Just like your other period costs (office expenses, advertising, etc), sales commissions make up your total period cost and need to be reported to ensure that you’re paying the right amount of taxes. 

Different countries have different tax authorities. In the US, for example, the governing tax body is the Internal Revenue Service (IRS). In the UK, it’s HM Revenue and Customs (HMRC). The rules regarding whether sales commissions are tax-deductible may vary by location. 

In the US, sales commissions are tax-deductible under both selling, general and administrative expenses (SG&A) and cost of goods sold (COGS) classifications. HMRC also recognizes commission as an allowable business expense that is tax deductible. So, it’s critical for your company’s financial health that all your sales commission payments are categorized correctly as period costs on your tax return. 

Filing tax returns is a hefty task for finance teams. To automate the tedious tax filing process and avoid the financial and legal repercussions of inaccurate tax filing, utilize tax software for small businesses. Tax software streamlines tax filing by allowing you to upload invoices, receipts, and other period expense documents into the cloud, in real time. 

With all of your financial records in one centralized location, you can enjoy painless tax reporting experiences and ensure that you’re audit-ready.

Decision-making implications

To explain the decision-making implications of sales commissions as a business expense, it helps to cover all three classifications of period costs: current, historical, and predetermined.

Current expenses are costs incurred within the current period.

Historical expenses are costs that relate to previous periods and therefore do not factor in decision-making.

Predetermined expenses are upcoming costs that are expected to incur in a future period and therefore must be considered when calculating overall budgets.

For businesses that need to comply with ASC 606 (which we’ll explain further in the next section), sales commissions should be classed as predetermined period costs. This means that they are calculated as an estimation and spread out over the contract lifetime. Naturally, this makes them critical to financial decision-making, most notably budget calculations.

This is all to say that failing to correctly classify sales commissions as period costs can limit data transparency and result in poor financial decision-making.

ASC 606 and subtopic 340

What is ASC 606 and how does subtopic 340 relate to sales commission? 

Explanation of ASC 606 and why it’s important

ASC 606 is a revenue recognition standard launched by the Federal Accounting Standards Board (FASB) as a joint initiative with the International Accounting Standards Board (IASB). Its primary objective is to standardize how revenue is recognized for all sales agreements and contracts between companies and customers.

As laid out by the ASC 606 standard, the five steps for recognizing revenue are as follows:

ASC 606 standardizes global revenue recognition by providing a single source of truth. As a result, there are fewer disadvantageous inconsistencies in revenue requirements and information pertaining to revenue recognition is more informed, robust, and valuable.

Compliance with ASC 606 does however mean that accounting for sales commissions has grown more complex.

How the subtopic 340 ties to commissions specifically

ASC 606’s subsection, ASC 340-40, dictates that sales commissions must be capitalized as intangible assets (on the company’s balance sheet rather than expensed immediately), correlated to a customer, and amortized over the expected contract term in alignment with the performance obligations laid out in the contract. 

Amortization is the process of spreading out the costs of intangible, long-term assets (in this case, sales commissions) over their anticipated lifetime. This contrasts with revenue recognition before ASC 606, where businesses could use manual spreadsheets to track sales commissions as and when the bonus payment was made. 

With the task of capitalizing, forecasting, and amortizing to complete, manual spreadsheets are no longer sufficient. Companies need to use small business accounting software to perform advanced forecasting and reporting to relieve admin burdens and generate hyper-accurate insights — all while keeping compliant.

Factors that determine if sales commission is a period cost

Still not sure whether to class sales commission as a period cost? Here are some factors that can help you decide.

Timing

The timing of your sales commission payments can help you determine whether the expense comes under period cost classification. If, for example, your sales commission payments are based on the volume of sales a representative secures over a period of time (under ASC 606 compliance), then the requirement to amortize the expense means that you should class it as a period cost.

Revenue relationship

Sales commission that is classed as income rather than expense is not a period cost. This occurs when your company earns a commission. (For example, when your company makes a commission by selling a product through a business partnership.) This type of sales commission is considered revenue.

Incentive structure

Along with the self-explanatory “salary plus commission” structure, some of the most popular sales commissions structures are:

• Gross-margin commission: This is a profit-based commission in which payment is calculated using the gross revenue generated from the sale. So, the higher the price a sales rep sells an item for, the higher their commission is in alignment with how much the product cost to build.
• Revenue commission: Sales reps receive a flat percentage on every sale. So if a product was worth $2000 and the rep’s commission rate was 5%, they would receive $100 compensation.
• Tiered commission: Commission continually goes up once reps hit a specific target.
• Straight commission: The rep receives no fixed salary or wage. So, they only generate income from the commission that they make on a sale. 

