More than 40% of reps aren’t motivated by their comp plans.

An easy fix? Consider SPIFs.

There are various ways to motivate specific sales rep behaviors and drive performance. Although properly prepared sales compensation plans address most overarching business goals, there are times when short-term rewards like SPIFs are necessary.

What is a SPIF? 

A SPIF, also known as a SPIFF or SPIV, is a short-term element of the overall incentive compensation management plan. What does SPIF stand for? SPIF stands for sales performance incentive fund or special performance incentive fund. It is designed to motivate specific behaviors of quota-carrying teams, such as salespeople, customer service agents, lead qualifiers, and sales engineers.

What is a SPIF in sales?

SPIFs can be used across departments within an organization to improve performance or to encourage and reward specific behaviors. In sales specifically, leaders run SPIFs to inspire revenue-generating behaviors.

When and how are SPIFs used?

Sales teams often add SPIF programs to meet short-term goals like:

• Closing a pipeline gap
• Improving specific behaviors or metrics
• Motivating reps to sell new customers or product types

To drive participation and reward attainment, employers offer various types of incentives or rewards to team members based on the rules set forth at the beginning of each SPIF program.

SPIF challenges

Well-executed SPIFs can be very effective. However, long-term or repetitive use can reduce their impact and diminish returns. Keep the following challenges in mind to increase the odds your SPIF program is a success.

SPIFs are often planned hastily

First and foremost, it’s common for teams to add SPIFs in response to unanticipated marketplace or organizational changes. As a result of this reactionary nature, SPIFs usually lack organization, planning, and strategy. Rushing into a poorly executed sales incentive rewards program can cause more harm than good by driving the wrong outcomes, distracting reps, or creating goals that conflict with those of your overall sales incentive program.

That’s why it’s best to plan SPIFs while building out your compensation plan design proactively. Create a  step-by-step process for adding unexpected SPIFs to minimize the risks of reactively introducing poorly executed programs.

Poorly executed SPIFs are common

Additionally, leaders usually calculate their SPIF program outside of their main compensation management services. In doing so, this increases the associated financial risk and makes it more difficult to track or analyze. So, it’s best to leverage a commission tracker that allows you to quickly add customized SPIF plans to facilitate compliance and control monitoring.

Sales reps can’t keep their eye on the prize

Plus, most sales organizations encourage reps to track their SPIFs independently, using a manual commission tracking spreadsheet or the likes. This is both time-consuming and error-prone. And, reps can’t easily monitor their progress toward their overall attainment goals. This reduces the motivational impact of the program as they approach the end of the designated period. 

It’s difficult to prevent cheating

Along with difficult tracking processes, SPIFs may lead to reps holding deals until they can benefit from the SPIF. When reps know a SPIF program is about to begin, they may delay closing deals to count them toward the desired program goal. To avoid this, wait to announce the upcoming SPIF until it’s time for the SPIF to begin. 

ROI measurement isn’t easy

Measuring the success of a SPIF program after its completion entails a complex process further complicated by manual tracking. Sales compensation platforms facilitate post-SPIF analysis, so you can determine which SPIFs are worth repeating.

Too many SPIFs are counterproductive

Last but not least, offering SPIFs too often reduces the motivational impact they have, leading to diminishing returns. If you feel the need to offer SPIFs frequently, you should revisit and revise your overall sales compensation plan. Ensure it’s driving the right behaviors and types of sales.

How to execute successful SPIFs

Take the time to properly plan SPIF programs to increase your odds of success and ROI. Below we share how to plan for your first SPIF.

1. Start with clean accurate historical sales data. This makes it easy to identify times and product lines best suited for SPIFs.
   
2.  Plan SPIFs when you design your sales commission plans. These programs can be easily integrated into the overarching comp plan, so they are implemented when they’re most needed to balance seasonal variability and key milestones throughout the year.
   
3. Use SPIFs to support established sales initiatives. These include planned promotional offers for new products or a new market segment to pursue.
   
4. Determine the overall compensation budget and what percentage to allocate for SPIFs. Then carefully track SPIF spending throughout the year to stay on budget.
   
5. Always measure SPIF performance against objectives. This prevents repeating expensive mistakes and increases future successes.
   
6. Use past SPIF performance insights to help guide future SPIF planning and adjustments.
   

The key to completing this process successfully is clean accurate data. An integrated sales compensation platform, like QuotaPath, makes this possible.

Integrating SPIFs with Your Overall Compensation Plan

Keep in mind, that you’ll want to integrate your SPIF with your overall compensation plan.

To do so, follow these seven guidelines.

By following these strategies, you can integrate SPIFs strategically into your overall compensation plan. This ensures they act as a valuable tool for motivating top performance, achieving sales objectives, and ultimately contributing to your company’s success.

SPIF Best Practices

We’ve gathered some tips on how to get SPIFs right to further boost your success.

Set well-defined goals for each SPIF. Knowing what you want to accomplish at the outset makes it easier to communicate to your team and to gauge success at the completion of the program.

Provide clear direction to your reps. They need to understand what they need to do to earn the incentive and what target, such as X leads or Y deals at $Z, equals success.

Designate who is eligible for the SPIF. This prevents confusion and prevents disappointment.

Specify a clearly defined start and end date for the SPIF.

Consider all SPIF-related costs to prevent going over budget.

Avoid SPIFs that contradict your main sales compensation plan.

Keep it simple. Complicated rules only lead to frustration, disappointment, and less participation.

Don’t use SPIFs too often. They become less effective at motivating and exciting the team if they become the norm.

They should be unexpected. Otherwise, reps will sandbag deals if they know when SPIFs are scheduled.

Make them possible for everyone. So, instead of offering a reward for the top X reps, set a SPIF target all team members can reach, like anyone who hits 100% of quota.

Tie success to things reps can control. For example, complete X dials per day for so many days versus speaking to X prospects per day.

How to use SPIFs to drive key business metrics

You can use SPIFs to drive specific business metrics, such as NPS scores, gross profit margin, and more.

For example, you could reward SPIFs or kickers for products that generate higher gross margins. To motivate your team to sell and upsell your most profitable products, pay your team higher rates on new business or renewals that include the products that yield higher gross margins.

You could also give a SPIF on non-discounted deals to promote full-priced deals. Maybe it’s $100 for each one on top of the commission they earn from closing the deal.

Another SPIF might entail $250 every time the rep closes a multi-year deal to drive gross revenue retention.

Key Metrics to Track During a SPIF

So, which metrics should you track? Consider starting with these five:

1. SPIF Achievement Rate: This metric measures the percentage of sales reps who successfully achieve the specific goal or behavior required to earn the SPIFF incentive. It helps measure the program’s overall effectiveness in motivating desired actions.
2. Sales Velocity: Track the average time it takes to close a deal during the SPIF period. Ideally, the SPIFF should incentivize faster deal closure, leading to a potential increase in sales velocity.
3. Revenue Generated: Monitor the total revenue generated as a direct result of the SPIF program. This helps determine the return on investment (ROI) of the SPIF by comparing the cost of the incentives to the additional revenue generated.
4. Product/Service Mix: If the SPIFF targets specific products or services, track the sales mix during the program. This reveals if the SPIFF is successfully driving sales towards the desired products/services.
5. Rep Engagement: While not one of the direct sales metrics, monitor rep engagement throughout the SPIF. This could involve tracking participation rates in training sessions or surveys to gauge their enthusiasm and overall satisfaction with the program.

Bonus Metric:

• Cost per Acquisition (CPA) of New Customers: If the SPIF aims to acquire new customers, track the CPA during the program. This helps assess the cost-effectiveness of the SPIFF in acquiring new business.

By tracking these key metrics, you can gain valuable insights into the effectiveness of your SPIF program. This allows you to refine future programs for optimal results and ensure they align with your overall sales goals.

Communicating SPIF Programs to Your Team

Effective communication is paramount when introducing a Sales Performance Incentive Fund (SPIF) program to your sales team. Here’s how to ensure your team is clear, motivated, and ready to succeed:

Transparency and Clarity: Start by clearly outlining the program’s goals and objectives. What specific behaviors or achievements does the SPIF incentivize? What are the desired outcomes the program aims to achieve? Be transparent about the criteria for earning the SPIF and the program’s timeframe. This clarity ensures everyone understands how to participate and what to do to win.

Highlight the Benefits: Don’t just explain the mechanics; emphasize the benefits. Frame the SPIF as an opportunity for reps to earn additional rewards and recognition for their hard work. Showcase how the program aligns with their personal career goals and contributes to achieving team objectives. By highlighting the potential rewards, you can generate excitement and motivate reps to participate actively.

Provide Resources and Support: Equip your team with the resources they need to succeed. Develop training materials or conduct coaching sessions to ensure everyone understands the SPIF details and the specific actions required to earn the incentive. Make ongoing support available to answer questions and address any roadblocks reps might encounter.

Communicate Regularly: Don’t just announce the program and expect magic to happen. Maintain open communication channels throughout the SPIF period. Provide regular updates on progress towards goals, celebrate individual and team achievements, and address any concerns that may arise. This ongoing communication fosters a sense of engagement and keeps reps focused on maximizing their earning potential.

Consider Feedback: After the SPIF concludes, gather feedback from your team. What worked well? What could be improved? This feedback loop allows you to refine future SPIF programs to better align with your team’s needs and preferences. By incorporating their insights, you can create even more effective incentive programs that drive exceptional sales performance.

By following these communication strategies, you can ensure your SPIF program is a well-understood motivating force that propels your sales team toward achieving outstanding results.

Spiff vs CaptivateIQ vs Xactly vs QuotaPath

Read this full comparison to identify the most adaptable commission software.

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SPIF examples

Companies with the best SPIF incentives tailored them to their teams. What motivates some sales reps may not appeal to others. Hence, it’s best to know your team and their preferences before selecting a reward for your SPIF program. Otherwise, you risk reduced participation and results. We find that successful SPIFs fall into seven categories:

Money – This is a popular choice, but not everyone is motivated by more dollars.

