Sales Compensation Plan
Quick definition
The compensation plan for your sales team: how much do they earn fixed, how much variable, and based on which metrics do they get bonus? A good plan motivates and guides behavior.
Detailed explanation
A sales compensation plan determines how you pay your sales team. Most B2B companies work with a mix of fixed salary and variable bonus. The standard ratio is 60/40 or 70/30 (60-70% fixed, 30-40% variable). For junior reps sometimes 80/20, for senior enterprise reps sometimes 50/50. You link the variable component to targets: deals closed, ARR brought in, number of demos done. Watch out: what you measure is what you get. If you only focus on new customers, nobody does upsell. If you only measure on deals, quality goes down. A good plan has accelerators: if you hit 100% of your target you earn 100% of your variable, but at 150% target you earn 200% variable. This motivates to keep going after hitting your target. Many companies make the mistake of linking too many metrics to compensation. Keep it simple: 1-2 main metrics (e.g. new ARR + renewal rate). The rest is nice to measure but not to pay on. And: make your plan predictable. If you change the rules every month, you lose trust.
Synonyms
Examples
A SaaS company pays €50K fixed + €30K variable (at target). Target = €500K new ARR per year. Per €1 ARR you earn €0.06 variable. At €750K ARR (150% target) you pay 200% variable = €60K. Total package at overperformance: €110K.
Match-day designs for an industrial company a comp plan: €60K fixed, €20K variable. 70% of variable is linked to closed deals (target: 15/year), 30% to pipeline building (target: €1.5M pipeline). This steers both short and long term results.
When to use this?
Design your comp plan before you hire people. Communicate it clearly: write on paper how someone earns at target, below target and above target. Review the plan annually: does it still work? Do the incentives motivate the right behavior? Adjust where needed, but not too often.
Match-day approach
We help you design a fair and motivating comp plan. We benchmark against the market (what do comparable companies pay?), calculate whether your plan is financially viable, and ensure the incentives align with your strategy. We also give you a calculator for your team: enter your result, see what you earn.
Learn more
Wil je weten hoe je sales compensation plan effectief inzet in jouw organisatie? Neem contact op met Match-day.
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