Differences in Commission Structures

Affiliate commissions MAKE or BREAK a program. 𝗧𝗼𝗼 𝗹𝗼𝘄? No sales. 𝗧𝗼𝗼 𝗵𝗶𝗴𝗵? No profit. After 15 years of starting and running affiliate programs, I have tested just about every commission structure imaginable. Here is the cheat sheet I wish I had when I started; so you can get it right the first time around. 𝟭. 𝗦𝘁𝗮𝗿𝘁 𝘄𝗶𝘁𝗵 𝘆𝗼𝘂𝗿 𝗺𝗮𝗿𝗴𝗶𝗻𝘀 A good rule of thumb: 20–30% of your gross profit margin as commission. (If your profit margin is 50%, that means affiliates get 10–15%.) 𝟮. 𝗞𝗻𝗼𝘄 𝘁𝗵𝗲 𝗶𝗻𝗱𝘂𝘀𝘁𝗿𝘆 𝗯𝗲𝗻𝗰𝗵𝗺𝗮𝗿𝗸𝘀 ↳ Retail/eCommerce: 5–15% ↳ Digital products/software: 20–50% ↳ Travel/hospitality: 4–10% 𝟯. 𝗖𝗵𝗼𝗼𝘀𝗲 𝗮 𝗽𝗮𝘆𝗼𝘂𝘁 𝗺𝗼𝗱𝗲𝗹 𝘁𝗵𝗮𝘁 𝘄𝗼𝗿𝗸𝘀 𝗳𝗼𝗿 𝗬𝗢𝗨 𝗯𝘂𝘁 𝗮𝗹𝘀𝗼 𝗿𝗲𝗺𝗮𝗶𝗻𝘀 𝗰𝗼𝗺𝗽𝗲𝘁𝗶𝘁𝗶𝘃𝗲 𝗶𝗻 𝘆𝗼𝘂𝗿 𝘃𝗲𝗿𝘁𝗶𝗰𝗮𝗹. Rev Share: ↳ Simple. Fixed percentage per sale. CPA/ PPS/ PPL: ↳ Reward leads or specific actions. Tiered: ↳ Higher volume = higher commissions. Hybrid: ↳ Base rate + performance bonuses. Check competitors: Are you paying enough to attract the right affiliates? 𝟰. 𝗞𝗲𝗲𝗽 𝗶𝘁 𝗰𝗹𝗲𝗮𝗿 & 𝗳𝗮𝗶𝗿 Allowed traffic sources: ↳ Define what is and isn’t acceptable (paid ads, email, social, SEO). KPIs expected: ↳ What matters? Conversion rate, lead quality, average order value? Fraud reporting: ↳ Set up detection tools, manual checks, and clear policies for invalid traffic. 𝟱. 𝗧𝗲𝘀𝘁 & 𝗮𝗱𝗷𝘂𝘀𝘁 Start at the lower end and scale up based on results. Affiliate feedback + conversion data = the ultimate guide to fine-tuning your structure. A winning commission structure is: ✅ Profitable for you (not just exciting for affiliates). ✅ Competitive enough to attract quality partners. ✅ Clear, transparent, and easy to track. When you get this right, your affiliate program scales fast without killing your margins. At Trackfinity we have set up all the tools you need to have very flexible (customizable) affiliate commissions at both the offer and the affiliate level. And let me tell you, getting the structure right from the start saves you months (or years) of headaches. What commission rates have worked best for you? Tell me the payment model and I will try to guess the vertical.

