Sales Commission Structures

I’ve built over 20 sales commission plans in my career. What frequency is best? Monthly? Quarterly? This is a question I get asked very often, so here’s my take: The general principles: 1- More often = better Sales need to taste money. The more frequently you calculate and pay out commissions, the more velocity you’ll create in your team. I’ve seen countless examples of companies that switched from quarterly to yearly and saw a slowdown in their team’s momentum. 2- Align with the sales cycle length In theory, a sales team should manage their pipeline and close deals consistently throughout the year. But when your sales cycle is 12-18 months, closing deals every month just isn’t realistic. Here’s what I usually recommend: - Sales cycle of less than 3 months: monthly - Sales cycle of 4-12 months: quarterly - Sales cycle of 13+ months: bi-yearly 👉 One move I’m the most proud of was combining a monthly commission plan with a quarterly kicker. It worked really well for motivation. Here’s how it looked: - Sales had a monthly commission plan - The problem: Too many ups and downs (one good month, one bad month) - The solution: A quarterly bonus to reward consistent performance 👉 Example: - When sales hit 100%+ of their quota over the quarter → $1000 + 20% of MRR - When sales hit 125%+ of their quota over the quarter → $2000 + 30% of MRR So you can very well combine monthly & quarterly comm plans. This combination gave the team both short-term wins and long-term goals to push for. Don’t hesitate to share your best practices for managing commission plans. ---- PS: I wrote an article on how to design a sales commission plan on the lemlist blog. Feel free to check it out.

I’m often asked, “What makes a fair commission structure?” Is there a threshold? Should new and legacy business be treated differently? And how much should you include? Here’s how to strike that balance between recruiter motivation & business profitability: 1: Define clear thresholds → Set realistic, achievable targets that align with market conditions → Thresholds can be motivating, but only if they feel attainable → A fair threshold means your recruiters feel challenged but not defeated 2: Separate legacy from new business → Consider a higher commission on new business to reward growth efforts and lower on legacy clients to support stability → Acknowledging the different effort levels here makes it feel fair on both sides 3: Keep it transparent → The best systems are clear and understandable.  → Set a straightforward formula that both sides can track in real-time, reducing questions and boosting trust 4: Regularly review the structure → Markets change, and so should your commission plan. → Build in annual reviews to keep the structure aligned with business goals and market shifts A fair commission structure rewards effort and quality without sacrificing profitability. It’s a win-win that builds long-term success for both recruiters and directors. If you’re rethinking your commission system, drop a comment or reach out.

As 2025 comp plans are being finalized make sure these non-negotiables are included. ·     Simple: You shouldn’t need a physics degree from Stanford to figure out how much you’ll be paid at the end of the quarter. ·     Measurable: Reps should be able to calculate their commissions down to the penny at any point during the quarter. There shouldn’t be any surprises when they get their check. ·     Flexible: The plan must accommodate unanticipated events. ·     Profitable: The financial needs of the salespeople and company must be met. Reps should be rewarded, but not at the expense of profit margins. ·     Motivating: There must be meaningful accelerators to reward top performers and decelerators to create pain for missing goals. ·     Thoughtful: Reps will do exactly what the plan tells them to do. Be careful about the goals you set so you’re not surprised by the results. ·     Uncapped: Enough said! A good comp plan will simplify a sales leader’s job by articulating company priorities and goals and rewarding behaviors that support them. A poor plan will result in an unmotivated, internally focused team that could spiral into turnover. You need to get this right if you want any chance for success in 2025. Did I miss anything? I’d love to hear your thoughts.