Praise & Recognition – Some people enjoy being in the limelight and see rewards in this category as potentially positioning them for promotion or advancement based on performance. These include:

• Feature of top performer’s name on the leaderboard
• Inclusion in the President’s Club
• Receipt of a displayable award/trophy

Access – These types of SPIFs provide access to special information, support, and resources not available to everyone. These incentives offer professional advantages. But some reps may not value them because they don’t cost the company any or much money. These include:

• The ability to select which sales engineer they’re paired with
• A private calling booth solely for the individual’s use
• First dibs on new accounts or the ability to pick a handful of target accounts
• A one-on-one dinner with the executive team providing access to exclusive information
• Opportunities to attend trade shows, trainings, or certifications to help advance their career

Power – This rewards individuals with the ability to participate in a change or process impacting the sales team. These include:

• Working with the creative team to build the next sales deck
• Inclusion in discussions about sales compensation structure
• Influence over the terms and location of the next President’s Club

Gifts – Like money, gifts are quite commonly used as SPIF incentives. These include:

• Basic gift cards
• Books
• Items to make work life better, like noise-canceling headphones or an extra-wide computer monitor
• A subscription to a platform like Headspace or a music streaming service

Consider these examples to get your creative juices started once you figure out what is attractive to your reps.

Unsuccessful SPIFs and solutions

Regardless of how hard you try, there’s always a chance you’ll fail the first time you use a specific incentive. If you can determine why it was a flop, make adjustments and try a variation in the future.

Some reasons a SPIF might fail include:

Incentives didn’t match the audience.

Although you can’t please everyone, the incentive needs to motivate most reps included in the program. Without this consideration, you’ll have poor participation and weak results. For a team consisting of diverse demographics, no single incentive will appeal to everyone.

That’s when it’s beneficial to offer reward points where X points are awarded for each unit achieved. Then at the end of the SPIF period, recipients can redeem their points for gifts of their choosing from a selection you offer. And, remember to reveal the gift options at the beginning of the program so reps know what they are working toward.

Promoting a team SPIF

Rewarding the entire sales team for hitting a team goal can negatively impact your team’s culture. This holds especially true if the team falls a few dollars short of a multimillion-dollar goal. Top performers end up feeling short-changed and weaker reps face backlash. Instead of team SPIFs, consider an incentive that applies to everyone who exceeds quota or another target. 

Leveraging Technology for SPIF Management

If you’ve made it all the way here, you should feel fully prepared to implement a SPIF that motivates and rewards your reps. Thank you for joining us!

Our last recommendation is to partner with a tool like QuotaPath to make SPIF management seamless and adaptable to your process.

In doing so, you’ll take advantage of:

Try QuotaPath’s free commission tracking software in a trial experience. Or, schedule time with a member of our team to learn how to optimize your entire compensation process. 

Revenue operations, commonly known as RevOps, is more important in today’s market than ever before. 

As buyers have shifted buying behaviors to conduct their own research and trial a product before even speaking to sales, companies have had to adjust. And one of the bigger adjustments over the years has been the rise of RevOps. 

What does a RevOps person do? RevOps aligns the entire revenue team by delivering data and visibility into a business’s more important metrics and processes. Then, they leverage their findings to improve efficiencies and drive revenue predictability according to Clari. In fact, SaaS companies with RevOps practices have reported the following increases in productivity and outcomes:

• 100% to 200% increases in digital marketing ROI
• 10% to 20% increases in sales productivity
• 10% increase in lead acceptance
• 15% to 20% increases in internal customer satisfaction
• 30% reductions in GTM expenses

So, it’s understandable that RevOps has rapidly risen in popularity. For example, job opportunities for RevOps-related job titles increased by 300% over the past 18 months. 

Plus, 41% of surveyed companies in Revenue.io’s recent study reported having an in-house RevOps function, a stat that’s up 15% since 2021. Another 11% of companies said they plan to introduce RevOps in 2023. 

When is it time to add RevOps?

Not sure if your company is ready to jump on the RevOps bandwagon? Here are some indicators that it’s time to launch your RevOps practice:

• You have a goal to drive transparency and accountability at scale across your organization.
• Your revenue targets across Sales, Marketing, and Customer Success aren’t aligned.
• Key business metrics across departments don’t match up.
• You’re experiencing continuous internal strife and conflict leading to finger-pointing and mistrust.

If that sounds like your organization, read on for best practices in developing your RevOps foundation, scaling your practice, and learning from some of the best SaaS companies that adopted RevOps early on. 

Building a foundation for RevOps

Every successful RevOps function shares three key elements in common. These include assembling a cross-functional team, setting RevOps metrics to measure success, and establishing repeatable processes. 

Let’s take a look at each of these.

Assembling a cross-functional team

RevOps is about creating alignment across your customer-facing departments like Sales, Marketing, Customer Service, Renewals, and Product. 

When these teams are well aligned:

• Sales can easily recognize the right customers for your products
• Marketing can attract and retain the right customers
• Customer experience is excellent
• Operations can put the right tools, systems, and resources in place

When strongly aligned, you’ll see shared goals and objectives and consistent cross-functional communication and collaboration on go-to-market efforts.

Setting RevOps metrics

Once you’ve aligned your customer-facing teams, you’re ready to begin tracking metrics that are essential to your success. This enables you to have better visibility into your RevOps performance, identify potential issues, and give you time to adjust accordingly.

Commonly adoptedRevOps metrics your team should track include:

• Revenue: Measuring revenue looks different based on the business type. In SaaS, we typically track monthly or annual recurring revenue (ARR).
  
• Revenue retention: Gross revenue retention and net revenue retention have started to replace ARR as the most important metrics in 2023 when predictable revenue trumps “grow at all costs.” Measuring revenue retention provides insights into the success of Sales and Marketing processes such as whether you’re:
  • Targeting the right customers
  • Pitching the right way
  • Onboarding new customers effectively
  • Providing sufficient support to customers experiencing problems

• Customer acquisition cost (CAC): Ensure your CAC aligns with the customer lifetime value (CLV) of your product. For example, you wouldn’t spend $100 to acquire a customer with a CLV of only $20.
  
• Sales pipeline velocity: This metric tells you the average time from lead to paying customer. However, pipeline velocity is not measured in time but in revenue. You can calculate sales pipeline velocity by multiplying the number of sales-qualified leads (SQLs) in your pipeline by the average deal size. Then multiply that by the overall win rate expressed as a percentage and divide by the length of the sales cycle. High pipeline velocity is an indicator of close alignment between your sales and marketing teams.
  
• Customer churn rate: This is the percentage of customers who stop paying for your product in a designated amount of time. This is often an indicator of how well customer support is performing. Average churn rates vary from 4.75% to 7.55% depending on the industry, according to Recurly.
  
• Sales forecasting: Define how much individual sales reps and your entire sales function will sell in a designated time period. This is often monthly, quarterly, or annually. Historically sales created relatively unreliable forecasts that ignored critical factors like marketing spend, customer lifetime value, and customer churn rate. So, it’s best that your RevOps team create these forecasts, track progress against them, and adjust accordingly.
  
• Renewals, upgrades, and cross-sells: the more renewals, upgrades, and cross-sells you attain, the greater your customer lifetime value will be. This translates to a better budget for customer acquisition to help you hit your growth goals.
  
• Conversion rate: this is the percentage of leads who advance through the sales process and become paying customers. This figure alone doesn’t tell you much but it is a valuable indicator of the effectiveness of your sales and marketing efforts.

Recommended Reading: Who Should RevOps Report To?

Establishing processes

RevOps is tasked with removing silos between departments, especially Sales, Marketing, and Customer Service to create a cohesive customer journey. 

As silos are removed, inter-departmental processes throughout the revenue cycle need to be established to streamline operations and provide transparency. These might include how to hand off leads between Marketing and Sales or how to prioritize customer support requests.

Scaling your RevOps practice

Whether you’ve yet to start your RevOps journey or you currently have a team of one, let’s look at how to scale your RevOps practice.

How do you structure a RevOps team?

RevOps is intended to unify all revenue-generating operations. It encompasses four main functions:

1. Operations experts: Leads high-level strategy and makes sure GTM teams have what they need to function efficiently. This includes tools insights, processes, and content.
2. Enablement specialist: Responsible for training GTM teams on things like proper messaging about current and new product features and relevant use cases.
3. Data analysts: Review and translate data to understand revenue performance and how to improve it.
4. Tools management technical owners: Manages all software and technical tools. These team members make decisions about tools, train GTM teams on their use, and oversee APIs and integrations to ensure they are functioning properly.

Many organizations start with only one RevOps person, typically at the director level, who oversees these functions. Then, as the business scales, they begin to grow their Revops team.  

To expand your RevOps team, start by looking at your internal staff to identify current team members you can shift into these functions. Then, fill in the gaps by hiring additional staff as needed.

Key RevOps roles for your organization include:

Chief Revenue Officer or Head of RevOps: Typically reports to the CEO and works collaboratively with heads of sales, marketing, and customer success. This role oversees the unified strategy of the revenue business.

Sales enablement manager: Arms sales with the knowledge, content, and training needed to effectively advance sales through the pipeline to a successful close.

Systems administrator: Responsible for knowing all the ins and outs of the tech stack, managing integrations, developing new processes, and migrating data as needed.

Business analyst or sales analyst: A data analyst who understands and tracks RevOps metrics. This role knows how to leverage insights from metrics to identify ways to improve the efficiency and productivity of revenue teams.

Fractional hiring is also a possible solution if you don’t have the budget or a long-term requirement for a role. It prevents you from hiring someone short-term only to turn around and lay them off. Plus, it saves time by enabling you to add someone quickly who can hit the ground running without a long onboarding period.

Investing in technology and automation to streamline processes

Once you have established product-market-fit and go-to-market processes, it’s time to build your RevOps tech stack. 

As your company grows, your tech stack should evolve accordingly. Here’s an overview of the progression from the seed stage through series C funding:

Seed stage: At this point, you are likely closing your first 10 customers and only need the basics like CRM, proposal software, automations, a payment platform, and accounting software.

Series A: Acquisition of new business while scaling existing customers is your focus here. So, potential additions to your tech stack include platforms for sales engagement, a data provider, a customer success platform, commission tracking, quote configuration, and an eSign platform for contracts.

