Your sales commission structure is your real sales strategy. People do what they're paid for.
Base plus commission, tiers, accelerators, margin-based pay, team bonuses and draws each fit a different stage.
The costly mistakes are quiet ones: paying on deals that churn, capping your best people, too many metrics, changing the plan mid-year.
A good plan fits on one page, and a rep can work out their own check without asking finance.
You told the team to sell bigger, longer deals. Then you paid them the same for a quick small one.
Guess which deals they brought in.
That's not a people problem. Your reps are doing exactly what you asked, just not what you said. The plan said one thing and the paycheck said another, and the paycheck won. It always does.
Most founders set up commission once, early. Then the business changes and the plan doesn't, and it quietly pulls the team somewhere nobody chose.
The short version
A sales commission structure is the set of rules for how your salespeople earn variable pay: what they get paid on, how much, and when. The right one pays for the revenue you actually want (profitable deals with customers who stay), is simple enough for a rep to calculate, and stays fixed for the whole plan period.
Your comp plan is your real sales strategy
Here's what most people won't tell you: your strategy isn't the slide deck from the offsite. It's whatever your sales compensation plan rewards.
Pay on revenue booked, and you'll get revenue booked, including the discounted deals and the customers who leave in month four. Pay on new logos only, and nobody will touch an upsell. Pay the same rate on every product, and reps will sell whatever is easiest, not whatever is most profitable.
None of that is bad behavior. It's rational behavior. A good salesperson figures out the plan faster than you wrote it.
Reps don't follow your strategy. They follow your commission plan. So make them the same thing.
That's why commission is one of the first things I look at when I step in as a fractional CRO. If the team is busy but revenue is flat, the plan is often paying for the busy part.
What goes into a sales compensation plan
Before you pick a structure, get the building blocks straight. Every plan answers the same five questions.
- The split. How much is base salary and how much is variable. Hunters who close new business usually carry more variable. Account managers who keep customers usually carry more base.
- The target. The number a rep is expected to hit, and the pay they earn when they hit it. If the target is wrong, the rest of the plan doesn't matter. (I wrote a full guide on how to set sales targets.)
- The measure. What actually triggers pay: booked revenue, collected cash, gross margin, new logos, renewals.
- The rate. The percentage or amount paid per dollar or per deal, and whether it changes past certain points.
- The timing. When commission is earned and when it's paid. On signature, on first invoice, on cash in the bank, or after the customer has stayed a set number of months.
Get those five on one page. If you can't, the plan is too complicated.
Types of sales commission structures (and when each fits)
There's no best structure. There's the one that fits your stage, your sales cycle and your margins. Here are the common ones side by side.
StructureHow it paysFits whenWatch out
Base plus commissionA salary plus a flat percentage of what the rep sellsMost B2B teams, especially with longer sales cyclesA flat rate pays the same for a great deal and a bad one
Tiered commissionThe rate steps up as the rep passes set levelsYou want reps pushing past target, not coasting at itToo many tiers and nobody knows what they've earned
AcceleratorsA higher rate on everything above 100% of targetYou want your top people to keep going late in the yearSet the target too low and you overpay for normal work
Gross margin basedCommission on profit, not on the top-line priceReps control pricing or discounts, or margins vary by productReps need to see margin, or they can't trust the math
Team bonusA shared pool when the team or company hits its numberDeals need several people, or you want shared ownershipOn its own, top performers carry everyone else
Draw against commissionAn advance paid early, then taken back from future commissionNew reps ramping up, or long cycles before the first dealA recoverable draw that keeps growing breaks morale
Commission only? It shows up in some industries, but I rarely see it work for B2B companies with real sales cycles. The people who'll take it are often the ones who can't get a base anywhere else, and they'll chase whatever closes fastest.
Most good plans combine two or three of these. A common one: base plus commission, a tier or accelerator above target, and a small team bonus tied to the company number.
What the math looks like, in plain numbers
Here's an example. The numbers are made up to show the mechanics, not a recommendation for your business.
Say a rep has a quarterly target of $300K, a 10% commission rate up to target, and a 15% rate on everything above it. Here's the same plan in two different quarters.