🇦🇺 Thinking about recruitment opportunities in Australia? Here’s what you need to know 👇 I speak with a lot of candidates considering a move to Australia—and the same questions come up time and time again. Here’s a quick overview to help you get started: 🔹 What are the requirements for sponsorship? • 1+ year of recruitment experience and  a degree, or 5+ years of experience • Sponsorship offshore is possible, but often seen as higher risk for employers • The most common pathway: arrive on a Working Holiday Visa, work with a business for ~6 months, ensure mutual fit, then transition to sponsorship 💰 What are the salaries in Australia? • $80k–$90k + super is typical for overseas recruiters • $90k–$95k+ for those with strong or niche experience 📈 What do commission structures look like? • Thresholds typically sit around 2.5–3x base (e.g. $80k base = ~$60k quarterly threshold) • Commission brackets usually range: 20% → 30% → 40% (up to 50% in some cases) • Some businesses offer no-threshold models with lower commission percentages ⚖️ What is the work-life balance like? • Strong across the market • Flexible working is now standard in many businesses • Common benefits include WFH days, flexible hours, and even 4-day work weeks 🤝 What is Business Development like in Australia? • Still requires effort, but overall feedback is positive • Many Australian businesses are open to working with agencies If you’re considering the move—or just want an honest view of the market—feel free to reach out. 📩 jo@limeres.com.au💬 Or message me here for a confidential chat about current opportunities ✨

A learner asked me: "Why hasn't sales compensation changed?" Over the past decade, many software companies moved from perpetual licenses to subscription (SaaS) or consumption-based models. Yet, they often never updated how they pay sellers. The reason? They underestimate the shift. It's more than a new pricing page—it changes: 💥 First-year revenue (drops significantly) 💥Risk profile (moves to the buyer) 💥Sales cycle velocity (wins happen faster) 💥Win rate (often drops) 💥Retention rate (often drops) 💥Pipeline needs (go way up) If we ignore these changes, we close fewer deals—& the ones we do close are more likely to churn. In a modern org that recognizes the impact of this shift, sales comp will align with SaaS & consumption models, helping us emphasize retention and expansion. No more purely transactional sales—resulting in higher NRR and GRR rates. Sales training & comp plans can reward behaviors for long-term customer retention: providing incentives for expansion, usage milestones, and paying commissions in phases. 5 Key Reasons Sales Comp Is Evolving: 1. Revenue realization over time In a subscription or consumption model, revenue typically trickles in monthly (or as usage occurs) rather than arriving in a large lump sum at the time of purchase. Because revenue is now recognized (and renewed) over time, sales compensation plans increasingly need to focus on ongoing customer impact rather than a closing that one-time deal 2. Emphasis on customer retention and expansion With recurring revenue, a customer’s lifetime value (LTV) depends on continuous renewal & potential expansion. Many companies now design incentives that encourage sellers to bring in high-fit customers who are likely to renew and grow rather than just close the biggest initial deal. 3. Shared accountability with Customer Success In a subscription world, retaining and expanding customers typically falls under CS, not sales. Comp plans increasingly should align both sales and CS teams around the same goal: driving recurring revenue. 4. Longer sales cycles Today, the buying process may involve a pilot a solution before committing to a bigger spend. Because deals can be smaller up front (land) but scale over time (expand), sellers need comp structures that reward nurturing and growing accounts rather than focus time only on new logos. 5. Risk-Sharing and Delayed Commission Some orgs now pay sellers a portion of their commission upon initial signing and another portion when customers achieve a milestone like first impact, a usage milestone, or a renewal. This ensures the sales does their part to ensure a high customer-solution fit. This helps align all team members on the primary element of growth: recurring impact. Ultimately, sales comp should align with key metrics (like Net Revenue Retention). That’s how we match the realities of this monetization shift—focusing on retention, expansion, and customer impact. We’re getting there...slowly but surely. 💪

