Variable Commission Plans

Most AEs think the fastest path to $500K/yr is mastering closing. It’s not. The #1 factor that determines if you’ll ever see that kind of money? Your comp plan. Here’s a breakdown of what a “good” comp plan looks like: I’ve coached thousands of sellers. I’ve seen every comp plan under the sun. And here’s the truth: making $500K–$1M in tech sales isn’t just about hustle, mindset, or skill. It’s about driving the right vehicle. If you’re trying to win a Formula 1 race in a Prius, it doesn’t matter how great of a driver you are. Same with sales. You need the right plan, the right OTE, the right accelerators. Here’s the breakdown of what “good” looks like: 1. OTE (On Target Earnings). SMB → $100K–$150K Mid-Market → $150K–$200K Commercial → $200K–$250K Enterprise → $250K–$350K Strategic → $350K+ (yes, I’ve seen $400K OTEs) A healthy split is 50/50 base and variable. If you’re $200K OTE, $100K should be salary, $100K commission. 2. Quota to OTE ratio. This is EVERYTHING. Good comp plans follow the “6x rule.” Your quota should be ~6x your OTE. $150K OTE? Quota ~ $900K. $300K OTE? Quota ~ $1.8M. If you’re staring at a $200K OTE with a $2M quota… you’re underpaid. Period. 3. Commission percentage. Here’s how you know if your plan is good: Variable ÷ Quota = Commission %. 10%+? Solid. 5%? You’re basically working twice as hard for the same money. 4. Accelerators. This is where reps get rich. Great plans pay more the further you blow past quota: 100–150% = 1.5x 150–200% = 2x 200%+ = 2.5x Do the math: An Enterprise AE with a $300K OTE, $1.5M quota, and strong accelerators can hit $900K+ by getting to 300% of plan. That’s not a pipe dream. That’s how you turn a $300K “job” into a $1M “career.” TAKEAWAY Stop blaming yourself when you’re stuck at $150K. Sometimes it’s not you—it’s the plan. Top earners don’t just sell better. They pick the right vehicle, with the right comp plan, and then step on the gas. Choose wisely. Because the wrong comp plan = capped potential. The right comp plan = $500K+ career. Your plan matters. A lot.

Over my 13+ year career in Customer Success, if I’ve learned anything, it’s this: People do what you pay them to do. If you want your CSMs focused on activity, pay them for activity. If you want them focused on outcomes, comp them on outcomes. If revenue is the goal, then revenue needs to be part of the comp plan. Yet too often, I see teams being told to do one thing… and paid to do another. That’s not a misalignment. That’s a failure in leadership. Compensation drives behavior. Maybe not for everyone, but for a lot of people. Across 5 different companies, I’ve designed 5 different comp models. Same goal every time: motivate and reward. But every model looked different, because every team had different priorities. I've tried: ▶️ Bonuses tied to team performance ▶️ Single-metric variable comp ▶️ Multi-component sliding scales ▶️ SPIFFs instead of formal variables There’s no one-size-fits-all model in CS. But there is one universal truth: You have to be crystal clear on what you're trying to achieve and put your money where your goals are. Thinking about reworking your comp plan? Now’s the time to start shaping your Q4 proposals or FY 2026 model. Here are 5 questions to get you started: 1️⃣ What behavior do you want to incentivize? 2️⃣ Are your goals individual, team-based, or hybrid? 3️⃣ What metrics actually reflect CSM impact? 4️⃣ Can you measure those metrics fairly and consistently? 5️⃣ Will your model reward the right outcomes not just the easiest ones? It’s not just about paying people. It’s about paying attention. Your comp plan is one of the loudest signals you send your team. It tells them what matters. It shapes their decisions. It defines your priorities, whether you like it or not. So if you're not intentional with it, you're leaving performance (and morale) up to chance. Let me say it louder for the folks in the back: Compensation is strategy. And it’s time we start treating it that way. What’s the biggest comp challenge you’ve faced in Customer Success?

In recent weeks, I’ve had a surge of inquiries about structuring commission and OTE (On-Target Earnings) for Sales Executives and BDMs. It’s a crucial topic—get it right, and you’ll attract and retain top talent. Get it wrong, and you risk demotivated sales teams and missed targets. So, how should you approach it? 1. Start with the Total Earning Potential (OTE) OTE is a combination of base salary and commission. A competitive OTE should align with industry standards and reward high performers. The typical ratio varies: ✅ 50/50 Split – Common in enterprise/B2B sales. ✅ 60/40 or 70/30 – More common for transactional sales, where a higher base ensures stability. 2. Define Clear, Attainable Targets A common mistake is setting unrealistic sales targets, leading to disengagement. The best practice? 🎯 Set a realistic baseline target that at least 60-70% of your team can hit. 🎯 Provide accelerators for over-performance (e.g., higher commission rates after 120% of quota). 3. Choose the Right Commission Model Different structures work for different sales cycles: 💰 Fixed % on Revenue – Simple and effective for high-margin products. 📈 Tiered Commission – Motivates overachievement (e.g., 5% up to target, 10% beyond). 🏆 Profit-Based – Ideal when margins vary widely. 4. Avoid These Common Pitfalls ❌ Capping Commission – Nothing kills motivation faster! ❌ Complex Structures – If your team can’t calculate their earnings easily, it’s too complicated. ❌ Changing the Plan Mid-Year – This damages trust and retention. 5. Regularly Review and Benchmark Against the Market The sales landscape is constantly evolving. Reviewing your commission plan against market trends and competitor packages ensures you remain competitive. 💡 Looking to structure an effective commission plan for your sales team? Let’s talk—I’ve helped many companies find the right balance to drive performance while attracting top talent. What’s working for your team? Drop a comment below! 👇