Series B: As your sales team expands, your focus is on standardizing processes as you grow your team. You may also be approaching more enterprise prospects, creating the need to configure more complex deals. Potential additions to your tech stack at this point include sales intelligence and upgrades to some of your prior technology selections.

Series C: By now your sales team likely consists of more than 30 team members divided between new business and current customer expansion. This is where you need to focus on a stack that helps you ensure standardization while being flexible enough for upsells and various renewal situations. Again, this is where you start upgrading some of your prior technology selections to meet your requirements as you scale.

We also found a great tech stack cheat sheet that gives you more details of potential technology to meet your needs.

Developing a culture of continuous improvement and learning

RevOps success requires a culture of continuous learning, adaptation, and improvements. In practice, this takes shape by constantly tracking and analyzing data to identify ways to improve revenue operations performance.  In doing so, you’ll be able to diagnose weaknesses and improve outcomes that allow you to keep pace as market conditions change.

Companies with successful RevOps practices

Who can you look to in the industry as a RevOps best practices example company? We sourced a few below, including us!

At QuotaPath, we have leveraged RevOps to accelerate growth. It started when our CEO, AJ Bruno, hired Ryan Milligan for the RevOps role. At the time, we had 40 employees. Ryan started as a SalesOps leader with a MarketingOps and SEO background but quickly shifted to a more centralized RevOps role.

The combination of SalesOps and analytics allowed the company to implement RevOps easily. 

According to Ryan, “The numbers are the numbers. We can’t change those numbers unless we start to think about the activities that drive the objectives, the results, and change those.”

AJ and Ryan conduct business reviews weekly where they assess the funnel from top to bottom. Ryan records information about the metrics and shares them with first-line managers so they can come to the meeting prepared with questions and ideas for continuous improvement.

Finding the right stack of tools and RevOps allows us to ensure we’re getting the most out of what we are using or make adjustments accordingly.

AJ said RevOps has been a key ingredient to QuotaPath’s growth.

Carbon Black, a cybersecurity company, began its RevOps journey to accelerate growth during a transition from an on-premise to a cloud business model. According to Daniel Carpenter, their RevOps leader, Carbon Black leveraged data science for RevOps success. It helped them drive productivity improvements for lead and account prioritization to facilitate prospecting and support Customer Success and renewals with predictive churn insights.

Carbon Black leaders have said they were glad to centralize their go-to-market operations functions under one leader. Although a challenge to finalize, the results in doing so have facilitated better process optimizations across RevOps. 

They also said that the enablement team played a critical role in driving the transformation from cloud-selling motions that their sales team and partners needed to learn.

Overall, Carbon Black believes their RevOps team was essential to meeting both its growth objectives and its speed of transformation during that transition.

Okta was an early adopter of the RevOps model, too. Jake Randall started out in finance at the company’s inception.  As the company started to grow, it embraced the RevOps approach even though it was yet to become popular.

Jake told Demand Gen Report, “A RevOps structure ensures you have a common understanding and agreement across the entire company for your go-to-market strategy, execution, and measurement to better drive growth.”

When Okta was a startup of around 50 people, they looked to optimize the entire buyer’s journey. This would enable them to grow as efficiently as possible.

As they built out their unified operations team, they made sure all operations roles had functional alignment with their business units to support them effectively. But the operations team was also a standalone function and team.

Jake summed things up by saying, “For Okta, RevOps is simply how we do business. And it’s the foundation from which a small startup became a $500M+ public company that is now delivering 50+% year-over-year revenue growth!”

Time to grow your RevOps practice

There’s no doubt that RevOps is essential to consistent revenue growth, efficient operations, and superior customer experience. Whether your RevOps journey is yet to start or you have a team of one, now you have a guide to help you scale.

Build a firm RevOps foundation by assembling your cross-functional team. Select essential RevOps metrics to track. And, establish processes to keep your organization on track.

If starting from scratch, establish the role of RevOps by identifying or hiring one person who can fulfill the four main functions of RevOps. If you’re looking to expand your team, look internally first before adding to your headcount.

Remember to select purpose-driven technology tools to meet your needs. Tracking and analyzing metrics is essential to your RevOps practice success. As is a culture of continuous improvement and learning.

About QuotaPath

QuotaPath supports RevOps, Sales, and Finance professionals by simplifying the process of sales compensation. From comp plan design through sales commission payments, QuotaPath partners with growth-stage companies to align teams over earnings and attainment visibility. To learn more, chat with our team or try QuotaPath for yourself with a free 30-day trial.

In a previous blog, our Chief of Staff Graham Collins shared 5 sales compensation plan examples. This article included a sales manager compensation plan sample featuring a single commission rate that applies to all deals, regardless of team attainment. 

It’s perfect for a startup that just hired its first sales manager. The plan is logical, simple in nature, and makes room for new complexity within the plan as the organization grows.

Now, for teams looking to go beyond a single rate, we outline two more sales manager compensation plans to consider. But first, let’s review some terminology since the following compensation plan templates introduce new compensation levers.

Sales manager comp plans definitions

Accelerator: Our first plan below includes accelerators. An accelerator is a commission tool that rewards salespeople with a higher commission rate for exceeding a certain sales quota or target. 

For example, a salesperson might earn a 10% commission on sales up to $100,000, but receive a 15% commission on sales above that amount. The higher commission rate is known as the accelerator, and its purpose is to incentivize salespeople to exceed their sales targets.

Attainment point bonus: In our attainment-point bonus compensation plan example below, sales managers earn a fixed dollar amount for every percentage point closer to the 100% target.

For example, if the bonus rate is $100, and the team reaches 95% of the goal attainment, the manager would earn a bonus of $9,500.

Buffer: Sales manager compensation plans usually include a buffer to ensure your manager is not held to the entire team’s performance. This measure accommodates team absences, underperformers, and overperformers. 

So, instead of setting the sales manager quota to 100% of the team quota, you would hold your managers to 80%-90% of their team’s collective quota. 

Cliff or commission floor: A cliff/commission floor in variable compensation requires the commissionable employee to earn a minimum amount of quota or revenue before being eligible for variable pay. We see cliffs used in conjunction with other commission structures, such as accelerators or tiers, to provide a balance between guaranteed income and incentivizing high performance.

While we don’t recommend cliffs for sales compensation plans at the rep level, we do at the leadership level. 

What does a sales manager position pay?

Next, let’s look at a few data points as far as sales manager salary and on-target earnings (OTE). 

Senior Sales Manager salaries

According to 2023 data from Bett’s Recruiting, senior-level sales managers in tech earn a salary between $140,000 and $200,000 annually. When factoring in commission potential, those numbers increased to $280,000 and $400,00 for total OTE. These numbers will vary by experience, region, and size of the company.

First-time Sales Manager salaries

The same report showed that first-time sales managers make a salary between $120,000 and $160,000.

“However, this number can vary based on experience, company size, and even location in some cases. For example, an SM with more than three years of experience will see $140,000 – $200,000 in almost any tech hub region” — Bett’s Recruiting. 

Pay mix

Pay mix refers to the ratio of base salary and variable pay that makes up an OTE. This is usually listed as a percentage breakdown with a base salary listed first.

For sales managers, the two most commonly adopted pay mixes are 50/50 or 60/40. 

Sales manager compensation plan: Commission with Accelerator

One of the most widely implemented sales manager compensation plans is this structure, Commission with Accelerator. 

Under this commission plan, the manager earns a fixed commission rate on every sale by the manager’s team. Then, once the team surpasses 100% of its quota within the quota period, the manager’s commission rate increases for every subsequent deal.

Note: the commission rate should change with the size of the team. Meaning, as hiring increases, someone departs, or someone is promoted, the commission rate should fluctuate with those changes. 

Typically, leadership adjusts the commission rate on a monthly or quarterly basis to account for team changes. Failing to adjust the rate accordingly can significantly impact the manager’s earning potential.

Lastly, consider adding a “cliff” to this plan. A cliff or a commission floor ensures the sales manager does not receive a commission. In the example below, the cliff is cleared after the team achieves 50% of the target.

Sales Manager Compensation Plan: Bonus

Next up is the bonus-based sales manager compensation plan. This structure pays a pre-determined bonus for each attainment point tied to the manager’s team’s total quota attainment progress. 

It’s like the Single Rate Bonus Plan for account executives but for leadership.

Under this plan, the Sales Manager’s bonus percentage is equivalent to their team’s quota attainment percentage. For example, if the team hits 93% of the quota, the Sales Manager will earn 93% of their bonus (at $250 per percentage point). That’s regardless of the size of their quota.

Like our other comp plan template above, this structure includes a manager buffer of 90%. 

However, with this sales leadership compensation plan, the bonus for managers stays the same regardless of team size. As the team grows or scales back, the quota may change, but the per-attainment bonus remains the same.

Which plan should you use?

We can’t decide for you, but we do have some pros and cons to each plan. 

The first plan with accelerators includes a fixed cost of sales and is easy to understand. 

However, because the plan fluctuates with the team, it will require changes throughout the year. Additionally, this plan can affect earnings potential if it remains unchanged and may send your manager in a hurry to hire to maximize earnings potential. Because, in theory, the more people the manager has on their team, the higher the manager can make.

Meanwhile, the sales manager bonus structure promotes consistent earnings across periods and can account for high variability on the team. But, your leader may push back against hiring plans as it benefits them most when the team is smaller. This plan is also a bit more complicated to understand how individual deals impact earnings. 

Compensation resources

For additional compensation plan templates, visit Compensation Hub. This free and ungated resource includes 20 of the most-trusted comp plan templates. With 9 adjustable variables, build a plan aligned and fit to your business. 

When you’re ready, send the plan for review internally, then save it directly in QuotaPath to kick off a 30-day trial of our automated commission tracking and sales compensation management solution. Sync your CRM in a few steps and eliminate the need for manual tracking. 

We’ve found our most successful customers have between 20 and 250 employees with plans to grow, that use a CRM, like HubSpot and Salesforce, to track deal data, and that are looking for an easier way to manage commissions. Is that you? Start a free trial today.  

This blog on paid parental leave explores how to adjust sales compensation plans and keep pipelines warm to better accommodate new parents in sales.