The 5 Pillars of Deal Structure: 1. Cash at close. Inversely correlated with valuation (the less cash the seller requires upfront, the higher total value you are willing to pay, and vice versa). No skin in the game from seller. 2. Seller note. Guaranteed future payment, senior to all equity. Usually 0-20% of total consideration. A seller willing to do 40-100% seller financing (very rare) could command a higher valuation (“I can pay you a billion dollars; one dollar per day for a billion days”). Moderate skin from seller. 3. Earn-out. Contingent on future performance. Best way to bridge the gap if negotiations are stalling. Meaningful skin from seller. Pro tip: base it on revenue (= less manipulative/controversial than gross margin or especially EBITDA). 4. Rollover equity. Usually 0-20%, but occasionally up towards 49%. Strong alignment with seller (the more rolled equity, the better). 5. Compensation for continued employment. This is most applicable for smaller deals (e.g., add-on acquisitions) - somebody who just cashed out $$$$ doesn't care as much. Emotionally important as many people like to have a fixed monthly income.

#Sales compensation is the largest GTM investment most B2B companies make. Yet we keep repeating mistakes in their design👇 In a recent webinar with my partners over at Qobra, a few comp plan mistakes we discussed live: ❌ 5-6 metrics per comp plan (way too many) ❌ Individual metrics worth <20% of comp (doesn't drive behavior) ❌ Reps building spreadsheets to calculate their own pay ❌ KPIs that individuals can't actually influence The cost? Confused reps, misaligned incentives, and your best performers leaving Here's a framework for better comp designs 1️⃣ Role Design First - comp plans START with nailing the role itself and its influence on the deal lifecycle → Hunter vs farmer? Full cycle vs specialized? → What behaviors drive business goals? → What can this person actually influence? 2️⃣ Maximum 3 Metrics (20% Rule) - keep it simple → Each metric must be worth 20%+ of variable comp → Less than 20%? Reps will ignore it → More than 3? You're creating confusion, not alignment 3️⃣ Simplicity Wins - no PhDs to explain comp plans → If reps can't explain it without RevOps help, it's broken → Complexity doesn't equal sophistication 4️⃣ Curves and Accelerators Matter → 30% attainment shouldn't pay the same rate as 110% (set tiers!) → Reward high performers, pressure underperformers 𝗧𝘄𝗼 𝗗𝗶𝘀𝘁𝗿𝗶𝗯𝘂𝘁𝗶𝗼𝗻 𝗧𝗮𝗿𝗴𝗲𝘁𝘀 𝘁𝗼 𝗠𝗼𝗻𝗶𝘁𝗼𝗿: 📊 Target achievement: 80% of salesforce hitting 80%+ of quota 📊 Comp distribution: Top 10% earning 3x the average rep If you're way off, your plan design or quota setting has issues 𝗧𝗵𝗲 𝗚𝗮𝗺𝗶𝗻𝗴 𝗧𝗿𝗮𝗽: Early-period accelerators sound great in theory. In practice? Reps sandbagged deals at period-end to capture the bonus. Always test for unintended consequences 𝗪𝗵𝗮𝘁 𝗔𝗰𝘁𝘂𝗮𝗹𝗹𝘆 𝗪𝗼𝗿𝗸𝘀: Annual plans > Monthly (reduces gaming, creates natural incentives) [especially for longer sales cycles and mid-market + enterprise segments] Quarterly reassignments for book changes (easier administration) [particularly for hybrid or farmer roles] Align metrics to actual influence (not corporate vanity metrics) Good luck out there for your comp designs Happy to help and chat about comp plans Go forth and operate 