As you can see, commission incentive structures can vary significantly. Evaluate carefully whether the incentive structure counts as an incremental cost of obtaining a contract with a customer, as per ASC 606 regulations. Consider whether the cost would incur regardless of whether the contract was obtained. 

Payment frequency

Are payments made monthly, bi-monthly, quarterly, or annually? 

As we’ve covered, sales commissions classify as period costs when they have a set structure that aligns with ASC 606 regulations. Sales commission payments should be scheduled in alignment with payment structures and regulations and reported accurately on your income statement.  

Industry norm

For most industries, it is the norm to classify sales commissions as a period cost. It mitigates non-compliance and tax repercussions, which can have serious financial and legal consequences for your business. The exception is usually within businesses that earn commission as income, in which case commissions must be strictly separated and reported appropriately.

Final thoughts

So there you have it. Sales commissions are a period cost. Now, how do you execute a commission model that is incentivizing, streamlined, and hassle-free?

With sales compensation software, you can easily build custom compensation plans and align sales reps with your revenue objectives. QuotaPath is an easy-to-use commissions solution with excellent forecasting and integration capabilities. Use it to unify teams, scale workflows, and eliminate confusion around sales commissions. Use Ledger to amortize sales commission costs and stay compliant with ASC 606. Try QuotaPath out for free over a 30-day trial (no credit card required). Or, chat with their team to learn more by scheduling a demo.

Sales quota attainment is a critical metric for any sales team. It measures how well a team is performing against its sales goals and offers a peek into the reality of your on-target earnings (OTE) for interested hires.

But setting a good quota attainment goal can be challenging. 

For starters, if you ignore market factors and set a quota attainment goal without considering it, you’re bound to miss it. You must understand the size of the market, the competition, the buying habits of your target customers, and environmental factors that may give buyers pause. 

Another challenge is not setting realistic goals.

If you set your sights too high, your team will grow discouraged and give up. But, if you set your sights too low, you’re not going to achieve your sales goals.

Lack of a solid process and resources can also deter your quota attainment percentage. Teams are more likely to thrive when a good sales process is in play and the training, tools, and support complement that process. 

On the flip side, when you understand the market and have strong sales enablement and historical performance data, you should be able to set a fair and reasonable quota attainment goal for your team.

Easier said than done, however. What is a realistic quota attainment? We explore below. 

80% is considered a good quota attainment rate

Our suggestion has been and will remain a minimum of 80%. 

“My 80% bar differs from what other sales teams say,” said QuotaPath CEO and Co-Founder AJ Bruno. “Others set an 80% target that translates to the sales team attaining 80% of their quota over the year.”

But AJ’s 80% rule is that 8 out of 10 sellers should hit their quota. 

“This perspective promotes consistency across the entire team,” AJ said. 

Others agree. 

We recently ran a LinkedIn poll and the results favored 80%  more than any other option. Although, to our delight, 90% and above came in second. 

Why 80%? 

In addition to the consistency that 80% drives across the entire team, 80% also represents a realistic number. It’s not out-of-reach, but it’s also not too easy in that it becomes an arbitrary number or a threat to your revenue targets. 

“You want your quotas to be achievable by most, but not incredibly easy to achieve, and also not super difficult,” per Revenue.io’s blog, “Sales Quotas: Everything You Need to Know for 2022.”

Following the 80% rule also accounts for the performance of both your top and bottom performers. That way, the former can pick up the slack for the latter and the organization as a whole can hit its targets.

Plus, 80% quota attainment is a good indicator of your team’s performance. If your team consistently hits its quotas, it means they’re doing a good job of prospecting, qualifying leads, and closing deals. This is a good sign that your sales process runs smoothly and that your team feels motivated to succeed.

How to set a realistic quota that gets your team to 80% attainment

Our Chief of Staff and Interim Head of Sales Graham Collins wrote a great blog on how to set SaaS quotas. Below, we pulled his key takes.

1. Quotas should be equal to some multiple of their OTE.
   
   This might be 3x the rep’s OTE or 8x depending on the size and stage of your company. Our rule of thumb is a quota 5x that of the rep’s OTE. This ensures the sales the rep brings in are greater than the cost of the rep itself to keep on your team. So, if your OTE is $120K, following a 5x rule, that means their quota would be $600K.
   
