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?

𝗛𝗼𝘄 𝘁𝗼 𝗲𝘃𝗮𝗹𝘂𝗮𝘁𝗲 𝗮 𝗰𝗼𝗺𝗽𝗲𝗻𝘀𝗮𝘁𝗶𝗼𝗻 𝗽𝗹𝗮𝗻 𝗯𝗲𝗳𝗼𝗿𝗲 𝘆𝗼𝘂 𝗷𝗼𝗶𝗻 (𝗖𝗵𝗲𝗰𝗸𝗹𝗶𝘀𝘁) Today’s topic matters! The wrong comp plan set you back a year. Last week I talked to an AE joined for a shiny OTE. After six months he earned 42% less than planned. Skill was not the issue. The plan was. Here is the shortest complete checklist to pressure test a plan before you sign. 𝟭. 𝗔𝘁𝘁𝗮𝗶𝗻𝗺𝗲𝗻𝘁 𝗿𝗲𝗮𝗹𝗶𝘁𝘆 Ask for the last four quarters. Percent at 100%. Percent at 80 to 99%. Percent below 80%. If under 30% hit quota, treat OTE as inflated. 𝟮. 𝗤𝘂𝗼𝘁𝗮 𝘃𝗲𝗿𝘀𝘂𝘀 𝗱𝗲𝗮𝗹 𝗽𝗵𝘆𝘀𝗶𝗰𝘀 Get average deal size. Average cycle. Win rate. Example. Quota 600k ARR. Average deal 30k. That is 20 deals. At 20% win rate you need about 100 qualified opportunities. With 90 day cycles and a three month ramp, is that volume realistic for this territory and motion. 𝟯. 𝗣𝗮𝘆 𝗺𝗶𝘅 𝗮𝗻𝗱 𝗮𝗰𝗰𝗲𝗹𝗲𝗿𝗮𝘁𝗼𝗿𝘀 Confirm base to variable split and the accelerator table. Healthy example. 60 to 40 mix. 1.5x at 110%. 2.0x at 130%. Red flags. No accelerators above 100%. Decelerators below 70%. 𝟰. 𝗣𝗶𝗽𝗲𝗹𝗶𝗻𝗲 𝘀𝗼𝘂𝗿𝗰𝗲 𝗮𝗻𝗱 𝗰𝗿𝗲𝗱𝗶𝘁 Share of inbound. Outbound. Partner. Who gets credit on multi touch deals. If you self source, credit must favor the originator. SDR handoffs should not dilute commission. 𝟱. 𝗗𝗶𝘀𝗰𝗼𝘂𝗻𝘁 𝗮𝗻𝗱 𝗺𝗮𝗿𝗴𝗶𝗻 𝗿𝘂𝗹𝗲𝘀 Ask how discounts change the commission rate. If a 20% discount halves payout, assume frequent discounting will crush OTE. 𝟲. 𝗥𝗮𝗺𝗽, 𝗰𝗹𝗮𝘄𝗯𝗮𝗰𝗸𝘀, 𝗰𝗮𝗽𝘀 Ramp length. Ramp quota. Draw recoverable or non recoverable. Clawbacks for churn or late payment. Any cap means haircut your OTE by historical impact. 𝟳. 𝗧𝗲𝗿𝗿𝗶𝘁𝗼𝗿𝘆 𝗮𝗻𝗱 𝗰𝗵𝗮𝗻𝗴𝗲 𝗰𝗮𝗱𝗲𝗻𝗰𝗲 Named accounts and whitespace. How often territories and plans changed in the last 12 months. Frequent change equals earnings volatility. 𝟴. 𝗠𝘂𝗹𝘁𝗶 𝘆𝗲𝗮𝗿 𝗮𝗻𝗱 𝗲𝘅𝗽𝗮𝗻𝘀𝗶𝗼𝗻 𝗰𝗿𝗲𝗱𝗶𝘁 Paid on TCV or only first year ARR. Renewal and upsell commission. If upsell pays zero, year two income may collapse. 𝟵. 𝗦𝗣𝗜𝗙𝗙𝘀 𝗮𝗻𝗱 𝗲𝘅𝘁𝗿𝗮𝘀 How often. Typical size. Paid on booking or cash. SPIFF heavy cultures often mask weak core plans. 𝟭𝟬. 𝗢𝗻𝗲 𝗿𝗲𝗮𝗹 𝗽𝗮𝘆𝗼𝘂𝘁 𝗲𝘅𝗮𝗺𝗽𝗹𝗲 Take one recent closed won and one average deal. Calculate your commission under this plan. If your math and their payout differ, ask for written rules. 📌 Final note Judge OTE by attainability, not promise. Simple rules, stable territories, real accelerators. If it fails on paper, it fails in your bank account. What did I miss? ______________________________ Hi, I’m Andreas, co-building SaaSlyte. I’ve worked successfully in both recruiting and SaaS sales. Today, I help SaaS and tech companies build and scale their GTM teams. I share what I learn from daily conversations with SaaS sales candidates and GTM leaders across DACH.