DAY 26 Total Rewards Strategy: Beyond Salary Total Rewards is not just salary. It is the complete value exchange between employer and employee. It includes: • Base Pay • Variable Pay (Bonuses, Incentives) • Benefits (Health, Pension, Insurance) • Recognition • Career Growth • Work Flexibility • Learning Opportunities • Employer Brand When compensation is poorly structured: High performers leave quietly Average performers stay comfortably Pay inequity creates internal tension Business costs increase through turnover When compensation is strategically designed: Performance improves Retention stabilizes Employer brand strengthens Financial planning becomes predictable #HowtoDesignaTotalRewardsStrategy STEP 1: Define Your Pay Philosophy (Write This Down) Answer these 5 questions clearly: Do we want to pay at market average (50th percentile) or above market (75th percentile)? Will we reward performance more than tenure? Are we willing to pay premium for scarce skills? What percentage of compensation should be fixed vs variable? What behaviours are we rewarding? #Output: Create a one page Pay Philosophy Statement. If it’s not documented, it doesn’t exist. STEP 2: Conduct Internal Pay Audit Do this simple exercise: List all roles List current salaries Compare employees in similar roles Identify gaps or inequities Check for: Same role, different pay (without justification) High performer earning less than average performer Pay compression (new hires earning close to long serving staff) #Output: Highlight risk areas in red. These are retention risks. STEP 3: Benchmark Against the Market You can use: Industry reports Professional HR networks Benefits 📌 Decide: Are you leading, matching, or lagging the market? Be intentional. STEP 4: Structure Variable Pay (Make It Measurable) Your bonus structure should answer: What exact target must be achieved? Is it revenue based? Is it productivity based? Is it KPI based? Example structure: • 10% annual bonus tied to company #profitability • 5% individual performance bonus tied to KPI score • Sales commission tied to revenue threshold #Rule: If performance cannot be measured, it should not be incentivized. STEP 5: Define Non Monetary Rewards Not all rewards are financial. Include: Recognition programs (monthly awards) Career progression pathways Learning sponsorship Flexible work options Wellness initiatives Sometimes development retains more than salary. STEP 6: Communicate the Structure Many organizations fail here. Employees should know: How salary increases happen How bonuses are calculated What qualifies for promotion What performance level earns reward Transparency builds trust. Silence builds suspicion. 🎯 Practical Diagnostic Test Ask yourself: Can I explain our #compensationstructure in 10 minutes clearly? Do employees understand how to increase their earnings? Can I defend our pay system at board level? If the answer is no, your #TotalRewardsstrategy is incomplete

📈 Maximizing Sales Motivation in 2025: The Power of Sales Accelerators 𝐀. 𝐖𝐡𝐲 𝐒𝐚𝐥𝐞𝐬 𝐀𝐜𝐜𝐞𝐥𝐞𝐫𝐚𝐭𝐨𝐫𝐬 𝐌𝐚𝐭𝐭𝐞𝐫 Qobra research shows 72.1% of tech sales reps benefit from accelerators. In 2023, 43.5% of them exceeded their objectives vs. just 24.9% without accelerators. They also report higher satisfaction: 73.5% vs. 49.7%. A strong commission structure drives both performance and retention. 𝐁. 𝐏𝐚𝐲 𝐌𝐨𝐫𝐞 𝐭𝐨 𝐄𝐚𝐫𝐧 𝐌𝐨𝐫𝐞: 𝐓𝐡𝐞 𝐈𝐦𝐩𝐚𝐜𝐭 𝐨𝐧 𝐂𝐮𝐬𝐭𝐨𝐦𝐞𝐫 𝐀𝐜𝐪𝐮𝐢𝐬𝐢𝐭𝐢𝐨𝐧 𝐂𝐨𝐬𝐭 (𝐂𝐀𝐂) One common concern is whether increasing sales commissions will hurt the company’s bottom line. The truth? Sales accelerators can improve profitability. Consider this example: A SaaS company with an annual recurring revenue (ARR) of €10 million and a target customer acquisition cost (CAC) of €15,000 is looking to optimize its sales rep incentives. In a scenario where sales reps exceed their targets, the company pays higher commissions to the top performers—but this results in lower CAC, from €11,161 to €10,080. This shows that paying top performers more can actually reduce customer acquisition costs and boost overall profitability. 𝐂. 𝐒𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞 𝐘𝐨𝐮𝐫 𝐀𝐜𝐜𝐞𝐥𝐞𝐫𝐚𝐭𝐨𝐫𝐬 𝐀𝐫𝐨𝐮𝐧𝐝 𝐏𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐆𝐨𝐚𝐥𝐬 Progressive commission tiers motivate reps to overachieve: - <70% of target: 7% - 70–90%: 8.5% - 90–100%: 10% - 100–120%: 11.5% - 120%: 13% 𝐃. 𝐑𝐞𝐰𝐚𝐫𝐝𝐢𝐧𝐠 𝐎𝐧𝐞-𝐎𝐟𝐟 𝐏𝐚𝐲𝐦𝐞𝐧𝐭𝐬 𝐰𝐢𝐭𝐡 𝐀𝐜𝐜𝐞𝐥𝐞𝐫𝐚𝐭𝐨𝐫𝐬 One effective sales accelerator is encouraging one-off payments. For many B2B and SaaS companies, improving cash flow is a top priority. Offering additional commissions (e.g., 10%) for sales that are paid in full upfront can provide an immediate cash boost to your company’s finances. Sales reps are likely to focus on closing deals that benefit the company, while also being rewarded for their efforts. 𝐄. 𝐀𝐜𝐜𝐞𝐥𝐞𝐫𝐚𝐭𝐨𝐫𝐬 𝐟𝐨𝐫 𝐌𝐮𝐥𝐭𝐢-𝐘𝐞𝐚𝐫 𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭𝐬 Multi-year contracts provide recurring revenue and long-term customer loyalty—two invaluable assets in any business. To motivate sales reps to secure these types of deals, companies can implement higher commission rates for longer-term contracts. For example: - 10% commission for 2-year contracts - 15% commission or more for 3-year (or longer) contracts This progressive commission structure not only drives stable revenue but also strengthens customer relationships, making these deals even more valuable. However, it’s essential to consider the potential discounts offered on long-term contracts and ensure your commission structure accounts for both the revenue security and the costs of such discounts. A hybrid structure (higher initial commission + smaller annual renewal commission) is a great way to balance this out. 💬 What sales accelerators do you use in your organization? Let’s talk about the best practices that work for your team! To discover Qobra 👉 https://www.qobra.co/

