6 Sales Commission Structures to Motivate Reps

Sales commissions are a critical component of compensation for B2B sales reps, serving as a significant motivator and a direct link to performance. 

Choosing the right commission structure can boost sales, improve employee satisfaction, and align the sales team’s goals with the company’s objectives. 

Here’s an overview of various sales commission options commonly used in B2B sales:

1. Straight commission

In a straight commission model, sales reps earn a percentage of the revenue from the sales they make, with no fixed salary. This model is straightforward and highly motivating for top performers, as their earnings directly reflect their sales success.

Pros:

  • Highly motivating for sales reps.
  • Low fixed costs for the company.
  • Aligns sales reps’ goals with company revenue.

Cons:

  • Income variability can lead to high turnover.
  • May discourage teamwork and collaboration.
  • Potentially risky for sales reps during slow periods.

2. Salary plus commission

This model combines a base salary with commission earnings, providing a balance between income stability and performance incentives. Sales reps receive a fixed salary plus a commission based on their sales performance.

Pros:

  • Provides financial stability for sales reps.
  • Attracts a wider pool of candidates.
  • Encourages a balance between closing deals and maintaining customer relationships.

Cons:

  • Higher fixed costs for the company.
  • May reduce the motivation for top performance compared to a straight commission model.

3. Tiered commission

In a tiered commission structure, the commission rate increases as sales reps achieve higher sales targets. For example, a rep might earn 5% on sales up to $50,000, 7% on sales between $50,001 and $100,000, and 10% on sales over $100,000.

Pros:

  • Highly motivating to exceed sales targets.
  • Encourages reps to maximize their performance.
  • Helps align sales efforts with strategic goals.

Cons:

  • Can be complex to administer.
  • May create undue pressure on sales reps.

4. Profit-based commission

Sales reps earn a commission based on the profit margin of the sales they generate rather than the total revenue. This structure encourages reps to sell higher-margin products or services.

Pros:

  • Aligns sales incentives with company profitability.
  • Encourages reps to focus on value rather than volume.
  • Discourages discounting to close deals.

Cons:

  • Can be complex to calculate and administer.
  • May demotivate reps if profit margins are outside their control.

5. Revenue milestone commission

In this model, sales reps earn bonuses when they hit specific revenue milestones. For example, a rep might receive a bonus for reaching $100,000 in sales, another for $200,000, and so on.

Pros:

  • Provides clear and achievable goals.
  • Highly motivating for sales reps.
  • Can be tailored to align with strategic objectives.

Cons:

  • May lead to a “feast or famine” income cycle.
  • Can encourage short-term thinking and neglect of long-term customer relationships.

6. Team-based commission

This approach distributes commissions based on the performance of a sales team rather than individual reps. It fosters collaboration and ensures that all team members are working towards common goals.

Pros:

  • Encourages teamwork and collaboration.
  • Reduces internal competition.
  • Aligns team goals with company objectives.

Cons:

  • May demotivate high performers.
  • Can lead to free-riding if not managed properly.

Choosing the right model

Selecting the right commission structure for your B2B sales team depends on various factors, including your company’s sales strategy, product complexity, market conditions, and the characteristics of your sales force. 

A well-designed commission plan should balance motivating individual performance with achieving the company’s strategic goals, ensuring both the sales team and the organization thrive.


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