I recently conducted an informal poll about commission splits between Customer Success Managers (CSMs) and Sales teams, and the results were insightful. Over 95% of companies reported that Sales typically does not take a commission on renewals unless the renewal is especially challenging, often termed a "bounty renewal." In these cases, the Account Executive (AE) receives a commission percentage that does not impact the CSM’s compensation. Other key findings: Commission on upsells and renewals generally represents about 30% of a CSM's total compensation. Companies usually calculate the exact commission percentage by dividing this 30% target compensation by the total Annual Recurring Revenue (ARR) managed by the CSM. How should you determine the right metrics for compensation? Most organizations follow an evolving model: Early-stage Customer Success teams often base commissions on leading indicators like product adoption milestones and completed Executive Business Reviews (EBRs). More mature teams shift to lagging indicators like retention rates, expansion revenue, and Net Revenue Retention (NRR), once they've established effective leading-indicator processes. Examples of Metrics to Consider: Leading Metrics: Scheduled vs. completed Quarterly Business Reviews (QBRs) or EBRs Achievement of specific product adoption milestones Lagging Metrics: Net Revenue Retention (NRR) – the most commonly used metric Customer Retention Expansion Revenue Advocacy (typically better suited as annual or SPIFF-based metrics due to scalability challenges) To illustrate, here’s a clear and simple compensation structure example: Criteria for Achieving 100% Bonus: 90% Renewal Retention (50% weighting) 125% Net Revenue Retention (50% weighting) This approach focuses clearly on two primary goals: retaining customers and expanding revenue. Separating the retention goal ensures that significant churn isn't obscured by substantial upsells. For example, a CSM achieving 85% retention and 115% NRR would achieve approximately 93.22% of their total bonus goal. This simplified structure provides clarity and alignment, motivating CSMs to prioritize both customer retention and growth.

Today’s question; Hey Mark, Quick question: In the landscape industry, are commissions typically based on gross margin or gross revenue? And are base salaries usually low with higher commissions, or more balanced with smaller commissions and bigger goals? My response: When it comes to commission structures in the landscape industry (or related fields like mulch blowing), there are a few common approaches. Most commission plans are designed to reward performance while keeping the salesperson focused on profitability. 1. Commission Based on Gross Margin: This is one of the most common structures in landscaping and related services. Tying commissions to gross margin keeps salespeople motivated to sell profitably, rather than just focusing on volume. For example, a salesperson might earn 5-10% of the gross margin on a job, which incentivizes them to upsell services or negotiate better pricing. 2. Commission Based on Gross Revenue: While less common, some companies do use gross revenue as a basis, especially in simpler sales models. The commission rate here is typically lower, since gross revenue doesn’t account for costs, which can be risky. In these cases, companies might offer 1-3% of total sales. Base Salaries: Base salaries vary widely depending on the market and company philosophy. A lower base salary like $24,000 (or around $2,000/month) is common in more aggressive commission focused structures, where high performers can significantly boost their income with commissions. In these cases, the commission rate would be higher, and goals more challenging. However, many companies in the industry prefer offering a mid-range base salary ($40k-$60k) to provide more stability, with lower commission rates, often around 3-7% of gross margin or revenue. This helps attract quality candidates while still keeping them hungry for the upside through performance based earnings. Ultimately, the right structure depends on your goals: if you want to push for high sales volume and profit margins, a gross margin based commission with a lower base can work well. If you need stability and steady performance in a stable market with more focus on maintaining revenue vs. high growth, a higher base with smaller commission payouts might be a better fit.

Managing commission structures for partner teams presents unique challenges compared to those for direct sales teams.👇 Partner managers often work with a range of partners, each requiring distinct commission approaches. For instance, referral partners may pass leads to direct sales teams, raising questions about how best to split commissions between partner managers and sales teams. On the other hand, ISV (Independent Software Vendor) partners typically onboard their own sub-merchants, allowing partner managers to secure the entire commission for these platform-led opportunities. Implementing different commission models based on partner type can quickly complicate things for finance teams, making accurate tracking and payout calculations challenging. Consequently, commission automation becomes crucial to managing these varied structures efficiently, ensuring accuracy and minimising the administrative burden on finance departments. Partnership leaders please ensure that you build close relationships with your peers leading sales teams and also your finance teams, or you will end up on a slippery slope to commission structure purgatory…

