Overview
A well-designed sales compensation plan motivates the right behaviors, aligns sales goals with business goals, and helps attract & retain top talent. The right plan gives clarity, drives revenue, and ensures your team is paid fairly based on impact — not just activity.
Preparing to Build Your Compensation Plan
Before numbers and commission tiers, start with planning:
- Build a compensation team with leaders from sales, marketing, finance/operations, and (if needed) a specialized recruiting firm.
- Sales + marketing define goals and territories.
- Finance models affordability, ROI, and payout scenarios.
- Recruiting partners can benchmark competitive pay.
The goal: ensure alignment across all departments so incentives don’t contradict strategic priorities.
Aligning Compensation Plans With Business Goals
Your compensation plan should reward the behaviors that support your company’s revenue priorities — not just activity.
Questions to consider:
- Are you prioritizing new business? Profitability vs. pure revenue?
- Are you launching new products and need quick adoption?
If comp plans don’t connect to business goals, companies unintentionally reward the wrong actions.
Critical Questions You Need to Answer
What level of sales professional do we need (junior vs. senior)?
Are goals based on product line, revenue type, or territory?
- How competitive is the talent market — and do we need stronger first-year incentives to attract A-players?
- How should earnings be split between base and commission?
- What payout frequency is reasonable for our business?
These decisions determine whether your plan attracts top talent — or loses them.
Compensation Models and Levers
Three primary compensation structures:
| Model | Best for | Notes |
|---|---|---|
| Straight Salary | Customer success / account managers | Low variability, but low motivation to sell |
| Salary + Commission | Most sales organizations | Balanced stability + performance incentive |
| Commission Only | Entrepreneur-style roles | Low cost for employer but high turnover risk |
Best practice: unlimited commission (no caps) so you never discourage performance.
Other levers & considerations:
- Profit vs. revenue-based commission
- Onboarding bonuses for ramp-up
- Base/variable mix (e.g., inside reps 70/30, outside reps 50/50)
Advanced Compensation Considerations
You can tailor compensation based on:
- Type of sales role (inside, outside, lead generation, management)
- Geographic market salary adjustments
- Including or excluding objective-based bonuses
The PDF includes a national salary benchmark table to compare base, bonus, and on-target earnings.
Common Mistakes in Compensation Plans
Avoid these pitfalls:
- Misalignment between company goals & comp metrics
- Capping commissions, which decreases motivation
- Complex plans that reps can’t understand
- Payout schedules that are too infrequent, causing cash-flow strain for reps
The simplest plans are the most effective.
Key Components of the Plan
A complete compensation plan includes:
- Earnings breakdown (base + commission)
- Quarterly objectives
- Clear revenue targets
- Payout schedule & accelerators
- Terms for reversals, territory, and tracking
The PDF includes a downloadable template so you can plug in your own structure.
