Commission Structures for New Sales Teams

IMO more orgs should tie AE comp to what happens AFTER signature. I mean, your reps get paid at close. Then they tend to disappear. CS inherits an overpromised deal. Customer realizes 8-week implementation was actually 16 weeks. ROI projection was complete bullshit. 6 months later customer submits their churn notice and your rep's already spent their commish on a bunch of On Clouds and a fancy humidor. Comp plans reward the signature. Period. Doesn't matter if customer goes live. Doesn't matter if they hit their goals. Doesn't matter if they expand or churn. Just get the signature and move on. So that's exactly what your reps optimize for. You can easily set up a 4-tier commish structure that fixes this: Tier 1 - Base commission at signature: 8% of ARR. - Rep closes deal. - Gets baseline comp immediately. Tier 2 - Go-Live bonus (+1%): Total 9%. - Customer completes onboarding within agreed timeline. - Must be actively using core features. - CS confirms product deployment. Tier 3 - Success metric achievement (+1%): Total 10%. - Customer hits outcome from business case within 90 days. - Examples: cost savings target, efficiency gain, revenue goal, etc. - Must be documented and verified. Tier 4 - Expansion unlock (+2%): Total 12%. - Customer adds seats, upgrades tier, or buys additional product within 12 months. - Minimum 20% ARR expansion from original deal. - Rep also earns standard 8% commission on the new expansion ARR. So, what changes with this? Reps start asking different questions during sale: - "What does success look like 90 days after launch?"  - "Who's responsible for implementation on your side?"  - "What would cause this to fail internally?" They stop overselling. They qualify harder. They care about customer readiness because their comp depends on it. They stay engaged post-sale. They check in with CS. They help remove blockers. They build relationships that lead to expansion. An SA member we worked with rolled this out a bit less than 18 months ago. Churn dropped 22%. Implementation time dropped 31%. Expansion revenue doubled. Same reps. Same product. Different incentives. Some reps pushed back: "Why should I get penalized if customer doesn't implement properly?" The answer: you're not getting penalized. You're getting baseline commission at close. Bonus is for making sure they succeed. If you're consistently selling to customers who can't implement or won't see value, that's a qualification problem. Fix it. Best reps loved it. They were already doing this work. Now they get paid for it. Mediocre reps weren't huge fans. They were used to dumping deals on CS and running. Suddenly they had skin in the game. Three of them quit. Fine. Don't let the door hit you in the ass on the way out. If you pay reps to care about customer outcomes, they'll start caring about customer outcomes. Plus, your CS team will appreciate not inheriting disasters anymore.

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! 👇

One of my first moves as Chief of Staff: fix the sales commission structure. Most companies pay lower commissions on renewals. 
They think renewals are easy and automatic. That’s bullsh*t. Renewals face churn risk every cycle.
 Customer success can drop the ball.
 Product bugs appear.
 Competitors undercut.
 Budget cuts hit. Economic shifts kill deals.
 Sales owns the outcome but controls almost none of it. I push for the same commission rate on renewals as the initial close.
 Better: pay on total contract value (TCV) from day one.
 Initial sale + all renewals and expansions at the same rate. Why it works: Reps stay engaged through the life of the account They fight harder to prevent churn They upsell naturally because it pays the same Team morale stays high; no resentment over “easy money” tiers Results: First: switched to flat 20% on TCV. Renewal rate rose 18% in 12 months. Pushed clients into 3 & 5 Year deals. Second: same rate on initial and renewal. Net retention jumped from 92% to 134%. Reps closed 25% more expansions. Your competitors cut renewal commissions.
 They lose deals they could have saved. Pay full rate on TCV.
 Align incentives with reality.

🚀 How to Build a High-Impact Sales Commission Plan 1. Set Tiers & Bonuses to Drive Performance 74% of reps with capped commissions missed targets, while 37% of those with uncapped commissions exceeded them. What does it mean? Reward success! ✔ Example: - 100% quota = 5% commission - 120% quota = 7% commission - 150% quota = 10% commission ✔ Bonuses for Strategic Behaviors: - Cross-selling - Fast deal closure - Customer retention 💡 Pro Tip: Tiers should be ambitious but achievable. Use bonuses to encourage key sales behaviors. 2. Build in Control & Correction Mechanisms Market conditions change. A great commission plan adapts to stay effective. Best Practices: ✅ Quarterly Performance Reviews – Adjust goals based on data ✅ Sales Team Feedback – Identify pain points & motivation blockers ✅ Pre-Planned Crisis Adjustments – Stay prepared for downturns 💡 Pro Tip: Use real-time tracking tools to monitor KPIs & adjust before problems arise. 3. Test the Plan Before Full Rollout Before launching, run financial simulations to ensure profitability. ✔ Example: If reps overperform, will commission payouts remain sustainable? Get feedback from sales reps & managers before rolling out company-wide. 💡 Pro Tip: The best commission plans balance motivation, fairness, and profitability.

Your "generous commission structure" may actually be hurting recruitment. 20% commish on a $10k product sounds great. But here's the problem: If your product and pitch aren't proven, that commission means nothing.  Your excited new rep will make 50 calls, get no bites, and churn in a month. Reps don't join for commission %. They join for commission $. Predictable, provable income. Great reps ask: \- What's the average close rate? \- How many opps will I get? \- What's the average deal size? \- How long is the sales cycle? If you can't answer confidently, that sexy commish is just a mirage. And if you want to attract GREAT reps, focus on: 1\. Winning pitch 2\. Consistent pipeline  3\. Provable commissions Then show reps the money they'll make (not the % you'll pay).