Threshold vs. Draw Commission Systems in Recruitment, Which One Wins? Having worked under all three major commission structures: Discretionary, Threshold, and Draw, I can confidently say discretionary is the worst (we all know how that!). Between Threshold and Draw, it’s a close call, but for me, Threshold slightly edges it. Here’s why: A Threshold system allows recruiters to start fresh each period. Even if someone had a bad quarter, as long as they bill in the next one, they get paid, making it a great motivator. It also rewards strong billers with increasing commission percentages as performance improves. Another major advantage is its simplicity, no complicated formulas or concerns about payback. However, the downside is that it can demotivate those who struggle, as billing below the threshold means no commission at all. On the other hand, a Draw system offers the potential for very high commission percentages, especially for top billers earning over 60M JPY in Japan, who can access rates above 50%. However, it creates a sense of “debt” that some recruiters struggle with, as they start their careers in a deficit that may take a long time to clear. A bad period due to external factors like a recession or personal challenges can leave recruiters heavily penalized, making it a riskier option. At the end of the day, commission structures matter, but billing is what really changes the game. Low performance leads to little or no commission, regardless of the system. If you’re consistently billing, the structure starts to matter less unless it’s discretionary, in which case, well… you’re just getting screwed.

There were years at Botify where ~50% of our new bookings came from upsell revenue. Going into specific years, we saw that we had this potential but in order to maximize, we had to ensure we had the right comp plans.   Here’s the different methods we explored: 𝟭) 𝗡𝗥𝗥: Have a quarterly bonus be based on a NRR target. I usually set a table with different attainment levels based on the performance level. Pros: ◾ It blends upsell and renewal revenue into one target making it simple to follow. ◾ It also guides the team to a core business metric. And at the end of the day, if these targets are hit, you are seeing nice growth from your client base. Downside: ◾ Can vary a lot from one rep to the next depending their client base. ◾ You might have some reps lean heavily in one area which (some reps may crush renewals but not generate any upsell rev which could hurt new bookings but still hit OTE). This plan will probably give you the most balance. 𝟮) 𝗨𝗽𝘀𝗲𝗹𝗹 𝗤𝘂𝗼𝘁𝗮/𝗥𝗲𝗻𝗲𝘄𝗮𝗹 𝗚𝗼𝗮𝗹: You give the rep a quota/commission rate plan and then a renewal rate goal by quarter and a corresponding table based on attainment to that goal. Pros: ◾ Allows you to dial in on both a new bookings goal and renewal goals. ◾ You can shift the % of OTE on the variable comp side based on what is more important to the business (renewals vs upsells). Downside: ◾ TAM can be finite for upsell attainment. ◾ One person’s book may be easier to hit than another for each of these goals. This is the structure I have used the most. 𝟯) 𝗦𝘁𝗿𝗮𝗶𝗴𝗵𝘁 𝗖𝗼𝗺𝗺𝗶𝘀𝘀𝗶𝗼𝗻: In this model, you pay a commission rate on both upsells and renewals (think .5 - 1%). Pro: ◾ Very easy to calculate for reps and finance. Downside: ◾ A rep could secure a big renewal, get paid a healthy amount but still be way off the renewal target ◾ At risk renewals could be ignored This plan is more advantageous for a rep but I have seen it make sense for the business. All in all, you may change comp models over time as the needs of the business change. The most important thing you want to do when you are fleshing these models out is to make sure they are attainable but also work with finance to make sure they make sense for the business.