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!

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?

What does a comp plan with an aligned Solutions function look like? This is the question I get asked the most right now, and for good reason. Solutions professions are typically 80/20 or 75/25 to limit their downside (and upside). And, that is why there is friction from Solutions professionals who feel they make superhero efforts to bring deals in but don't receive the glory or compensation (aka one of the reasons I was motivated to start PreSales Collective). Let's start with a FACT: Incentives drive behavior. Here is a roadmap to changing comp plans in the aligned solutions org. Change 1: Willingness to take on less base salary to provide for more upside: 65/35 - 50/50 - Sales reps live and die on 50/50, and we typically don't want our solutions in that model, but you cannot make AE OTE without the accountability - Note: this is the most challenging change for people in the role, so a slow roll to 50/50-ish is typically the suggested path (let them experience the upside) Change 2: Prevent downside by making variable both commission and MBOs - Flat rate commission on net new, expansion, and cross-sell - MBOs for renewals - MBOs on Account Health Metrics (plays run against customers to increase value metric, adoption, utilization, etc...) Change 3: Full Cycle Solutions are included in SPIFFs - No more days of Rolexs and Spa days for just AEs. Sales is a team sport. - SPIFFs for programs run within a quarter or the year - SPIFFs can also be used instead of MBOs to increase upside (renewal, etc..) This type of comp plan may be the norm in your business, but this may likely be a [radical] shift. And for those who say this model will impact the customer experience if we are just focused on revenue, there is a reason why you use MBOs and SPIFFs to drive the proper behavior with customers (account health plays >>>>). Note: employees are not incentivized to go above and beyond for customers when your teams are at 100% or 90% base salary with no upside.

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 once asked a CRO on structuring commissions for BDRs: His answer: Stop paying for meetings. It's lazy & encourages fluff. Pay for results such as qualified opps or closed won. Rewarding reps just for activity creates noise and wastes AE time. But here’s the trade-off: paying for results isn’t without its challenges. When you tie commissions to closed revenue or highly qualified opportunities, you slow down the process. BDRs spend more time handpicking accounts and overthinking outreach instead of driving high activity. It’s great for quality, but quantity takes a hit, which means AEs often see fewer opportunities in their pipeline. At an early stage, where the biggest bottleneck is awareness, incentivizing meetings booked might actually make sense. The goal is to fill calendars, learn from conversations, and iterate fast. But as you grow, this approach can lead to junk meetings, low conversion rates, and frustrated AEs. The trick? Know where your bottlenecks are. Early stage? Focus on activity and learning. Scaling up? Shift to outcomes that move the needle. No one-size-fits-all, but one thing is clear: a good commission plan should grow with your business. I explore this in my upcoming newsletter: link in comments