2. Sales cycle length and company stage play a big role.
   
   To ensure that your quotas are reasonable, use data and benchmarking reports from companies that match your size and sales cycle from your industry. It also doesn’t hurt to talk to peers, mentors, and your friends at QuotaPath.
   
3. Adjust when needed.
   
   Remember that you should adjust quotas to account for changes in the market, the economy, and your own sales process. Evaluate your quota and attainment rates so that you can ensure quotas remain challenging but achievable.

Quota attainments around tech

RepVue, a platform with verified sales organizations’ ratings, recently published the top sales team attainment numbers from their reviews. And, guess what? The best fell between 80-90%.

Take a look at the top 3.

1. Miro: 85%
2. Veeva Systems: 84%
3. Gusto: 83%

Give your reps visibility into their attainment progress

Of course, there will be times when your team doesn’t hit their quotas. But if you’re setting realistic goals and providing your team with the resources they need to succeed, you should be able to achieve 80% quota attainment on a regular basis. 

To help track progress and give your reps real-time visibility into their performance and forecasted attainment, check out QuotaPath. Our sales compensation and commission tracking software integrates with your CRM, like HubSpot or Salesforce, and translates pipeline data into earnings and attainment progress. 

Let your reps see how close they are to achieving their goals and encourage them to bring in those lingering opportunities to reach them. 

Sign up for a free 30-day trial and begin tracking, or talk to our reps by scheduling a demo to learn more. 

After heavily investing in our native HubSpot integration, we are honored and proud that QuotaPath is a leading commission software app on HubSpot Marketplace.

QuotaPath has seamlessly automated sales commissions to remove the burden of manual calculation for thousands of HubSpot users across RevOps, Sales, and Finance. We’ve made it possible for stakeholders to access real-time earnings, attainment, and forecast data at any time both in HubSpot and QuotaPath.

That’s right, this is a two-way relationship between the platforms and a truly one-of-a-kind CRM commission tracking integration. 

So, how did it begin? 

We recognized the similarities between us early on. For instance, HubSpot believes in swapping friction for clarity, consistency, and ease of use, which mirrors how we think about sales compensation. Our platforms would work well and deliver a positive experience for those looking to make variable pay more transparent and meaningful. 

So, we launched an official integration in 2021 and deepened our partnership in April 2021 when HubSpot Ventures invested in QuotaPath. 

Since then, we have continued to evolve our platform in step with HubSpot. 

Today, we both offer transparent pricing, a free-to-try model, and a simple UX atop a high degree of functionality. For us, that’s led to faster onboarding rates (23% faster) for customers who come to QuotaPath with HubSpot, as well as higher retention rates (120%).

QuotaPath’s HubSpot integration includes:

• Quick implementation setups
• Real-time data integration
• Customizable mapping of fields
• Earnings viewable directly in HubSpot
• A HubSpot-Certified App

Below, learn more about QuotaPath and HubSpot, and how to leverage the most out of this exclusive integration. 

Inside the HubSpot QuotaPath integration

QuotaPath is the only commission software that offers a true native integration with HubSpot. 

That means no manual refreshes or waiting on updates to see existing and forecasted earnings and attainment data. In QuotaPath, this information is real-time and accurate. As long as the data in HubSpot is correct, QuotaPath’s data will match. 

Additionally, your field names in HubSpot migrate to QuotaPath, so that you and your team won’t have to learn new terms between the two platforms.

“Because QuotaPath and HubSpot share the same fields, I can align my language to what my teams are seeing in HubSpot. When I call it an ‘amount’ or ‘close date’ in QuotaPath they know what it means from HubSpot,” said Katie Cooper, Muck Rack’s Senior Business Manager, Business and Data Operations.

We also earned HubSpot app certification by having a success rate of 98%+ for all activities, more than 100 customers using the integration, meeting HubSpot’s security best practices and other metrics tied to privacy, reliability, performance, and usability. 

Plus, we took the integration a step further. Sellers don’t even have to leave HubSpot to view their earnings data via a QuotaPath HubSpot card.