The lowest salaries at a company usually involve the sales teams’ base pay, with their variable pay balancing out the difference (and beyond).

It’s that variable pay that reps often accept positions over. In fact, many companies offer sales on-target earnings (OTEs) that far outrank their neighboring department peers’ salaries.

That’s all great, and to be expected, until we explore the murky waters of parental leave policies for individual contributing sales reps.

Most leave policies that we see only offer base salary pay for new parents who take leave.

“Every other employee at the company is getting their full normal pay while on leave, and their manager and the business accept that output for that team will decrease,” wrote Co-Founder and CEO at Parentaly Allison Whalen in her blog.

“And yet, most companies still will only guarantee their sales reps just their base pay during this time, and often, the business will expect the sales team to hit numbers as though the sales rep isn’t on parental leave.”

Seems unfair, no?

The gender gap widens

Not only would most people consider this unfair, but base-pay leave plans tend to hit women reps the hardest.

Expecting dads, for example, historically have taken on the secondary caretaker role. As a result, leave policies that pay only the base salary haven’t caused much of an issue.

At least that’s what the new mom of two Olivia Millard has observed throughout her 10-plus years working in SaaS sales.

“In my experience, men who have had children while working in sales typically take the minimum amount of leave,” said Olivia. “They have a child, keep their pipeline, come back early, and end up not sacrificing any deals.”

Women, however, more often assume the primary caretaker role and take full leave, as a result.

This leaves moms in sales with less leave pay than their colleagues from other functions and puts them in tough spots upon their return.

Empty pipelines

For instance, in addition to earning lower leave pay, new parents — moms especially — who take the full leave, often return to empty pipelines.

“At most companies, when a sales rep returns from parental leave they have a normal quota instead of a ramp quota. So they return to work with limited to no pipeline, yet are paid and evaluated against a fully productive AE quota,” wrote Allison.

This happened to Olivia when she returned to work after leave with her first child a few years ago.

“I came back to a full quota and hardly any opportunities in my pipeline,” Olivia said. “I felt like a failure starting from ground zero.”

As a salesperson, that’s the last feeling you want to have, especially when trying to navigate the added stress and pressure that comes with having a child.

“All you want to do is win in sales. You don’t want to be at the bottom of the leaderboard just because you were out on leave,” said Olivia.

Perhaps this is why so many women leave sales in pursuit of other roles, such as account management or customer success.

But for Olivia, who chose a career in tech sales, she didn’t want to bump to another function.

“The world is changing. Women coming up in sales are now in their 30s. They’re in their prime. They’re experts,” Olivia said. “They want fat paychecks and a family, too. How can companies make it sustainable for us to have a career in sales and a family?”

So, Olivia and other motivated people at her company did something about it.

The solution

They began by advocating for change in bite-size increments, setting out clear near-, mid-, and long-term goals. This allowed them to prioritize where to compromise and what leaders to loop in. It also helped them stay calm, Olivia said.

“We had to remove ourselves emotionally and do a lot of benchmarking with other companies who resembled our organization.”

“Then it’s just a sale,” Olivia said.

The results of their presentations, advocacy, and research led to changes that the company solidified.

Those changes included:

• • Reps on parental leave would earn 60% of their OTE while out

• • Upon return, reps may work 4-day weeks

• • Distributing pipeline opportunities based on the sales cycle stage and splitting a percentage between the rep who takes it on and the rep who is on leave (ie: the further along the deal, the larger the percentage to the rep on leave)

• • Ramping quota upon return from leave (based on sales segment)

• • Codifying the new plan to avoid misinterpretation and grey areas

To learn how Olivia advocated for and made impactful changes at her organization around paid leave and sales compensation, we asked her a few questions.

What advice would you give others looking to change sales paid parental leave policies?

Olivia: Do not do this alone if you don’t have to, and treat it like a professional process like you would a sale. The more we professionalized it, the more progress we made. Start by finding your champion within your organization. Identify the motivations of those who are at the top and how much it will cost.

For us, that person was from human resources with the title Employee Advocate. She did her homework, brought it to our VP of Compensation’s attention, invited other leaders to be a part of it, and worked across divisions to get buy-in.

How did you go about benchmarking?

We approached benchmarking by taking a ‘who we want to be in the future vs. who we are as a company right now’ perspective. Who do we want to attract to work here? Do we want to compete with the larger tech companies for talent? As such, we looked into the policies at Facebook, LinkedIn, and Google, by connecting with people within our own network or finding them online if available.

How should leaders at companies approach rep-level paid parental leave?

You don’t have to be perfect as a company, but you have to be willing to grow and evolve with employee needs. Be willing to listen. Be willing to change. That’s why I stayed. A company that is willing to grow with me is what I look for.

Start by holding open dialogues with people who have already gone on leave. Talk to managers. Identify short-term solutions and rank the least expensive to most expensive solutions. Be willing to compromise on both sides.

Paid leave sales compensation plans

In addition to Olivia, we reached out to our Sr. Director of RevOps Ryan Milligan for leave best practices compensation strategies. He suggested the following when designing sales compensation plan parental policies.

1. 1. Evaluate how the person is compensated today.
      Review the drivers of their sales compensation and what percentage of their OTE is base salary versus variable pay. How much do sales reps make? And, how much of their straight commission plans do they have control over?

1. 1. Plan for what happens while they are on leave.
      Have a clear plan in place for what happens to the reps’ deals and incoming leads while they’re out. Who will keep them warm, and how will ownership of the deal split when it closes?

1. 1. Determine how progressive or conservative your organization will go.
      The most conservative play would entail paying your reps base while they’re gone. Reversely, the most progressive policies pay full OTE. Maybe meeting in the middle works best by offering 60% OTE each month the person is out, like Olivia’s company.

1. 1. Prepare for their return.
      Keep those pipelines warm. Don’t have your reps feeling like failures on their first day back because they’re at the bottom of the leaderboard. Close deals and continue to feed and move prospects through the funnel.

      Even better, deploy ramp-up plans so that they have a fair shot at achieving OTE by year’s end.

1. 1. Communicate your comp plan leave policies
      Lastly, as we suggest with any comp plan, communicate your policies. Explain the “whys” behind the policy and show the math to everyone on the sales team.

Want some more help? We just went through structuring our own comp plans to support parents on leave. Reach out to kelly@quotapath.com and we’ll put you in touch with someone from our team to share our experience and offer suggestions.

About QuotaPath

QuotaPath provides sales compensation and commission tracking sales enablement software for scaling GTM organizations. Pairing an easy-to-use user experience with a highly technical backend, QuotaPath is the only solution fit to get Sales, RevOps, and Finance on the same page.

To see how we fit into your tech stack, check out our integrations page. And, to learn more, book a time with a member of our team today.

This blog, written by Cody Short, details commission rates by industry, setting commission structures, and more. 

All companies need a high-performing sales team. Sales helps a company increase its profitability and plays an integral role in the growth of the organization. 

But first, you need a talented team of people who can sell the company’s products. Easier said than done, right? 

A lot of businesses, especially early-stage startups, struggle to find and keep a loyal pool of top sellers. And in 2023, keeping those top sellers is more than ever. Mass layoffs across the tech industry and the previous year’s 50 million people who voluntarily quit their jobs have made matters increasingly more challenging. Plus, inflation in 2023 remains high at 6.04% — although that’s about 2% lower than in 2022.

However, having the right variable compensation plans in place can help with your sales team retention strategies.

It’s important to pay people well so that they feel like a valuable part of the team and remain loyal to the business. Many sales reps base their career decisions on the amount of money they can make at a company. 

So, how can you set sales commission rates that attract and retain talent? We’ve outlined a few commission structure best practices below.

Importance of Transparent Commission Rates

First, let’s start with why it’s important be upfront about commission rates.

Transparent commission rates foster trust between sales teams and leadership, ensuring everyone understands how their earnings are calculated. This clarity helps motivate salespeople, as they can directly see the link between their performance and rewards. Transparency also reduces confusion or disputes, saving time and improving morale. Lastly, it supports equitable treatment across the team, aligning compensation with goals and fostering a fair, high-performing culture.

Top Commission Rates and Bonus Types to Consider

A sales commission structure determines how much variable pay a company wants to compensate its sales teams.

A typical sales commission structure sets the rules or conditions for how a sales rep earns commissions or bonuses according to their sales compensation plan. The structure differs from the sales compensation plan model in that the plan itself outlines the sellers’ entire compensation package. This could include the base salary, commission rates, and on-target earnings (OTE).

There are about 10 commission structures to consider, in addition to determining when reps get paid, on what, and how much in the actual comp plan.

But what matters most is that the structure and compensation strategy complement one another and motivate and reward positive selling behaviors.

How Commission Rates Vary by Sales Role

The first commission rate we’ll cover includes the single rate, flat rate, and fixed rate. All three terms mean the same thing, which we define as a set earned commission based on a single percentage of the deals that close. By the way, the standard commission rate for SaaS sales is 10%. To set a commission rate, check out this blog.

Instead of a single rate, a company can offer a bonus. Bonuses incentivize sales reps by paying out a pre-determined amount after they meet or exceed a goal. A company can determine the bonus payout in several ways, such as the following:

Milestone Bonus: This bonus is awarded for achieving set goals for each given milestone (monthly or quarterly) within a year that is set by the company. Example: If you hit your quarterly quota you will get a $5,000 bonus. 

Ranking Bonus: This bonus is awarded based on a final ranking within a group. Example: If you’re the top seller for the quarter, you will get a $1,000 bonus. 

Bonus on Multiple Quotas: This bonus is awarded to the person who achieves multiple quotas. Example: If you hit your new business and retention quotas you will earn a $2,000 bonus. 

Accelerators, which reward sales reps for exceeding their quotas or goals, mark another way to incentivize reps. There are two types of accelerators:

Accelerated Rate Tiers by Attainment: The rates can change based on quota attainment or the amount sold. Example: 20% of any deal sold until achieving quota. When the quota is reached, you can earn 25%. 

Accelerators with Multipliers: Rates change based on achievements and multiply by other criteria. Example: You can earn 15% on a 1-year deal, 20% on a 2-year deal, or 25% on a 3-year deal. 