Is Your Commission Plan Driving Sales—or Driving Sales Reps Away? How can you ensure your commission plan incentivizes performance, retains top talent, and drives revenue growth? Here's what you need to consider. 🎯 1. Clarify the Goals and tie them to the Rewards You want your reps to hit the quota in a certain way. ARR matters but it’s not the only way to go. Multiyear deals, Payment terms (upfront vs monthly), New Product, Contract Value, etc. all this matters as well. ✅ Pick 3 items maximum and tie them to the rewards. ✅ Goals & targets must stand in 3 bullets points only. It gets even more complex for SDRs and CSMs, where even more KPIs exist. So make sure you select only the ones that actually matters. 💰 2. Choose the Right Commission Structure Not all commission structures are created equal. The right approach depends on your sales cycle, team roles, and business model. Here are some effective structures: 🔹 Tiered Commission – Drives overperformance through increasing rates at higher targets 🔹 Thresholds & Cliffs – Protects from paying in case of underperformance, but can create side effects 🔹 Kickers & Boosters – Accelerates the commissions if additional conditions are met (multi-year, etc.) The key? Match the structure to your team's goals to drive the right behaviors. ⚖️ 3. Promote Fairness and Transparency Nothing kills motivation faster than unclear commission calculations. When sales reps don't trust the system, they focus more on questioning their earnings than closing deals. 🔹 Make commission structures easy to understand 🔹 Set clear, predefined rules that eliminate disputes 🔹 Offer real-time visibility into earnings and targets 📈 4. Align the Plan with Strategic Priorities Your commission plan should drive the right kind of sales, not just any sales. Consider your priorities: ✔ Expanding into new markets ✔ Increasing recurring revenue ✔ Driving long-term customer retention Your commission structure should support these goals. For instance, if retention matters most, reward renewals more than expansion for Accounts Managers. ⏳ 5. Simplify Administration & Automate Calculations Manual commission management wastes time and invites errors. Here's where modern tools make a difference. Tools like Qobra can: ✅ Automate commission calculations ✅ Provide real-time dashboards for reps ✅ Reduce errors and disputes The outcome? More time selling, less time wrestling with spreadsheets. 🔄 6. Be Flexible & Adjust Regularly A commission plan isn't static. As markets shift, business goals evolve, and sales strategies change, your commission structure should too. 📌 Gather regular feedback from your sales team about what works 📌 Fine-tune targets, accelerators, and commission rates to maintain motivation 📌 Experiment with new structures to optimize results The most effective commission plans evolve alongside your business growth. 💬 How does your company handle sales commissions? Share your experiences in the comments!

🚀 It’s 6PM—here’s your train commute read! 🚉 ------------------------------------------------------------------ 💼 Recruiters, are you aware of your own earning potential? We ask candidates about their salary all the time—“What’s your base? Bonus? Expected earnings?” No hesitation. But when it comes to our own earnings, many recruiters hesitate. From my conversations with recruiters in Japan, many aren’t fully aware of salary benchmarks in our industry. But shouldn’t we be just as informed about our own earning potential? Here’s are some indications based on what i gathered over the years. 💰 Base Salary Ranges (JPY): 🔹 Individual Contributor (Associate to Senior Consultant): 3.5M–7M 🔹 Manager to Director Level: 7M–13M And then there’s commission—the part that really impacts earnings. Here are the three most common commission schemes: 1️⃣ Threshold Commission Scheme 💡 How It Works: You must hit a minimum threshold before earning commission. ✅ Pros: Simple and transparent—no complicated formulas. Gives recruiters a fresh start each period. Motivates strong performers with increasing commission percentages. ❌ Cons: If you don’t hit the threshold, you earn nothing. A few bad months can mean long periods without commission. 2️⃣ Draw System 💡 How It Works: You receive an advance (draw) against future earnings. If your revenue doesn’t exceed the draw, you owe the company the difference. ✅ Pros: Offers high commission percentages (30%–60% on average). Can be lucrative for top billers with consistent revenue. ❌ Cons: Creates a "debt"—you must pay off the draw before earning. A bad month puts you in the red and delays commission. Riskier in fluctuating markets. 📝 Note: Your minimum draw is based on your salary + extra costs incurred by the firm. This means: 👉 Lower base salary = Faster commission eligibility. 👉 Higher base salary = Longer time before earning commission. 3️⃣ Discretionary Bonus Scheme 💡 How It Works: Commission is based on company performance and management discretion rather than a set formula. ✅ Pros: Rewards top performers beyond standard commissions. Can incentivize teamwork and company success. Provides additional earning potential. ❌ Cons: Not guaranteed—depends on company performance. Lack of transparency—payouts can feel unpredictable. Can lead to frustration if expectations aren’t managed properly. For more detailed information about the compensation breakdown at each level (Associate Consultant, Consultant, Senior Consultant), feel free to reach out. I’m happy to have a chat and share insights! 🚀 In the end, transparency is key. As recruiters, we should have open conversations about compensation and market expectations. After all, if we’re advising candidates on salary matters, shouldn’t we be fully informed about our own compensation packages too? 🤝