Example quarter A: hits target
Sold this quarter$300K
10% on the first $300K$30,000
15% above target$0
Commission$30,000
Example quarter B: beats target
Sold this quarter$400K
10% on the first $300K$30,000
15% on the next $100K$15,000
Commission$45,000
Notice what happens. Selling a third more pays half again as much. That's the point of an accelerator: the extra effort late in the quarter is worth it to the rep, and the extra revenue is worth it to you.
Now the gross margin version of the same idea. Say two deals are both $100K. One closes at a 50% margin, the other at 25% after a heavy discount. Pay 10% of revenue and both earn the rep $10,000. Pay 20% of margin instead, and the first deal earns $10,000 while the discounted one earns $5,000. Same rep, same effort, very different message about discounting.
The commission plan mistakes that quietly cost revenue
None of these blow up in a month. They leak slowly, which is why they survive.
Paying on bookings that churn
The rep gets paid when the contract is signed. The customer leaves before the first renewal. You paid full commission on revenue you never really kept. Fix the timing: pay part on signature and part once the customer has paid or stayed a set time, or build a clawback window into the plan. It also pushes reps to bring in better-fit buyers, which starts with how to qualify leads properly.
Capping what people can earn
A cap tells your best rep to stop selling once they hit it. Some park deals until the next period. Others leave. If you're worried about a windfall from one giant deal, handle that with a clear large-deal rule, not a cap on everyone.
Too many metrics
Five measures with five weights means nobody focuses on any of them. Reps can't tell what matters, so they pick the easiest one. Keep it to two, three at most.
Changing the plan mid-year
Nothing burns trust faster. The moment you change rates or targets partway through, every rep starts wondering when you'll do it again. Set the plan, write it down, and live with it until the period ends. Then fix it.
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How to build a sales commission structure that pays for growth
When my team and I rebuild a commission plan, we work through it in this order.
- Start with the revenue you want. Not the revenue you have. More new logos? Bigger deals? Better margin? Customers who renew? Pick the one or two that matter most this year.
- Choose the measure that matches. If margin matters, pay on margin. If retention matters, tie part of the pay to customers staying.
- Set targets people believe in. A target nobody thinks is reachable isn't motivating. It's ignored.
- Pick a structure from the table above. Usually base plus commission, with an accelerator above target.
- Run last year's deals through it. Before you launch, check what each rep would have earned. If the results surprise you, the plan isn't ready.
- Write it on one page. Rates, targets, timing, clawbacks, large-deal rules, what happens when a rep leaves.
- Explain it in person. Walk each rep through their own example. Questions now save fights later.
One note: commission plans touch employment and wage rules that vary by state and country, so have yours checked against local law before it goes out.
And remember that pay is only one lever. It sets direction, but it won't fix a team that doesn't believe in the product or the leadership. More on that in how to motivate a sales team.
When to change your commission plan (and when not to)
Plans should change. Just not on a whim, or mid-period.
Good reasons to redesign at the next plan period:
- Your top reps earn about the same as your average ones.
- Discounts keep growing and margin keeps shrinking.
- Customers brought in by sales leave faster than they used to.
- You've launched a new product and nobody is selling it.
- Reps regularly ask finance to work out their check.
Bad reasons: one rep had a huge quarter and you feel you overpaid, or you want to save money on commission this year. If a rep earned a big check under the plan you wrote, they brought in the revenue that paid for it. Honor it, then improve the plan next period if you need to.
Pay is one part of 20
Sales is all or nothing. I think of it as about 20 parts across strategy, team, tools and systems, operations, and brand and marketing. Commission is one of them, and it pulls on all the others.
A strong plan can't save a weak target. And an accelerator can't help if the CRM can't tell you what was sold.
That's why I don't fix comp plans on their own. In 25+ years of building B2B revenue, including leading teams of 80+ people, the plans that held up were the ones that fit everything around them.
If you want a second set of eyes on yours, start with the free revenue review. I'll show you where your revenue is leaking, and whether your pay plan is part of it.
Written by Joe Greco
Fractional CRO with 25+ years building B2B revenue. I lead revenue for a small number of companies at a time, with a network of 40+ specialists behind me.
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