Usually, a company will offer a comprehensive compensation package that will include most or all of the things mentioned above. According to Mapmycustomers, nearly 50% of businesses offer a base salary plus commission, while only 25% offer a base plus a bonus. 

Commission Rates by Industry: A Detailed Breakdown

Curiosu what the top-paying sales industries are? We found some sales commission benchmarks by industry, according to mapmycustomers and SmartWinnr. 

The section of the table featuring only commissions is brought to you by data from Indeed.

Different types of compensation structure

There are more than three compensation structures, but these are the most common:

Commission-only sales compensation plan

A sales rep earns their entire pay based off of what they sell. This type of compensation is common in B2C transactions like real estate, auto sales, and insurance plans. Some sales reps stay away from this type of compensation plan due to companies usually don’t invest in developing the rep’s talent nor can the company forecast long-term business expenses.

Base salary plus commission sales compensation plan

This plan is probably the most common. It’s a healthy balance of giving the rep a salary to live off of, but also giving them an incentive to reach their sales quota. Companies who offer this plan tend to have a better forecast of their business expenses.

Base salary plus bonus sales compensation plan

This plan is most effective for reps who surpass their quotas or preset targets. This plan is also not exclusive to sales reps but also other roles in a company that assist sales reps in closing deals. This allows a company to remain predictable in their forecasts but still give their reps an incentive. 

Commission rates by role

In addition to industry, commission rates by role will vary as well. For instance, a sales rep typically earns the highest percentage from a sale, while a sales development rep, account manager, and sales director receive much less. Let’s take a look at the commission rates by role below.

Account executive commission rates

The standard commission rate on a deal for an AE is typically 10%. Most sales compensation plans will also adopt accelerators to motivate and reward overperformance. Check out this AE comp plan example and template that includes a 10% base rate and an accelerator.

Sales development rep commission rates

SDR comp plan examples might include a means to earn a commission if an AE goes on to close/won a lead the SDR generated. Called the Closed Won Commission model, SDR commission rates will usually fall between 3 and 5 %. 

Account manager commission rates

We’re noticing a shift in commission rates on account manager plans this year. Previously, 5% was the most common commission rate on upsells. However, now that organizations are moving from a “grow at all costs” mentality to a “predictable revenue model,” we’re seeing upsell commission rates closer to 10%. 

Sales Director commission rates

Since sales directors usually earn a commission from every single deal a member of their team brings in, commission rates for sales directors float between 3 and 5%. 

How the Right Commission Structure Can Attract Top Sellers

Thanks for learning with us today about commission rates and comp structures!

There’s not a perfect way to pay out a commission or bonus, but there is a way to make it fair for everyone. QuotaPath can handle nearly all sales compensation plans. So, regardless of the sales commission rates by industry, our commission tracking and compensation management software makes it easier for everyone to understand their sales incentive programs. 

To learn how our platform helps teams maximize revenue through automated commissions, book a time with our team today. 

PS: If you send us your comp plan ahead of time, we’ll map it out for you in QuotaPath and show you over a live demo. 

FAQ

What is a typical sales commission?

A typical sales commission is a percentage of the revenue generated by a sales rep, commonly ranging from 5% to 20%, depending on the industry, role, and sales model.

How much does a sales rep earn?

A sales rep’s earnings typically consist of a base salary plus commissions, with total compensation varying widely by industry, role, and experience, often averaging between $50,000 and $120,000 annually.

How to find commission rates?

Commission rates can be determined through industry benchmarking, analyzing competitor plans, and aligning rates with your company’s financial goals and sales objectives.

What are commission rates?

Commission rates are the percentage or fixed amount of revenue or profit paid to sales representatives as an incentive for achieving specific sales results.

How do you determine a fair commission rate?

Fair commission rates are determined by balancing industry standards, role-specific responsibilities, profitability, and the need to incentivize desired sales behaviors.

How often should sales commission rates be reviewed and adjusted?

Sales commission rates should be reviewed annually, or more frequently if business goals, market conditions, or team feedback suggest misalignment or opportunities for improvement.

This is a guest blog written by our friends at Weflow.

When your sales team is struggling to hit performance metrics, one of the possible culprits is a lack of transparency. 

A transparency problem isn’t always obvious. It might look like missed team goals, people using old scripts, or a lack of clarity on team priorities.

As a sales leader, you find it frustrating when your sales reps aren’t on the same page — but it’s also your job to make sure that the information flows.

Sales teams with great transparency are more accountable. They have healthier cultures, better retention, and an easier time hitting their sales goals.

These things happen because a transparent team shares information freely and openly. There’s a higher level of trust, both between teammates and between sales reps and leadership. An environment like this squashes gossip in favor of honesty, and reps find it easier to ask for help.

Improving transparency in your team is a gradual process.

Here’s how to get started.

Start with top-down transparency

If you want your sales team to be transparent with you and with each other, the first step is for you to be transparent with them.

Top-down transparency takes courage and trust. Leaders often hesitate to share details with their teams, especially when the information isn’t ideal. 

However, it’s important for your entire team to have some visibility into financial performance, company goals, and business outlooks. Remember that your sales team members are the people who can pull together to help you achieve tough goals, but they can only do that if they know it’s needed.

Senior leadership should regularly share updates on company performance and financial outlooks with the entire company.

From a department level, each team should have specific goals and performance metrics to track their progress. Sharing OKRs makes the progress toward these goals transparent. Plus, it gives every person a meaningful stake in the company’s success or failure. That’s a big motivator, especially for performance-driven salespeople.

Build a Sales Funnel

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

Calculate Now

Make accurate data accessible to everyone

You probably store a lot of data in your CRM or other sales software. All of that information can and should be visible to everyone on the team.

Don’t just look at team reports yourself and expect your sales reps to operate only in their own pipelines. Show your reps how the team is doing by making that data transparent. It will help them gauge the team’s performance, judge how close you are to team goals, and ultimately close more deals.

Keep in mind, though, that CRM data is notoriously inaccurate for most sales organizations. Updating a CRM like Salesforce is a manual process, and if you’re relying on reps to update those contact records on their own, your data is almost certainly incomplete.

You can use a tool like Weflow to automate data entry and keep your pipeline data current and accurate. Weflow automatically syncs your sales reps’ activities, including emails, meetings, and calls to Salesforce.

This ensures all relevant data ends up in your CRM instance. From there on, you can use Salesforce reporting tools to format and share the data with your team.

By automating the data flow and publicly displaying your team data, you’ll help motivate your team to keep their records up-to-date and use that information as a valuable sales tool.

Implement a sales leaderboard

One way to display team data effectively is with a sales leaderboard. Using a monitor or screen that’s visible in your office — or a Slack channel or link if your team is fully remote — the leaderboard is a smart way to create more accountability and celebrate wins.

To make your leaderboard as effective as possible, keep it updated either in real-time or on a regular cadence. Post the results somewhere highly visible and easy for everyone on the team to see.

Your leaders should be offered compelling rewards and incentives to help motivate people to strive for top performance. The recognition is nice, but that alone is probably not enough to motivate your whole team. Offer juicy rewards for top performance like cash bonuses, physical prizes, catered lunches, or other relevant perks.

Whatever reward system you choose, make sure that the rules are clear and that every team member knows exactly what to expect if they top the leaderboard. An overly complicated system can be demotivating instead, so keep it simple and transparent.

Make compensation plans transparent

Just like your leaderboard system will be less effective if it’s confusing, your compensation structure can also be a barrier to performance if you’re not transparent in how you pay.

From keeping your hourly rates a secret to failing to publish your quota-based bonus structure, a lack of transparency in pay seriously harms your sales team’s trust in you.

It’s hard to push for better performance if you suspect that your coworker makes more money for the same amount of work.

Transparency in compensation forces you to offer equal pay to employees who share the same job title and seniority level. This eliminates the risk of a team member finding out that someone makes more than they do, fostering resentment and distrust.

It also requires a clear, structured bonus plan that keeps you and your entire team accountable for performance-based pay.

This might sound like a scary change to make, but consider this: 

For junior representatives who haven’t yet moved up the ranks, they can see exactly what kind of earning power they’ll have if they meet their goals and stick with your company. This is a way more attractive option than shopping around for a different entry-level sales job, so it’s great for employee retention.

More senior team members know that their pay is based entirely on their performance — not their relationship with the boss, their negotiation skills, or their popularity. If they want to earn more, they know exactly how to do it.

You can quickly improve your compensation transparency with tools like QuotaPath.

QuotaPath allows you to design custom compensation plans to suit your team structure and goals.

It streamlines the calculation and tracking of commissions to save you time, and your team knows that those calculations are fair because they can easily see the payment structures for themselves. Plus, it automates payments.

Boost transparency to boost performance

Building a transparent sales team can feel like a challenge, but it’s well worth the effort. As you improve transparency, you also boost trust and give your sales reps the tools they need to perform at their best.

Remember, transparency starts at the top. Leadership must be the first and most consistent practitioners, then your reps will gradually start to follow your example as they build trust. 

Stick with it. You’ll be glad you did.

About the author:

Catherine Solbrig is a well-rounded content marketer with more than 12 years of experience. Her work has been published by Automattic, GoDaddy, AOL, the American Bar Association, and many more high-tech companies.

We’re in a challenging market with two bank failures and a US recession forecasted by 58% of surveyed economists. 

As a result, businesses are changing their key business metrics over previous years to accommodate for the approaching market downturn. That means less attention to grow-at-all-costs and more on predictable revenue, such as churn rate and customer acquisition cost.  

So, now that we’re deep into 2023, how’s it going? Are you meeting this year’s most important metrics?

Your comp plan’s success can act as a way to gauge this. Below, learn how to assess your comp plan’s effectiveness.

What to look at

A successful comp plan motivates your sales team to behave in a way that helps your business meet its goals and objectives. But there are times when it’s necessary to change sales compensation plans mid-year.

An economic downturn marks one of those times when numbers across the board might be less than desirable 

So, take a look at your comp plan to see if it supports your most important Q2 initiatives.

Here’s what you need to look at.

Are your compensation plans aligned with your most important business metrics?