How to set up the right commission structure for your team: I’ve seen and tested out many commission structures. They usually share a common attribute: Lack of incentives. The challenge is to match the structure with your goals. In my business, I like to offer higher splits to keep my team motivated. These are the 5 most common structures: 1. Straight Commission. This structure pays based on sales made only. No base salary. It makes sense if you’re a scrappy startup needing to sell without a lot of cash on hand to pay employees upfront. 2. Tiered Commission. Paying out bigger commissions as contract values increase. This is good for rewarding your top performers. But you need to keep good track of who is doing well. 3. Single-Rate Commission. It pays out a fixed commission for each sale, no matter how big the deal is. This is easy to keep track of and helps save money. But the problem is that it treats all sales the same way. 4. Gross Margin Commission. It pays commissions based on the company's gross revenue. Rather than the contract's value. As a CFO, I like this because it helps with the problem of giving too many discounts. 5. Residual Commission. It rewards reps for securing long-term clients and upselling them. But be careful with this one, especially if another team is doing most of the work to keep clients. Each commission structure has its benefits and drawbacks. What works best for your business will depend on the behavior you’re trying to drive among other factors. — I’ve helped 75+ SMBs with their finances. If you want to chat about your business numbers, shoot me a DM.

Scaling your business means growing sales, and most of the owners I work with expand their sales team at some point during our engagement. One of their biggest decisions is deciding how much of a salesperson's compensation should be salary vs. commission. This decision affects everything from your sales team’s motivation to the company’s bottom line and future growth. There’s no one-size-fits-all ratio—choosing the right balance depends on your goals, sales cycle, and industry. Here’s how Salary-Heavy vs. Commission-Heavy models work: 1. Salary-Heavy A higher salary with a lower commission rate works well in industries with long sales cycles or complex products, where relationship-building and expertise are key. When a salesperson knows their paycheck is stable, they can focus on nurturing leads without feeling pressured to rush a sale. This model also suits situations where client retention and satisfaction drive profitability, like professional services or technology solutions. 2. Commission-Heavy A higher commission rate with a lower base salary motivates quick, high-volume sales. This structure is effective in fast-paced, transaction-oriented industries, like retail or insurance, where volume is critical to growth. Salespeople in this model tend to be highly motivated by performance and thrive in competitive environments. However, commission-heavy models can lead to burnout or high turnover if not carefully managed. 3. Balanced Model Most of the businesses we work with opt for a balanced model—a moderate salary with a solid commission component. This approach combines stability with performance incentives, making it ideal for sales environments that require a mix of relationship-building and deal closing. A balanced model is often a fit for industries where sales cycles vary, or where adapting to client needs is a key part of the sales process. Regardless of the model you choose, don’t forget to track leading indicators so that you can better predict future sales success. Metrics like the number of new leads generated, initial meetings held, or proposals submitted give you insight into the future pipeline. These early indicators allow you to identify trends and make adjustments to keep the team on track. They also let you better make informed decisions on compensation adjustments and ensure alignment with growth goals. Compensation is more than just motivating sales—it’s a tool to shape the direction of your sales strategy, improve profitability, and increase the value of your business. #entrepreneur #strategy #businessgrowth #entrepreneur