Sales Compensations

Sales Compensations

Sales Compensations

Streamlining sales compensations may help enhance the fairness and bottom line of Partners working together. Below is a summary of the structures used in various industries:

Commission structures

Commission structures are designed to help companies meet their financial objectives, and provide incentives to sales reps to sell their products or services.

Residual commissions
Residual commissions are commissions paid for each direct purchase by a client introduced to the company by the sales rep, and that required a significant initial input. He/she will receive residual commissions as long as the account remains active and the client continues to purchase products on a regular basis. Can be used to prioritize long-term accounts.

Variable commission
A variable commission structure depends on the gross sale, type of sale, type of market, or new market for a product, and can vary with the amount or terms of a sale.

Straight commission
A straight commission is a form of compensation paid to sales reps after each sales transaction. They earn a percentage from their sales, instead of receiving a salary and/or draw.

Bonus commissions
Bonus commissions are an opportunity to reward people for extraordinary performances or hitting sales or profit targets, and can be an addition to people’s established (taxable) pay and are usually based on pre-established formulas.

Graduated commissions
Graduated commissions are based on a percentage that may increase or decrease incrementally at a predetermined rate as the sales rep reaches higher levels of sales overall or per account. It can be used to incentivize overall or specific sales volume or to increase the number of new accounts.


Click here

Sales Compensation Planning

Commission percentages are based on gross sales, net sales (gross profits), or net overall or net account-specific company profits. Discounts can be split 50/50 or otherwise.

The industry average is between 20-30% of gross margins, or 7–15% of gross sales, with lower commissions being offered for “easy sales,” vs sales that are more complex.

Reps are hired based on the industry-sector or territory they cover, who they know, the extend of their Networks (NW), the frequency of buyer meetings, products demonstrating, deal making or closing abilities, conducting of training and solving of problems. Their commission reflects the value of their NW, time & expertise involved, and expenses incurred.