One of the biggest mistakes companies make around comp plan design is a failure to align the plans to the business goals. This is especially true as it pertains to key metrics,  such as gross revenue retention, gross margin, and customer acquisition cost.

If your comp plans do not incentivize your teams to move the needle on these, consider shifting them to do so. 

For example, if the company’s main metric focuses on growing gross revenue retention, the comp plans should align teams to drive GRR. To do that, you might offer accelerated commission rates on multi-year deals or when a customer signs from a segment that data shows have the highest retention rates (think: ideal customer profile).

Will your company hit your Q1 targets?

If yes, great! 

Not so much? How far off are you? If it’s way off, something likely needs to change, but not necessarily at the comp plan level. You probably need to step back and reassess your business goals. Then support your adjusted objectives with Compensation Hub to motivate behaviors that achieve those goals.

What percentage of your team has or is on pace to finish the quarter at goal?

We recommend that 80% of your team should hit their quotas. This level of attainment enables businesses to stay current with profitability and retention of sales reps.

If you’re well below 80%, take a look at the following.

First, identify the root cause of the problem. It’s likely not your comp plan, so what is it? A lack of leads? Closing skills? Motivation? Once you know the root cause, you can start to address it.

Then, check the math. Are the quotas and OTEs realistic? How did your team initially set these and what data was that based on? How does that data match today’s environment? If you set unrealistic goals without considering the economic landscape, your team is likely to fail and become discouraged. If this is the case, we recommend decreasing quotas.

Next, how are training and support? Your sales team needs to be trained and supported in order to succeed. Provide them with the resources they need to close deals, such as training on your products or services, or access to sales leads.

You can also add logo commissions and other SPIFs to encourage and motivate your team for quick wins.  

What’s the difference between the earnings and attainment of your lowest-performing rep and your highest?

Identify how big of a gap exists between your lowest and highest-performing reps and find out why.   If the cause relates to a plan or territory, you need to adjust your plans or territories to make them more equitable to everyone on your team.

How much in commissions are your reps actually making?

Do these commissions align with their on-target earnings (OTE)? If not, it’s time to make an adjustment so that it is more attainable. 

You’ve heard of tech jobs advertising $275K OTEs, but how many of the reps actually achieve that? Those who adopt this trickery will soon be saying goodbye to the top talent they misled. 

To check how realistic your OTEs are,  use our free Quota:OTE Ratio Calculator.

Are you paying high commissions even though your team isn’t hitting targets?

This may indicate that you need to add a commission floor to secure a minimum performance before reps begin earning commissions. In doing so, you motivate quota-carrying team members to hit targets while protecting the company from rewarding shortfalls in performance.

However, be careful with commission floors. If they are set too low, then what’s the point of having one? Reversely, setting them too high can discourage reps and cause sandbagging. 

What are your reps saying about it?

Getting feedback from your reps is essential when assessing the success of your comp plan. Otherwise, you end up making broad and often incorrect assumptions about what your reps care about. This results in bad comp plans that don’t incentivize your sales team.

Questions to ask your reps include:

• How motivated are you by the current structure
• How do you like it? 
• Can you explain to me how you’re paid? 

Evaluating the success of your comp plan is only the start.

3 compensation levers to pull if something needs to change

Now that you’ve assessed your comp plans, it’s time to mull over making adjustments.  Here are three compensation levers to pull if something needs to change.

Standardize plans 

When you standardize comp plans, everyone with the same quota has the same earning potential. You can do this by standardizing the commission rates, bonuses, and OTEs so that everyone has the same income potential. This is the best way to create transparency, trust, and equality around sales compensation.

Use our 20 compensation plan templates when standardizing. 

Add a commission floor for leadership and customer support/renewal teams 

While we don’t encourage commission floors or cliffs for account executive plans, we definitely recommend them for leadership and customer support and renewal teams. A commission floor incentivizes team members to hit minimum key targets while protecting the company from paying commissions for underperformance.

Add SPIFs or higher commission rates to incentivize the behaviors you’re hoping to drive across the business.

A SPIF is a short-term reward to motivate quota-carrying teams, like sales reps and sales engineers. You can leverage these bonuses to help close performance gaps toward company goals.. Some ways to add these to your comp plans include:

• SPIF on ideal customer profile (ICP) deals
• Add a bonus when a deal isn’t discounted
• Offer a kicker for early renewals
• Pay higher rates or SPIFs on products that generate the highest gross margins

These levers are a good starting point,  but it’s important to keep some compensation plan best practices in mind.

Comp plan best practices

These comp plan best practices will help prevent you from making any major mistakes while you finetune your plans.

• Avoid caps: For most sales reps, capped commission plans are a no-go. What if a rep crushes quota right out of the gate? With a cap, your rep isn’t incentivized to keep going.
• Tie your plan to measurable actions: Compensation plans should tie to measurable action. If you pay higher rates or bonuses on larger deals or longer contracts, track if your compensation adjustment inspired new selling behaviors.
• Standardize your plans: Everyone on the team with the same title should have the same compensation plan. This allows for everyone to be paid equitably.
• Test changes before adopting: To see how an adjustment will play out before implementing, test it. You can do this by running a SPIF, which is a short-term element within a compensation plan.
  • For instance, some SPIFs to test might include:
    • Different rates for different products — launch a new product, pay a higher rate on it
    • Different industries — you give an extra 5% on SaaS deals
    • Upfront payments — you want to see if your reps can get people to pay upfront, so you agree to pay them an extra 1% for Q4 if their customers do.
    • If it changes behaviors the way you intended it to, then add it to your next comp plan.
• Create a feedback loop with sales:  Meet with your quota-carrying team and ask for their opinion. 
• All changes should have a formal communication rollout:  This is essential to get buy-in. If your sales team doesn’t understand the plan and why it’s changing you risk losing your sales team. There are five main steps to a proper plan rollout:

1. Educate management on the plan first.
2. Senior management shares a high-level review of the new plan with the entire team.
3. Sales managers present a detailed review of the new plan to their individual teams.
4. Sales managers meet with each rep for a one-on-one plan review.
5. Plan verification where reps sign off on the plan to show understanding.

Follow these comp plan best practices to avoid any major pitfalls as you make adjustments to your comp plans.

Resources to help

Businesses have shifted their focus from growth at all costs to churn prevention and revenue stability due to market uncertainties. While you’re evaluating your most important metrics of the quarter, don’t forget to include an assessment of your comp plan.  

Start by looking at your plan to answer key questions that diagnose plan issues. Then make changes to drive desired behaviors by quota-carrying teams.  Keep the compensation best practices in mind to avoid major pitfalls as you finalize and implement your new plans.

Are you looking for an easier way to pull up real-time and forecasted attainment or earning at the rep or team level? Try QuotaPath’s free commission tracking software by signing up for a 30-day trial. 

Or, schedule time with our team to learn how to make mid-year adjustments easily by automating your compensation process. 

We created a library of compensation plan templates for you to use in order to simplify sales compensation design. With 20 adjustable templates, Compensation Hub is free to explore, modify, and share with your team.

Now, we’re sharing our most popular templates of the first quarter. 

To our surprise, after actively campaigning for more multi-year accelerator programs to promote longer-term contracts, neither the Single Rate Commission with Contract Term Multiplier nor the  Commission with Multi-Year Accelerators plans made the top three. (To see why we love these plans, see: 4 sales compensation best practices to help you for 2023, Multi-year deals are your most important play in 2023, and Is your sales comp plan fit for a recession?)

Instead, the Single Rate Commission, Commission with Accelerators & Decelerators, and Commission with Accelerators earned the top spots.

Below, we look at each plan and why leaders like them.

Single Rate Commission

A flat rate commission plan, also known as a single rate commission plan or fixed rate commission plan, pays a set commission rate on all deals. This rate remains the same regardless of quota attainment, different products, longer contract terms, or other variables. 

It’s a near-perfect plan if you’re a small team with one to two sales reps. Leaders and reps alike love its simplicity and directness.

“I want the simplest plan there is,” said Lori Richardson, Founder of Score More Sales and Women Sales Pros. “This one is very easy to understand, and you won’t spend hours analyzing it or trying to game it. This plan could be a great starting point for a lot of people.”

With this plan, reps can understand how they’re paid and, as a result, focus their attention on deals rather than how to game their comp plan.

Commission with Accelerators & Decelerators

This commission structure features a three-tiered system that motivates sales teams to achieve quota. And it does so by rewarding them with a higher commission rate on all deals beyond quota. 

The addition of a decelerator pushes reps to achieve at least 50% of their quota goal in order to begin earning their full base commission rate. Before reaching 50% of their target, the rep earns half of their base commission rate. 

Then, after passing 50% of their quota period’s attainment, the full commission base rate goes into effect. An accelerator, a rate that is 1.5x the base rate, then applies to all deals closed within the quota term after the rep reaches 100% quota.

While this plan adds complexity to tracking, Commission with Accelerators and Decelerators encourages reps to have a consistent flow of won deals throughout the quota period. 

“When a rep misses their number badly, it cascades upward,” said Pavilion CEO and Founder Sam Jacobs. said. “I think it’s pretty compelling when a 10% miss on a $20M business equates to $2M. That’s why I think having a baseline level of productivity and performance like a decelerator should be baked into the comp plan.”

Commission with Accelerators

Not a fan of decelerators? You’re not the only one.

Decelerators are a hot topic on our webinars with many citing that this comp plan mechanic actually discourages reps. 

If you’re in that boat, then consider our most popular compensation plan template of Q1: Commission with Accelerators. 

This commission structure is designed to motivate and reward sales teams for exceeding their quota. Once the team passes 100% of its quota within the quota period, the commission rate increases for every subsequent deal. 

This structure itself features a flat commission rate until the rep hits their quota. That means it’s easy to understand, and allows your sales team to feel rewarded even if they fall short of their quota while also rewarding overperformance.

“For an early-stage company between zero to $10 million in annual recurring revenue, I love a flat-rate commission with an accelerator,” said Insights Partners Operating Partner, Sales & Customer Success Pablo Dominguez. 

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Curious about what other comp plan templates Compensation Hub includes? Check out 20 AE and SDR comp plan examples. Keep an eye out for Sales Leadership compensation plans coming soon. 