A too common blunder when crafting a commission plan: Starting with the payout % you want to pay—and building backwards from there. Your payout % is an output—not a starting point. It’s determined by the variable portion of the OTE and the quota. Not the other way around. Here’s how to get in the right ballpark: -Benchmark OTE using market comps that reflect the role’s scope and sales motion -Define the base/variable split (50/50, 60/40) -Set quotas. A "finger in the air" starting point is a 2x OTE annual quota, ramping up to 5x+ as you scale. (Adjust based on ACV, average sales cycle, inbound demand etc.) (Variable Comp ÷ Annual Quota) x 100 = Payout % Don’t reverse-engineer your plan from the payout % you think “feels right.” Let the math and market lead you there.

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!

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.

Spoke with a leader the other week who began tying comp / SPIFFs to CRM hygiene. Well, to not only that, but a bunch of other out of the box stuff too: 1. Data hygiene incentives: $500 quarterly bonus for maintaining 95%+ opportunity accuracy. Next-step updates within 24 hours of customer contact. MEDDICC qualification completed before Stage 3 progression. They (understandably) got frustrated by the repeated misses in forecasts, so put some money behind maintaining integrity of the data. 2. Certification accelerators: - Complete discovery training by day 30? Get 25% quota relief in month two. - Finish competitive battlecard certification early? Unlock higher commission rates on displacement deals. Believe it or not, reps actually became excited to join their internal enablement sessions. 3. Cross-functional behavior rewards: They also tied CS variable comp to post-sale adoption milestones triggered from AE handoff notes. Now AEs actually document implementation requirements and success criteria. I also know of another company that pays EXTRA commish for deals where product and sales collaborate on technical discovery. 4. Pipeline health SPIFFs: Not just volume-based, but weighted for quality. - $1K bonus for opportunities with 3+ contacts engaged. - Extra accelerators for deals with documented champion validation. - Higher kickers for pipeline with realistic close dates and defined next steps. 5. Long-term outcome alignment: - Bonuses tied to 90-day customer health scores. - Commission clawback protection based on first-year retention rates. - SPIFFs for deals that expand within 12 months. The framework is pretty simple: Map your strategic priorities to compensation triggers. Want multichannel pipeline? Pay extra for opportunities sourced through multiple channels. Want better territory planning? Tie comp to account penetration metrics and relationship mapping. Want quality over quantity? Weight commission rates based on deal profitability and customer lifetime value. The principle is bulletproof: People do what they're paid to do.

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.

I made my fair share of mistakes when building commission plans for sales reps. One of the biggest: I only paid SDRs for generated revenue from their opportunities, not for booked meetings or sales accepted opportunities. Not smart. I failed to recognise one key principle: People have to be in control of their own commission. 100%. In the case above, SDRs were dependent on AEs. Which caused a lot of friction in the team. And was frustrating for SDRs. The other key principles of sales commission plans: 1/ Sales reps have to be able to calculate their commission for every opportunity in their funnel. From their head. If you have a salary of 200k, 100k variable and 100k fix (50:50 split). And the target is 800k a year. Write on the commission sheet: 12.5% for every dollar of generated revenue. That is easy to calculate. 2/ No cap and no minimum amount to get commissions. Both of these lead to really stupid behaviour. If you have a minimum amount to reach commissions, reps will stack up deals and make sure they get all of them in one quarter. If you have a cap, reps will make sure deals are prolonged to another quarter in case they already reached that cap in a given quarter. Both make no sense for the business. The one additional benefit that makes sense are accelerators: If reps reach 100% of their commission, they get 15% (instead of 12.5%) on any additional deal. This way, people will speed up to get more deals in. Makes sense for all. 3/ Payments should be as immediate as possible. For SDRs: Monthly. For AEs quarterly. 4/ Commissions are the key tool to change behaviour of reps. Fast. You key strategic goal has to be the core of the plan. If you need ARR, you have to pay for ARR. If you need any revenue, pay for any revenue. If you need to expand into a different market, pay double for that market. Here is an example of a commission sheet: Anything I missed?

Great comp plans fit on a sticky note. Bad ones need a whiteboard. A salesperson shouldn’t need a PhD to figure out their commission. They need a straight line from effort to earnings. Here’s a real-world AE plan, broken down so it’s impossible to misunderstand: The Annual Plan: $75K base / $150K OTE / $750K quota The Monthly Pace: Hit a $62.5K quota by closing 8–9 deals at an average of $7.5K each. The Commission: 10% on all new business. Paid from dollar one. No decelerators. The Kicker: 13% total commission on all revenue above 120% of the monthly goal. That’s it. The rep knows their base, their target, their pace, and the upside for overperformance. Clarity creates focus. Focus drives results. What’s the most confusing comp plan you’ve ever had to deal with? #Sales #SalesLeadership #Compensation #Startups #SaaS