With QuotaPath, you can:

• Import HubSpot Deals in 4 clicks
  
• View QuotaPath Earnings directly in HubSpot
  
• Identify which records count toward earnings
  
• Map comp plans with HubSpot CRM data from designated fields
  
• Import custom HubSpot fields
  
• Define Deal stages to pull from HubSpot
  
• Preview mapping and input additional filters
  
• Set payout eligibilities and schedules
  

“When I’m reviewing commissions in QuotaPath, I’m not checking to see if they’re right in QuotaPath. I’m checking to see if the deals and fields in HubSpot are correct. Knowing that the data comes from HubSpot is a huge peace of mind. I can trust it,” said Katie.

Operationalize sales compensation with HubSpot and QuotaPath

Having trust in the data provides huge value when it comes to syncing HubSpot and QuotaPath — as does the simplicity of setup and ability to operationalize your sales compensation strategy.

With a UX that’s easy to make changes in, QuotaPath admins can learn the platform quickly and see fast time-to-value.

In fact, many of our users run commissions for their entire GTM team just weeks after signing. The HubSpot integration takes only a few clicks to set up. Should you need help, our team is ready to jump in at no additional charge.

“Our Customer Success Rep Josh was so patient with us,” said Jay Wallace, Sales Founder and VP of Worldwide Sales at runZero. “He made strong recommendations in HubSpot that led to a better output with QuotaPath. He really went above and beyond.”

Plus, when you need to refer to compensation data from previous quarters or fiscal years  — or get a pulse on cash flow — QuotaPath makes this info accessible to all stakeholders. This offers a nice change for those coming from organizations with private spreadsheets. 

By operationalizing your sales compensation process, you will save time calculating and paying commissions, when you need to add new team members, compensation plans, SPIFs, and more. 

“A major game-changer for me is the ease with which I can onboard a new team member,” Katie said. “Assigning a plan, quota, and rate in QuotaPath saves me about 30 minutes per employee.”

What’s more, reps build accountability over their variable compensation by having a universal system to check commissions, communicate discrepancies in-app, and reference comp plan policies on demand. 

Motivate teams

Rep accountability is great, as is motivation. 

QuotaPath’s HubSpot commission tracking integration gives reps instant visibility into how the next deal impacts their earnings. This eliminates the guessing games around how SPIFs impact their earnings, or how close they are to quota or the next commission tier.

For instance, Joe St. Germain, Blackthorn’s VP of Sales, noted how after implementing QuotaPath, his reps used the forecasted earnings and attainment view to run “what if” scenarios.

 “Our reps realized they could run scenarios and see how much they could earn from our monthly kickers,” Joe said. 

As a result, reps made big pushes to move the incoming deals across the finish line, Joe said.  

EverView’s Director of Operations Ron Morgan shared a similar experience.

“Our comp plan was easily measured and easily viewed by our sellers in QuotaPath, which drove positive selling behaviors,” Ron said, who noted a record sales year after implementing QuotaPath.

Plus, with our HubSpot cards feature, reps can toggle between existing earnings and forecasted earnings directly from their HubSpot view. 

Encourage HubSpot CRM hygiene

By adding commission values to individual deals via QuotPath and HubSpot, we’ve found that organizations have benefited from improved CRM hygiene. 

Turns out, to get reps to care about accurate data in the CRM, tie it directly to their commission potential. In doing so, you’re immediately delivering a direct incentive for reps to maintain their pipelines. Those “hypothetical numbers” in the CRM become tangible by showing how the data informs their future paychecks.

One RevOps leader, for example, noticed in the first weeks after implementing QuotaPath that his reps kept HubSpot cleaner once they could see how their pipeline translated to earnings. 

A similar logic applies when reps flag errors in QuotaPath.

“When they say, ‘This looks wrong in QuotaPath,’ I can ask them if it’s wrong in HubSpot, too,” Katie said. “If it is, they can fix it in HubSpot and QuotaPath will automatically adjust.”

HubSpot and QuotaPath, a match unlike any other

The HubSpot CRM already provides so much information to your GTM team. Now, take it to the next level by giving them a tool that converts that data to actual earnings. 

Ready to add automated commission tracking and payouts to your HubSpot setup? Learn more by scheduling time with our team for a custom demo. Or, sign up for a 30-day trial (no CC required). Build your comp plan within QuotaPath, integrate HubSpot, and invite team members to begin tracking.

 Learn how HubSpot and QuotaPath can help your business reach its goals.

This is a guest blog from our friends at Dialpad on sales objectives and key results (OKRs).