Got a sales team? Is your commission structure is working against you? Here's the lowdown on making your commission structure a win-win: (does anyone else have Boz Scaggs stuck in their head now?) 👉 Basic pay + commission - Everyone gets a solid base salary. On top of that, we throw in a commission for every sale. This way, everyone's got skin in the game and a safety net. Key note here: base pay is a safety net and shouldn’t be enough for a “comfortable” living, otherwise you’ll end up with people underperforming. 👉 More sales, more Cash - No earning caps! Sell more, earn more. It’s that simple. We set up levels, you hit a level, you get a bigger slice of the pie. Keeps everyone hungry for that next deal. 👉 Time's ticking- All commission calcs reset under one year. No long-term stacking of commissions. This keeps reps hungry. 👉 Spot bonuses for big wins - Knocked a big target out of the park? There’s a bonus for that. It’s our way of saying, “We saw that. We appreciate it.” This doesn’t only include hitting sales targets, but other wins too. 👉 Targets that make sense - We set targets that are fair, based on real numbers and what we know we can achieve. These aren’t pie-in-the-sky numbers; they're your roadmap to making bank. Unrealistic targets are a way to ensure you lose your top performers. 👉 Adapt and overcome Different territories, different challenges. We get it. So, if you’re wrestling alligators while someone else is walking puppies, we’ll adjust the numbers to keep it fair. 👉 Keep it clear - How close are you to hitting your next bonus? There’s an app for that. Or a dashboard. Point is, you’ll always know where you stand. 👉 Performance comp isn’t just for sales - The sales team has two roles: generate revenue and generate information. If a sales person isn’t recording everything in the CRM, their entire commission takes a hit. I recommend a 30% haircut on performance comp if a rep isn’t keeping proper records. This approach is all about making sure your sales team is motivated, rewarded, and clear on what success looks like. It’s about cutting through the clutter and making sure that when the company wins, you win. Now… let’s get out there and close some deals. ✌️ 🧡 🌮