A commission structure specifies how sales reps are compensated. You might think “OK, let’s go for revenue based commissions”. But things are not that simple. We will give you some tips on how to develop a sales commission plan that really fits your needs.

What is a sales commissions structure and why is it so important ?

Why is this structure important ? Because the sales commission structure must align company business goals with sales rep behavior. Sometimes you want to maximize revenue incomes right now. Other times you would prefer new customers to arrive progressively throughout the year. And there comes complexity.

You have multiple weapons to activate in your compensation structure. Do you pay commission on a weekly or a monthly basis ? Do you add quotas and accelerators ? Do you pay every sale the same way ?

How to structure your sales commissions the best way ?

  1. Establish clear targets and goals for your company
  2. Structure compensation plans the way they have to be
  3. Evaluate and revise your plan
a guide about structuring sales commissions

 

What are the types of commissions ?

There are few different commissions types out there :

  1. Pourcentage on revenue commissions. 8% means 80$ incomes on a 1000$ deal.
  2. Pourcentage on gross margin commissions. Identical to percentage on revenue except for one thing : the commission is only based on revenue minus product cost.
  3. Fixed commission amount. The sales rep wins the same amount for every deal.
  4. Challenge rewards. Let your imagination do the work.

 

6 sales commission structure examples :

Now that you know the commission types, let’s jump into commission structure examples.

  1. No commission structure. Rarely seen, sales reps would only receive a fixed salary
  2. 100% commission structure. No base salary, every dollar earned comes from closing.
  3. Base salary plus commissions. Maybe the most common way to incentive your sales reps. A common ratio would be 60% as a fixed income, and 40% variable. 
  4. Draw Against Commission structure. Employees are paid a fixed amount upfront, whatever happens. Then depending on what is decided, the draw could be Recoverable or Non-Recoverable.
  5. Tiered Commission. The quota goal is divided in tiers. Each tier has its own commission pourcentage.
  6. Shared commissions. Team shares a team quota and deals revenue. That way, everyone helps each other within the sales team. Of course, pourcentages are different between each rep and based on seniority.