In sales, it’s easy to feel overwhelmed with numbers and unattainable targets. Sales objectives and key results (OKR) is a goal-setting approach that enables organizations, and individuals to reach their potential.

This article will explain everything you need to know about OKRs and why they’re important. We’ll also show you some simple examples to illustrate how sales OKRs work.

What are sales OKRs?

OKR is a dynamic management approach made up of ‘objectives’ – measurable goals, and ‘sales results’ – a series of smaller aims to help brick-and-mortar stores and eCommerce firms reach their objectives. It creates alignment within teams by helping members engage better.

OKRs encourage a team-focused approach because working towards your own key results will often cross over with other team members’ key results. This also encourages accountability as team members work on individual key results that will help the whole team reach the objective.

The purpose of OKRs is to track your sales goals in real-time. They are objectives, usually set quarterly, with a set plan (the key results) of how to work towards them. But these aren’t just targets that need to be hit. They are also ambitious objectives that encourage teams to develop and learn. In fact, if you find you are ticking off your list of objectives easily, you probably aren’t challenging your team enough.

For example, if a team leader wants to decrease the time taken for sales reps to pick up parked calls within a call center, they could set the goal of decreasing call waiting times by 50%. But this doesn’t look at core problems and encourages short-term fixes.

Using the OKR approach of goal-setting, the team would look into why response times are down. Measurable goals would be set, such as decreasing call waiting times by 50%. But key results could also include categorizing calls and prioritizing callers. This would mean results are long-term, and the teams would be discovering new ways to work.

OKRs encourage transparency within a business. Team members working towards the same objectives should be kept in the loop about what each other is doing. Their individual goals (key results) are often tied in together.

OKRs should also promote ambition and growth within your team. It’s not only effective when working in sales. This approach can also be used in any line of business. It’s a framework that is split into two sections: sales objectives and key results.

Sales objectives

The “objective” part of your OKR is the overall goal and motivation for your key results. It should set out what you aim to achieve and why this is important for your business and employees. You must create a concise objective that explains what you need to do to reach your end goal.

Objectives can be either qualitative or quantitative. OKRs should be measurable. But you don’t have to get straight into numbers in your objectives. You specify these in your key results.

You can choose an objective, such as ‘Integrate our online sales channels using an e-commerce integration platform.’ Then your key results could set out how you would do this. Alternatively, you could set something more specific, such as ‘Increase productivity of sales channels by 25%.’

Key results

Key results are measurable goals that help you track your progress toward your main objective. They are basically steps created to allow you to reach your main objective. There are always multiple key results, some of which will tie in together. It’s also important to create a hierarchy to establish which results are more important, which help others, and which can be left until later.

For example, if you’re trialing a new call forwarding service within your sales department, you will want to track its functionality. So an example objective could be – “Use new call forwarding service to decrease the hang up rate of customers by 10%”.

Key Results

• Have all sales team trained on new tool within week 1
• Create a call-forwarding strategy using peak call times
• Decrease call-waiting times by 25%

The difference between OKRs and KPIs

OKRs are sometimes confused with KPIs (key performance indicators). Here are the main differences between the two:

• OKRs are created to boost engagement and are team-focused. KPIs evaluate business activities, projects, or products.
• OKRs tend to change quarterly, depending on the business. KPIs are long-term goals.
• OKRs tend to have a hierarchy and are connected. The key results are created to help achieve the objective. KPIs are of equal priority and usually separate.
• OKRs encourage ambition and development within a team. KPIs are more about hitting targets.

Let’s say a Google Analytics agency, Dubai, is having trouble getting repeat customers.

KPI: Increase the number of repeat customers by 50%.

This could be done by offering a discount to repeat customers. The company would hit its targets, but the results would be temporary while the deal is offered.

OKR Objective: Encourage repeat customers.

Key Results

1. Increase customer satisfaction by 20%
2. Improve communication with current clients 
3. Ask for feedback once projects are completed

These are goals that tie in together, making them more efficient. They are also in order, so the team knows what to prioritize. The results encourage communication, so the teams are learning new skills, such as using the perfect talk-listen ratio. Even if customer satisfaction is only improved by 15%, the current results are sustainable and leave room for growth in the future.

Why are OKRs important?

Promoting Teamwork

For example, if customer journey optimization is one of your priorities, your main objective would be to improve your customers’ experiences. But your key results would bring your team together to reach this objective.

