Sales Commission Structure: Designing Plans That Drive Growth
How to build sales compensation plans that motivate the right behavior, align with company goals, and scale with your growth.
Key Takeaways
- •Commission structure directly drives sales behavior—design it intentionally to achieve your business goals
- •Base + commission models provide stability; pure commission offers unlimited upside but higher risk
- •Accelerator tiers reward over-performance but must be funded sustainably
- •SPIFs (Sales Performance Incentives) can shift focus temporarily but shouldn't replace core comp
- •Quota attainment of 60-70% is the benchmark for healthy, achievable targets
Your sales compensation plan is one of the most powerful tools you have to drive behavior. Get it right, and you align your team's efforts with your company's growth goals. Get it wrong, and you either overpay for results you would have gotten anyway or—worse—motivate the wrong behaviors.
As covered in our Complete Guide to RevOps Finance, commission design is a core responsibility of the RevOps Finance function. This article dives deep into the mechanics of commission structure design.
Commission Model Types
There are several fundamental commission models, each with advantages and trade-offs. The right choice depends on your business stage, sales cycle, and strategic priorities.
Base + Commission
60/40 or 50/50 split, stable income
Pure Commission
100% variable, unlimited upside
Revenue Share
Percentage of ARR, aligns incentives
Draw Against Commission
Guaranteed minimum, recoupsable
Base + Commission (Salary Plus Variable)
The most common model for established companies. Salespeople receive a guaranteed base salary plus variable commission based on performance.
Typical split: 60/40 or 50/50 base to OTE (On-Target Earnings)
Best for: Companies wanting to attract/retain experienced sellers
Pure Commission
Compensation is entirely performance-based with no guaranteed base. Higher risk, higher reward for salespeople.
Commission rate: Typically 10-20% of revenue
Best for: Startups, high-growth environments, or transactional sales
Draw Against Commission
A guaranteed minimum that is recouped from future commissions. Provides floor protection while maintaining performance incentives.
Structure: Base draw + uncapped commission once draw is earned
Best for: New hires building territory, or industries with long sales cycles
Revenue-Based vs. Profit-Based
Revenue-based commissions are simpler but may incentivize deal volume over profitability. Profit-based aligns with company margins but requires transparent margin data.
The Key Question
Ask yourself: "What behavior do I want to drive?" Then design the model to incentivize that behavior. Every model has unintended consequences—anticipate them.
Accelerator Tiers and Quota Attainment
Accelerator tiers increase the commission rate when salespeople exceed quota. They motivate over-performance but must be designed carefully to avoid sustainability issues.
Standard Accelerator Structure
| Attainment Level | Quota % | Commission Rate | Description |
|---|---|---|---|
| Below Quota | 0-99% | 8% | Base rate |
| At Quota | 100% | 10% | Target rate |
| Accelerator Tier 1 | 100-120% | 12% | 1.2x multiplier |
| Accelerator Tier 2 | 120-150% | 15% | 1.5x multiplier |
| President's Club | 150%+ | 20% | 2x multiplier |
Accelerator Design Principles
- Start accelerators at 100% quota: This ensures accelerators actually reward over-performance, not just hitting the number
- Keep accelerators simple: 2-3 tiers are easier to communicate and administer than 5-6
- Fund accelerators through quota increase: If you raise quotas, accelerators become affordable without increasing comp expense ratio
- Cap accelerators thoughtfully: Unlimited accelerators can create unexpected costs—consider caps or graduated curves
The Accelerator Sustainability Test
Run the numbers: If everyone hits 120% of quota, can you still afford the commission expense? If not, your plan is unsustainable. Build in contingency for over-performance.
Quota Attainment Benchmarks
Quota attainment is both a measure of plan effectiveness and a leading indicator of sales team health. Understanding benchmarks helps you set realistic expectations.
Quota Attainment Ranges
- Below 50%: Indicates quota is too high, market issues, or team/territory problems
- 50-60%: May indicate quotas are aggressive or ramp issues
- 60-70%: Healthy range—challenging but achievable
- 70-80%: Strong performance, possibly aggressive quotas
- 80%+: Consider raising quotas or adding territory
What Attainment Says About Your Plan
- High attainment (80%+): Plan may be under-earning company; quotas may be too low
- Low attainment (below 50%): Likely to cause turnover; investigate root causes
- Wide variance: Indicates territory imbalance or compensation inequity
- Consistent variance: May indicate need for plan redesign
SPIFs and Special Incentives
SPIFs (Sales Performance Incentives) are short-term bonuses designed to drive focus on specific priorities. They can be powerful but require careful management.
Common SPIF Types
Product SPIFs
Bonus for selling specific products or services. Useful for launching new products, clearing inventory, or shifting mix toward higher-margin offerings.
Example: $500 bonus for every new customer for Product X
Behavior SPIFs
Incentivize specific behaviors beyond closed deals. Can drive activities that lead to future revenue.
Example: $100 for each demo completed in the new platform
Team SPIFs
Incentivize collaboration between team members or departments.
Example: $250 for each qualified lead passed to enterprise team
Contests
Time-limited competitions with prizes for top performers.
Example: "Q3 Presidents Club"—top 5 reps by revenue win trip
SPIF Best Practices
Use SPIFs sparingly and temporarily. If you find yourself running the same SPIF every quarter, it should probably be built into the base commission structure. SPIFs are for shifting focus—not permanent compensation.
Equity Compensation for Sales
Equity can be a powerful component of sales compensation, especially for growing companies. It aligns sales incentives with long-term company value.
Equity Components
- New hire grants: Stock options or RSUs granted upon hire, typically vesting over 4 years with 1-year cliff
- Accelerated vesting on performance: Equity that vests faster when quota is exceeded
- Sales accelerator stock: Stock bonuses that kick in at accelerator tiers
- Retention grants: Additional equity to retain top performers
Sample Total Compensation Package
Base Salary:
$80,000
Target Commission:
$80,000 (at 100% quota)
On-Target Earnings (OTE):
$160,000
Equity (4-year grant):
$100,000 (valued at grant)
Commission Recovery and Clawbacks
What happens when deals are lost after commissions are paid? This is a critical policy question that affects both company and sales team trust.
No Recovery
Commissions are paid and kept regardless of subsequent events. Simplest to administer but can be costly if deals frequently unravel.
Recovery Period
Commissions are subject to recovery if deals are lost within a specific period (typically 30-90 days).
Chargebacks
Commissions are charged back when deals are lost. Requires clear policy on what constitutes a "lost" deal.
Policy Transparency
Whatever policy you choose, document it clearly and communicate it upfront. Ambiguity here creates legal and trust issues. Many disputes between sales reps and companies involve commission recovery.
Need Help Designing Your Commission Structure?
Eagle Rock CFO helps companies design sales commission plans that drive the right behavior. From plan design to technology implementation, we bring expertise to optimize your sales compensation.