About QuotaPath

We believe sales compensation should be simple in design and powerful in results. Our free resources and commission tracking software eliminate confusion and build visibility across Sales, RevOps and Finance. Try our free trial to get started. 

Should you pay commissions once the deal closes or wait until the invoice is paid?

According to our 2023 Sales Compensation Trends survey, 64% of companies pay out commissions upon the deal closing versus 20% at the time of invoice payment.

That number shifted to 47% at the time of deal closing and 35% at invoice if the company generated less than $25 million in annual recurring revenue. 

But with a harsher market and a higher risk of companies not fulfilling payment obligations, it’s time to rethink commission payment periods.

We realize there are a ton of factors to consider when setting payment terms. (Industry, size of the opportunity, stage of the company, and even new hire ramp time.) So, to help work through those factors, we asked five RevOps and Sales leaders for their takes.

Here’s what they said. 

Natalie Love — Depends on the stage of the company

Natalie Love, Senior Manager of RevOps at 15five, has experienced both commission payout methods.

“When we were an earlier stage company and more manual in our billing and collections processes, we paid upon collection,” Natalie said. “This incentivizes the sales rep to help with collections and ensuring payment.”

However, once they scaled and added automation to their accounts receivable processes, they transitioned to pay on the closed deal. In doing so, they were able to incentivize deal velocity and speed-to-close.

And, to ensure a successful launch of customers, they added a clawback clause.

Carl Ferreira — How you book revenue should dictate payment terms

Meanwhile, Carl Ferreira, Director of Sales at Refine Labs, said the timing of commission payments depends on how your company books revenue.

“Big contracts might have extensive processes, accounts payable departments, and net 90 terms,” said Carl. “If I’m working and selling for SAP, then I shouldn’t have to wait for 90-plus days and another 30 days for the payroll cycle for commissions.”

Reversely, in an early-stage startup, where free cash flow might be limited and the product is more transactional, paying on collection makes sense, Carl added. 

At Refine Labs, Carl said his reps receive commissions in the next possible payroll cycle for deals closed won.

“If a deal implodes and never pays, then we issue a clawback. Although, that’s never happened,” Carl said. 

Jonathan Slagle — New biz at start date and renewals at invoice

Nearpod Senior Commissions Analyst Jonathan Slagle has worked at two organizations that handled this differently.

One company, for instance, paid on the “effective date,” or the start date.

“For new business, this aligned pretty closely with the close date, but for renewals and upsells tied to their renewal, it could vary by a couple of months or more,” Jonathan said. 

So, to account for auto-renewals that triggered or closed extra early in their CRM but were not effective for revenue or case purposes until later, they held payout until redeemable. 

“This was at a startup that had a higher frequency of contested autorenewals and invoice ghosting, so the effective date was used to reduce clawbacks and help align commissions with cash flow while not making the reps wait until actual cash flow,” Jonathan said. 

At another organization, where the risk of churn post-invoicing was much lower, everything became payable on the close date of the sale. 

Winson Liu — Churn risk isn’t a factor

The risk of churn keeps coming up. But On Deck Founder Fellow and RevOps leader Winson Liu offered an alternative view.

“I’d argue that paying reps based on close date doesn’t reduce churn risk, nor does it make churn risk higher,” Winson said.

Rather, customers churn due to account operations, whether that’s owned by accounting, the AE, or the CSM.

“It’s all about how the company overall manages the handoff from signed contract to payment to implementation to product adoption and usage,” Winson said. “At least to me, it’s not a conflated situation.”

Shalhevet Engelson — Paying on invoice limits payment terms creativity

Can payment upon the invoice lead to internal dissonance for the rep? This leader thinks so.

“If you pay reps based on the invoice date, you’re incentivizing reps to be less flexible on payment terms with customers and that might put your reps in a sort of Catch-22,” said Shalhevet Engelson, RevOps Specialist at DealHub.

That’s especially timely in today’s economic climate which has pushed sales teams to get creative on how they structure deals.

“That flexibility leads to more wins and more revenue,” Shalhevet said. “If reps don’t get paid until the invoice, they might want to be flexible with the customer in order to close the deal more easily, but they also might not want to be flexible because they want to get paid sooner.”

So, how have you set up your sales commission payment terms?

As you can see, like most topics with sales and sales compensation, there are no absolute rules. However, there are some organizational indicators that signal one way might be better than another.

Previously, we’ve recommended paying your reps as quickly as you can. However, if you’re hoping to solve for cash flow in 2023, re-defining your payment terms can help address that.

Need additional help with sales compensation management and commission tracking? Schedule time with our team today. 

From learning how to cold call prospects to finding ways to shorten the sale cycle, sales reps have a lot on their plate. But there’s one concern that supersedes them all — compensation. And with that, comes pay mix.

In sales, compensation is made up of base pay and extras, such as bonuses and commission. Together, those elements make up your pay mix.

What is pay mix?

Pay mix is the ratio of base salary and on-target commission. This might be confused for on-target earnings, but it’s slightly different.

Now you may think Pay mix sounds like something you’d eat at a party, but it’s even more important. This ratio outlines how a sales rep gets paid. You’ll most often see it represented in a percentage format. One half of the ratio is the base pay, and the other half is commission and bonuses, also known as incentive compensation. When combined, the two form your on-target earnings (OTE).

Remember that pay mix is about more than defining compensation. The right mix can help the company achieve its own goals, too. Commission pay drives salespeople to increase their demos, connect with more customers, and keep a sharp eye on their performance. In other words, a good pay mix means more selling! Fair base pay ensures the team feels taken care of while they sell your newest product.

Calculating pay mix

It’s easy to calculate pay mix. On-target commission divided by OTE equals the percentage of your pay tied to the commission. Base salary divided by OTE equals the percentage tied to base salary.

For instance, if your on-target earnings are $100,000 and your base pay is $54,000, your pay mix is 54/46. Usually, it’s expressed as base salary first, then on-target commission, but it’s important to confirm that’s the case!

What’s the average pay mix?

According to our 2023 Sales Compensation Trends Survey, the most-used and industry-recommended pay mix in SaaS consists of 50/50, or 50% base and 50% commission and bonus for sales roles.

Other industries may have a different default pay mix. The numbers may also shift, depending on position and/or experience. A sales executive is more likely to have their pay mix weighted toward base pay, while a rep traditionally relies more on incentive pay.

Marketing is a good example of an industry with a higher base. In real estate, agents have no base salary and rely solely on commission for a pay mix of 100/0.

The skewed mix seen in real estate is unusual, though. A pay mix weighted heavily toward base pay can demotivate reps who have little incentive to chase commissions. When the pay mix is out of balance and in favor of commission, reps get stressed, and concerns over income might tank morale.

Pay mix is important, but it depends on the ability to calculate commission accurately and efficiently. In other words, you must know exactly how much you or your reps are bringing to the table. QuotaPath’s innovative software is designed to make tracking and managing sales commissions easier than ever. To get started, create a workspace for free today.

In this blog, QuotaPath‘s Chief of Staff and host of Sales Nerds Live! Graham Collins shares 5 sales compensation plan examples. Read on for a sales manager compensation plan sample, SDR compensation plan, VP of Sales compensation package, sales rep commission, and recruiter commission plan sample.

Designing compensation plans is not an easy task. You have to balance fairly paying your sales rep commission. However, you don’t want to overpay them. You also have to consider the goals laid out by the finance team. Not to mention trying to build a compelling VP of Sales compensation package! It can feel like you’re being pulled in 10 different directions.

I wish there was a universal perfect sample compensation plan, I really do. However, with all the different sales roles, business models, industries, and locations, that one perfect plan is impossible. There is no SDR compensation plan that works for everyone. The tiered commission structure that works for one company, may be horrible for another. So, instead of trying to solve all compensation plans for everyone, I thought I’d give you a leg up when designing compensation plans for your company by showing you a few sales compensation plan examples that have worked for companies in the past. 

Below you’ll find an example sales rep compensation plan, an example SDR compensation plan, an example sales manager compensation plan, an example VP of Sales compensation plan, and an example recruiter compensation plan. Don’t forget to check out Compensation Hub, a free resource we created that includes more than 20 adjustable comp plan templates to support comp plan design. 

First, I’ll explain what a comp plan entails to be successful. Then, we’ll take into consideration each of the examples of variable compensation plans. Lastly, I provide a list of comp plan examples for inspiration.

What Does a Sales Compensation Plan Need to Achieve?

A well-structured sales compensation plan is the backbone of a motivated, high-performing sales team while ensuring alignment with your company’s business goals.

Sales roles are notoriously high-stress and prone to high turnover; in fact, the median tenure for sales representatives is just over three years, according to the Bureau of Labor Statistics. With hiring costs ranging from $10,000 to $15,000 per sales rep, turnover quickly becomes an expensive challenge for businesses.

A strong sales compensation plan can reduce turnover by providing clear incentives for sales reps to stay and perform at their best. It motivates them with a balanced mix of salary, commissions, and bonuses while offering the clarity and fairness necessary to build trust. Notably, over half of employees consider leaving their jobs if compensation doesn’t meet their expectations, underscoring the critical role of a thoughtful comp plan.

Here are the core goals a sales compensation plan should achieve:

Align with Business Objectives

Your compensation plan must support your company’s overarching goals and sales strategy. For example:

• Increasing market share? Incentivize reps to acquire new customers.
• Boosting customer loyalty? Offer rewards for upselling and cross-selling to existing clients.
• Building strong leadership? Use manager-focused compensation plans to encourage team-building and development.

You directly link rewards to business outcomes to ensure sales reps’ efforts drive the desired results.

Motivate High Performance

The right plan creates a clear connection between effort and reward. Fundamental mechanisms to consider include:

• Sales Quota: The minimum sales target reps must meet to earn commissions.
• Accelerators: Additional bonuses for exceeding sales quotas, motivating reps to go above and beyond.
• SPIFFs (Sales Performance Incentive Funds): One-time bonuses for achieving specific objectives, such as closing deals in a priority category or within a short timeframe.

Incentives like these boost individual performance and contribute to overall team success.