For example, the first key result could focus on tracking the current customer journey, while the second could involve gathering feedback from customers. The final key result would focus on creating a new customer journey using the information gathered from the first two key results. With team members working towards your main objective using individual key results, you are creating a more well-rounded team who can work together.

Track progress in real-time

Setting long-term goals is important. But once you reach them you want to know how you got there. What problems did your team face along the way? What did they learn?

Also, if your team failed to meet its goals, you need to know why. What stopped your team from achieving its objectives? What progress did they make?

We see teams create OKRs most frequently on a quarterly basis. But do what works best for your team. Key results are measurable, so you can see exactly how your business is progressing. But it’s not just about your figures, it’s also about your team’s development. Transparency and ambition are key. You don’t just want to track your sales, you want to look at how your team has progressed. This can be as simple as finding out what they have learned while working on their key results. It could also include discussions on how the team can improve in the future.

Overcoming problems

With OKRs, your sales team is all working towards the same objective. Even if team members have individual goals, they all crossover and benefit each other. Weekly meetings mean that team members can look at problems together and work out how to solve them. Communication within a team is very important. 

How to set good OKRs

• Look at problems within your business – what isn’t working? What can be improved?
• Be clear and concise when setting objectives – you need to know exactly what you aim to achieve from this goal.
• Set measurable goals – how will you know you’ve been successful?
• Make goals achievable – don’t look at goals completely out of reach, shelve them for later.
• Don’t make goals too easy – remember this isn’t a checklist, it should promote ambition.
• Look at how your OKRs can improve your KPIs – don’t just duplicate them.
• Look at past objectives – were they successful? Can they be built on?

Measuring your success with OKRs

We have talked about your OKRs being measurable, but how exactly do you measure your success? One of the main ways to do this is by analyzing the sales metrics. But this isn’t all of the information. You also want to review team learnings, gained advantages, and how the team collaborated.

For example, if a sales manager doesn’t think that their teams are properly utilizing their call logs they may set the objective: ‘Increase productivity of sales calls by 10% using received calls list.’ One of the key results could be: ‘Use call logs to determine the best times for sales calls.’

Measuring your success, in this case, would come from comparing the previous period’s sales figures with this period’s. This would determine whether this key result had helped the team to achieve the overall objective. However, even if your team has not met the objective’s target, the information you gather throughout the process is helpful. For instance, team members could compare data on the best times for sales calls. This can help them increase the likelihood of meeting the objective next period.

Start creating your sales objectives and key results

Now you understand the importance of OKRs and how they work, it’s time to get your team together and set up some objectives. Don’t expect to get it right straight away. This management approach evolves over time while you tweak objectives and key results.

Remember, having too many objectives will be counterproductive to your team. Don’t create more than 3 or 4 at once. If you have more than this you’re spreading your team too thin. This can lead to them creating quick fixes to quickly complete objectives. The whole point of OKRs is to set goals to improve sales effectiveness long-term. Think quality over quantity. 

About the author:

Jenna Bunnell is the Senior Manager for Content Marketing at Dialpad, an AI-incorporated cloud-hosted unified communications system that provides valuable call details for business owners and sales representatives through features like Dialpad call waiting. She is driven and passionate about communicating a brand’s design sensibility and visualizing how content can be presented in creative and comprehensive ways. Check out her LinkedIn profile.

No two sales interviews are exactly alike. In some, the focus may be on your experience and education. Other interviewers may be more concerned with seeing if your personality will mesh well with the existing team. But there’s one question that seems to crop up more often than not, and it’s a doozy: “Why sales?”

This question can come in a few different formats. The why sales interview answer is very similar. It seems like such a simple query, but finding the right way to answer this burning question could mean the difference between scoring a new position or going back to the drawing board (or the job board, as the case may be).

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Why sales? The reasoning behind this common interview question

Sales jobs are all about convincing someone that they need whatever it is you’re trying to sell. That could be software, paper, real estate — almost anything — and during an interview, the commodity you’re trying to sell is yourself. The question “why sales?” is valuable for several reasons:

• It puts your skills to the test. If you can’t convince your interviewer that you’re the best candidate for the job, that could make your potential boss a bit wary. This is your opportunity to showcase your ability to make a product or service shine.
• It separates candidates who do their research from those who don’t. Answer “why sales?” with a clear-cut, well-constructed answer that acknowledges both your own strengths and a few of the company’s key attributes. Do that, and it’ll be apparent that you did your homework before sitting down to chat.
• It reveals what drives you. Sales requires enthusiasm beyond a desire to make tons of cash. When times are slow, what’s going to inspire you to keep working? Let’s say you’re interested in a growing industry like SaaS sales. Are you driven to develop long-lasting relationships with customers to pave the way for upgrades and upsells? Most employers are looking for the big-picture answer to “why sales?,” not just someone who wants to close the big account and move on.

