Simple sales compensation plan

Who this is for

Founder led lower-middle market companies with 5 to 50 million in annual revenue that need a plan reps understand and finance can operate.

The quick answer

Pay for the outcomes you want. Use two or three measures such as new annual contract value, plan renewals, and on time collections. Set on target earnings by role, publish a rate table, and use a simple accelerator for over plan. Cap only to protect margin on outliers. Share one page rules and five examples.

The method in seven steps

Choose measures
New revenue for hunters. Net revenue retention or renewals for account managers. Collections or margin guardrails where needed.
Set on target earnings and mix
Common mixes are fifty and fifty or sixty and forty for hunters. Account managers lean higher base. Publish the numbers in a short table.
Write the rate table
Show payout per dollar of valid revenue. Add an accelerator band above one hundred percent of quota. Keep math simple.
Protect margin and cash
Use approval rules for heavy discounting. Pay only on invoiced deals and claw back if unpaid after a set period.
Define the edge cases
Splits, multi year terms, professional services, and credits. Keep the rules short and example driven.
Set timing
Pay monthly or quarterly based on your sales cycle. Close the month fast so trust stays high.
Publish and train
Share a one page plan and five worked examples. Run a short Q and A and update the examples when new patterns appear.

Example

A firm replaced a complex points system with a clear rate table, a small accelerator, and a collections rule. Reps understood how to win and finance closed faster.

Pitfalls and fixes

Too many measures. Use two or three at most.
Rewarding bookings that never collect. Tie payout to cash rules.
Hidden rules. Put examples in the plan.

Checklist

Measures chosen by role
On target earnings and mix published
Rate table and accelerator defined
Margin and cash rules written
Edge cases documented with examples
Timing and process set