Provide Transparency and Security

Sales teams thrive when they understand how their efforts translate to earnings. Detailed communication about on-target earnings (OTE)—the expected annual income if targets are met—and clear documentation of commission structures help ensure transparency.

Security measures, like ensuring fair base salaries for sales reps and managers, also reduce turnover risk while fostering trust.

Enforce Accountability

While motivating your team is crucial, your plan should include mechanisms to address underperformance or mitigate financial risks.

Common elements include:

• Decelerators: Reduced commission rates for underperforming reps.
• Clawbacks: Provisions for reclaiming commissions in cases of canceled sales or misconduct.

Accountability measures maintain fairness and protect the organization’s financial interests.

5 sales compensation plan examples

1. Sales manager compensation plan sample

Sales managers are responsible for, well, managing salespeople. There are times when the title “sales manager” applies to someone who doesn’t actually have a team of salespeople reporting to them. For this example, I’m talking specifically about managers who do not focus on closing their own deals but instead have several sales reps who report in. 

Unlike sales reps whose quotas are unique to themselves, sales managers’ quotas are typically based on the collective quotas of the people reporting to them. Their quota is not always a sum of their team’s quota. They are sometimes given a “buffer” of 10-20%. This means that if a sales manager has 5 reps reporting to them, each with a $150k quota, the manager’s quota is 90% of that sum. So, instead of $750k (5*$150k) it is $675k ($750k*90%).

Because the sales manager compensation plan sample is built around the deals their reps close, it allows them to spend their time coaching their sales team to close more deals. 

Build a Sales Funnel

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

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2. SDR compensation plan

An SDR, or sales development rep, is typically responsible for scheduling meetings for the sales team. Sometimes businesses refer to this role as an MDR (market development rep), BDR (business development rep), or LDR (lead development rep). Regardless of their title, they handle the top of the funnel for a sales team. This could be qualifying marketing leads, running outbound calls and emails, and even holding discovery calls. As for compensation, the three plans below are the most widely implemented SDR comp plans.

• Number of meetings: This SDR compensation plan is the most common for early organizations that want to fill their sales reps’ calendars. For every meeting the SDR sets (that actually happens!) they receive a bonus. This bonus varies wildly based on the company’s ASP (average sales price) and demo-to-close rate. Generally, the bonus falls anywhere between $20 and $300. 
  
• Number of qualified opportunities: This SDR comp plan is better once an organization has a clearly defined ICP (ideal customer profile) and only wants sales reps on the phone with qualified prospects. It’s important to create very clear and concise rules as to what a qualified opportunity is so there is no ambiguity. Once again, this bonus is highly dependent on the company but generally a higher dollar figure than simply paying for demos. 
  
• Percentage of revenue generated: While many organizations think this is the ideal SDR compensation plan, it is only the right option for specific companies. Essentially, in this example comp plan, SDRs get paid a commission on all closed won deals that originated from the opportunity they created. This only works if you have a shorter sales cycle (ideally sub-60 days) because the SDR needs to have control over their income. The SDR commission percentage typically ranges from .5% to 4%. 

With all that being said, the most common SDR compensation plan is actually a combination of 2 or more of these components. See below for an example of this. 

3. VP of Sales compensation package

When thinking about a sample VP of Sales plan, you have to factor in the entire VP of Sales compensation package. If a VP of Sales is looking purely for a high base salary, most organizations would consider that a red flag. That’s because a VP of Sales compensation package consists of base salary, bonus/variable, and likely a hefty equity component. If the VP of Sales doesn’t have an equity component of their comp package, they may have milestone bonuses for certain achievements or an alternative way to ensure they have a competitive sales compensation plan model.

A VP of Sales compensation package varies from a standard compensation plan in a few other key ways. For example, organizations generally hold VPs to a financial target number set by the CFO and Board of Directors. It is their responsibility to hire, ramp, and train reps to be able to hit that number. So, instead of having a quota that aligns with the number of reps they have, it’s the other way around.

Secondly, their quota tends to change over time as the company grows. That implies that their target might double in Q4 from where it stood in Q1. Because of this, they might earn incentive pay on a “per attainment point” model. This means that they have a set bonus amount and they multiply that bonus number by their quota attainment. See below for an example.

4. Sales rep commission

Because most people who work in sales identify as sales reps, thousands of different sales rep commission plans and commission structures exist.

Where do you start? Well, the easiest thing to do is to start simple and add complexity later as needed. A simple comp plan doesn’t always entail paying a flat rate commission. You might want to add in accelerators/decelerators or you might want to have a bonus. Maybe you want to change the commission rate based on the length of the contract. It will all depend on the specifics of your company and what you’re hoping to accomplish. 

Below, we’ve provided a sample sales rep commission plan that has worked well for organizations we’ve seen in the past. 

5. Recruiter commission plan sample

The first thing to remember about recruiter commission plans is that there are two types of recruiters, internal and external. The difference is that an internal recruiter works entirely within one company. They are an employee of that company. Whereas an external recruiter might work for several companies and is either an independent contractor or an employee of a recruiting firm. Typically internal recruiters do not have a variable pay component of their compensation and receive just a base salary.

On the other hand, external recruiters generally do have commission plans. Those plans can vary quite a bit. But they often share one thing in common: the recruiters earn compensation based on someone getting hired. Now, how much they earn varies widely, but it is typically a percentage of the revenue that the recruiter generates.

For easier-to-fill roles, a recruiting firm might earn only 10% of the candidate’s salary as a recruiting fee. Whereas for more difficult-to-find hires, the recruiting firm might make 50% of that person’s salary. So from there, the recruiter earns a percentage of that revenue based on their revenue target. These commission rates might be as low as 5% and as high as 20%. 

Building Your Own Custom Compensation Plan

Designing a sales compensation plan that aligns with your company’s goals and motivates your team requires a thoughtful, structured approach.

Here’s four steps to get started:

Step 1: Establish What Goals You Want to Achieve

Before diving into the numbers, identify the specific business outcomes your compensation plan should support.

Are you aiming to:

• Drive new customer acquisition?
• Increase upselling and cross-selling among existing clients?
• Foster a collaborative sales culture?
• Incentivize long-term retention and leadership development?

Defining these goals will provide a clear roadmap for the plan’s structure.

Step 2: Determine the Market Rate and Target Compensation

Understand the market benchmarks for sales roles in your industry and region. Resources like salary surveys or compensation platforms can help identify competitive pay rates. Next, decide on your target compensation for each role, focusing on on-target earnings (OTE)—the total expected income for meeting performance expectations.

Step 3: Pick the Right Metrics and Targets

Select metrics that directly support your business objectives. For example:

• Revenue-based metrics for driving sales volume.
• Customer acquisition metrics for market expansion.
• Retention or upsell metrics to increase customer lifetime value.

Pair these metrics with realistic, yet ambitious, sales quotas or targets. Be sure your reps have the tools and support to achieve them.

Step 4. Choose a Compensation Breakdown

Determine the balance between fixed and variable pay, such as:

• Base salary: Provides security and reduces turnover risk.
• Commission: Rewards performance and motivates effort.
• Bonuses or SPIFFs: Drives short-term goals or strategic priorities.

Your breakdown should reflect the role’s focus—heavily commission-based plans often suit individual contributors, while managers might prefer a steadier income mix.

Following these steps, you can craft a compensation plan tailored to your company’s unique needs, ensuring alignment with both business goals and your sales team’s motivation.

Final thoughts

As you’re building out compensation plans, remember that you always want your plans to fill three core requirements: 

• Simple. The plan has to be easy to understand, otherwise, you won’t get the behavior you’re trying to encourage. 
• Logical. Comp plans should follow your company’s strategy, not the other way around. 
• Fair. It has to be attainable and people have to feel like they can make money off it.

As long as your plans meet all those requirements, you’re already ahead of the game. If you need more advice or sales compensation plan examples, visit Compensation Hub for free, customizable comp plan templates, and QuotaPath’s blog is also a great resource for helpful tips and resources. 

Once you’ve built out your compensation plan, find an easy commission tracker. That’s where QuotaPath comes in. QuotaPath is a commission tracking tool built for transparency, simplicity, and accuracy. If that’s appealing, schedule a full overview today.

You’ve heard from us about how sales compensation software can help you save time, align your teams, and provide transparency.  

But did you know that tools like QuotaPath can also help you and your key stakeholders understand and anticipate cash flow expectations?  

For instance, when Silicon Valley Bank abruptly shut down, many companies immediately jumped into action to mitigate risks related to expenses and safeguard employee paychecks.

This likely meant understanding the timing and amount of upcoming expenses related to payroll, including commissions. How much would you need to pay commissionable reps at the end of the month or the end of the quarter?

Payroll systems provided a majority of the answers to their questions, but what about the employees with variable compensation? 

That’s where QuotaPath came into play. 

In SVB’s aftermath, we heard that many of our customers leveraged our earnings forecasts, deal reviews, and approvals to quickly get a pulse of their expected commission expenses for the month and quarter. They didn’t have to request special access, wait on a spreadsheet, or call upon a teammate. Instead, they logged in and had access to the info immediately. 

It’s moments such as this, when stakeholders need to understand cash flow, that QuotaPath can provide real-time insights.

Below are a few more scenarios that QuotaPath can help you with, no matter how the market or your business changes. 

Get a pulse on expected commissions expenses

The SVB situation magnified the importance of knowing how much cash you’ll need to run payroll, inclusive of commissions. QuotaPath can be useful in making business decisions when you’re applying for a loan, fundraising, or need to report on cash burn.

Measure your capital and team efficiency

Since QuotaPath keeps a record of commissions, leverage the historical data to track effective rates, see the total cost associated with a win using our deal detail page, and showcase the info to current or potential investors.

Weekly pipeline reviews

QuotaPath’s team runs our pipeline reviews by pulling up Team Attainment leaderboards. Individually, each rep speaks to the recent deals they won, while sharing the next steps and the win probability for the remaining forecasted deals at the monthly and quarterly levels. 

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If we can be of assistance in helping you get the most out of QuotaPath and manage your team’s compensation, please reach out. 

We’ve got a dedicated team here of experts ready to show you how our platform can play an integral role in your business operations.