Why sales interview answer

Why are you interested in sales? You need to know the answer to that question before you sit down for your interview. Think of this like an elevator pitch. Develop a short, catchy explanation of what attracts you to sales and why you think you’re going to be good at it. This should be about 30 seconds to a minute long, no more. You’ll likely have a chance to elaborate further, but the idea is to sell yourself without selling.

• Does the challenge of closing a sale get your heart pumping?
• Do you feel strongly about the product or service you’re selling?
• Do you get supercharged by the competitive aspect of beating out your colleagues?

You can tailor your why sales interview answer to the company for which you’re interviewing, too. Check out their website and visit sites like Glassdoor to see what makes the business tick. If employees talk about monthly sales quotas or tiered commission, see if that resonates with you. If so, reference that as you being “committed to surpassing monthly quotas by 10%” or something similar.

Above all, it’s important to be honest. You’re likely interviewing with someone who has been through this process countless times and met with dozens if not hundreds of applicants. They can smell a lie from 10 miles away. In other words, don’t ramble on about your 100% close rate unless you have the cold, hard figures to back it up.

Examples of great answers to the question

The interviewer may ask “why are you interested in sales?” as soon as you sit down. If you’re brand new to this space, see if you have a personal or professional background that ties into whatever you’d be selling. If so, make that experience the basis of your answer.

Example (assuming you’re applying for a job selling restaurant technology):

Say you’re experienced in the same industry but want to move from the company you’re at. Talk about what you can bring to the table and why you want to make the switch.

Demonstrate your knowledge of the company. This could mean referencing recent news stories (positive ones only, of course). Or, you could discuss something in the company’s mission statement that aligns with your own core values.

Emphasize skills pertinent to the industry. If you’re applying for SaaS sales jobs, discuss your tech background and willingness to play the long game.

Why do you want to work in sales? What not to say:

When it comes to interview questions, sometimes what you don’t say is more important than what you do say.

• “I need the money.” Clearly, someone seeking employment is looking for compensation. Employers understand that you have financial goals you need to meet. That said, money shouldn’t be your only motivator — if it is, don’t admit it.
  Anything vague. It’s quite possible to talk a lot without saying anything. That kind of slick, salesy talk won’t work on interviewers who have heard it all.
• Complaining about your current boss or disparaging their product/service. No one wants to hire a Negative Nellie. Bad attitudes are not only contagious, they’re toxic. Present the kind of positive, uplifting energy that helps entire teams succeed. After all, one person does not a sales department make. Remember, a rising tide lifts all boats.
• Any references to “always be closing.” The idea that sales is about talking customers into products they don’t necessarily need is ethically questionable and quite outdated. Modern-day sales techniques are more about addressing the clients’ needs and shifting the sales pitch to match those concerns and priorities.

“Why sales?” is one of the top interview questions for good reason. It gives discerning employers insight into applicants’ motivations and helps them evaluate preparedness. For job seekers, the question is an opportunity to highlight their best assets. Master this question and you’ll stand out from other candidates for all the right reasons.

Questions sales candidates should ask during an interview

Now that we’ve got your interview responses sorted out, let’s explore some of the questions you should ask the interviewer.

• Can you tell me more about the sales team and their roles?
• What are the main challenges facing the sales team currently?
• How is performance measured and what are the expectations for the role?
• What percentage of the sales team is hitting quota?
• Can you tell me more about the company’s sales process and how new sales representatives are trained?
• Can you provide examples of successful sales campaigns or initiatives?
• Can you tell me more about the company’s products/services and target market?
• How does the company support its sales team in terms of technology and resources?
• Can you tell me about the company culture and how it relates to the sales team?
• Can you tell me about opportunities for growth and advancement within the sales team?

Happy interviewing!

About QuotaPath

QuotaPath’s commission tracking and sales compensation management software automates and simplifies tracking, calculating and paying out sales commissions. Teams who see the most value from our platform already track their deals using a CRM and have between 20 and 250 employees with plans to grow. Learn more by scheduling a time with our team.