Sales compensation is the most direct lever you have for driving rep behavior. A well-designed comp plan aligns individual motivation with company objectives. A poorly designed one creates perverse incentives, gaming, sandbagging, and attrition. Getting this right is worth significant time and analysis.

Start with your unit economics. Calculate your customer acquisition cost target, average deal size, expected quota per rep, and the on-target earnings required to attract the caliber of talent you need. Your total cost of sales โ€” base salary plus commission plus benefits plus tools plus management โ€” should target 20 to 30 percent of the revenue a rep generates.

The base-to-variable ratio signals what you value. A 70/30 split tells reps that consistency and account management are important โ€” you’re paying for the relationship. A 50/50 split says hunting new business is the priority โ€” you’re paying for performance. A 40/60 split creates a high-stakes environment that attracts aggressive closers but may cause turnover if quotas aren’t achievable.

Quota setting is where most comp plans fail. Quotas should be challenging but achievable โ€” 60 to 70 percent of your reps should hit quota in a well-calibrated plan. If everyone hits quota, it’s too low. If fewer than half hit quota, it’s either too high or your enablement and pipeline generation are insufficient. Base quotas on historical data, market conditions, and territory potential, not on investor targets divided by headcount.

Include accelerators that reward overperformance. Once a rep hits 100 percent of quota, increase their commission rate by 1.5x or 2x for additional sales. This ensures your top performers are compensated in a way that retains them and creates a visible incentive for the rest of the team to stretch beyond their targets.

Avoid common pitfalls: overly complex plans with more than three or four variables, commission structures that don’t pay out for months after the deal closes, clawback provisions that extend beyond reasonable periods, and plans that change mid-year. Each of these erodes trust and motivation. Keep it simple, pay promptly, and honor the plan as written.

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