In the highly competitive modern business landscape, selecting the ideal sales commission structure is paramount. It’s the fuel that ignites your sales team’s motivation and drives their success.
The Salesforce commission model is a blend of strategic compensation plans that align your team’s efforts with your business goals, serving as a powerful incentive for stellar performance. They are the key to not only motivating but also fairly rewarding your sales force.
Spreadsheets allow sales leaders to craft and analyze various commission scenarios with precision. They enable you to craft and analyze various commission scenarios with precision, ensuring both your sales team’s contentment and your company’s prosperity.
In this article, we explore the art of selecting the perfect Salesforce commission structures, complete with a free commissions calculator to aid your journey to sales excellence.
Keep reading to learn more!
How to Design a Sales Commission Structure for Sales Reps?
Designing Salesforce commission structures is a critical task that can significantly impact your team’s motivation, performance, and the overall success of your business. To accomplish this, follow these key steps:
Align to Company Goals: Ensure that your commission structure aligns with your company’s overarching objectives (e.g.profitability, profit & loss, growth, client retention, etc.) and your sales process. Use it as a tool to guide your sales team in the right direction.
Motivate Desired Sales Behaviors: Fine-tune your commission rates and structure to motivate the behaviors you want from your sales team. Make sure the compensation plan encourages reps to focus on target customers, expand existing accounts, cross-sell complementary products, and engage in activities that contribute to your business’s success.
Reward Top Performers: Recognize and reward top-performing salespeople by incorporating elements like accelerators for outstanding achievements, commission caps for cost control, and quotas for consistent performance and growth.
Consider Role and Segment: Understand that one size doesn’t fit all. Tailor your commission structure to match the unique characteristics of various roles within your sales team. Inside sales, field sales, different product segments, and deal sizes may require different approaches for fairness and effectiveness.
Keep It Simple: Avoid complex commission structures that can confuse and demotivate your sales representatives. Strive for simplicity and clarity so that your team can easily understand how their efforts translate into payouts.
Model Financial Impact: Use spreadsheets to model the financial impact of your commission structure at various sales levels. This helps anticipate costs, make data-driven adjustments to commission rates, and strike a balance between incentivizing performance and managing expenses
Clearly Communicate: Meticulously document the commission plan details and provide comprehensive training to your sales reps. Clear communication ensures that everyone understands the rules, fostering effective teamwork toward common goals.
Review Periodically: The business landscape is dynamic, so periodically revisit and evaluate your commission structure’s effectiveness. Make adjustments as business needs evolve, ensuring that your compensation strategy remains aligned with your company’s objectives.
Common Types of Sales Commission Structures for Sales Reps
Salesforce commission structures vary widely, with each offering unique advantages and drawbacks. In this section, we’ll explore some common types to help you find the best fit for your sales team’s needs.
1. Base Pay
Base pay is a straightforward type of sales commission structure where salespeople receive a fixed amount of money as their regular salary, regardless of their sales performance. It provides financial stability, ensuring salespeople have a consistent income even during slow sales periods.
While it lacks the potential for big bonuses seen in other structures, it can be ideal for industries with long sales cycles or when the focus is on building customer relationships over immediate sales results.
However, it may not always provide strong incentives for high-performance, as there’s no direct link between sales success and earnings in this structure.
2. Base Pay + Commission
In a Base salary plus Commission structure, salespeople receive a regular fixed salary (base pay) along with additional earnings (commission) based on their sales performance. This approach combines stability with motivation.
The base pay ensures a consistent income, reducing financial uncertainty. Meanwhile, the commission rewards sales achievements, giving salespeople a reason to strive for higher sales numbers. It’s a win-win, as salespeople have a safety net, and the potential to earn more when they excel.
This structure aligns interests, encouraging both steady work and striving for greater sales success, making it a common choice for many sales teams.
3. Residual Commission
Residual commission is a type of sales commission where salespeople continue to earn money from past sales they’ve made. Instead of just getting a one-time payment when a sale is made, they receive a portion of the revenue generated by that sale over time.
This structure rewards ongoing customer relationships and encourages salespeople to focus on long-term customer satisfaction. It’s like a continuous bonus for the initial sale, providing financial stability as these commissions can add up over time.
However, it might require maintaining good customer relationships and service to ensure the commissions keep coming in.
4. Tiered Commission
The tiered commission is a sales compensation structure where salespeople earn different commission rates based on their sales performance. The more they sell, the higher the commission rate they receive.
It’s like climbing a ladder – as you reach higher sales targets, you get bigger rewards. This approach motivates salespeople to push their sales efforts and aim for higher tiers to earn more money.
It can be a powerful incentive, but it requires careful planning to set fair and achievable sales targets at each tier. Overall, the tiered commission encourages consistent performance and rewards sales excellence.
5. Revenue Commission
Revenue commission, often used in B2B sales, is a straightforward compensation structure where salespeople earn a percentage of the total revenue generated from their sales. It’s like getting a share of the money the company makes from the sale.
This system directly ties earnings to the financial success of the business, incentivizing salespeople to focus on high-value deals and larger sales volume benchmarks.
However, it may not account for profit margins or other factors, so careful consideration is needed to ensure it aligns with the company’s overall financial goals. Revenue commission is simple to understand and can motivate sales teams to chase bigger deals.
6. Gross Margin Commission
Gross Margin Commission is a sales compensation structure where salespeople earn a percentage of the profit margin generated from their sales, rather than the total revenue. It’s like receiving a share of the money left over after deducting the costs associated with making the sale.
This approach encourages sales teams to prioritize deals that not only generate revenue but also maintain healthy profit margins.
It aligns the interests of sales reps with the company’s profitability goals and motivates them to focus on high-value, cost-effective sales strategies. Gross Margin Commission is particularly effective in industries where profit margins can vary widely.
7. Commission Only
In a straight commission-only structure, salespeople earn their income solely through commissions based on the sales they make. There’s no fixed salary or base pay involved. It’s like getting paid only when you successfully sell something.
While this can provide high earning potential for top performers, it also carries financial risks during slower sales periods because there’s no guaranteed income.
Straight commission roles are common in industries like real estate and insurance, where the potential for big commissions exists, but success depends on individual sales skills and effort. It can be a motivating structure for those who thrive on performance-driven income.
8. Territory Volume Commission
Territory Volume Commission is a sales commission structure where salespeople earn commissions based on the total sales volume within their assigned geographic or market area, known as their sales territory.
It’s like getting rewarded for the total sales made in your specific region. This approach encourages sales professionals to grow and maximize sales within their designated area, fostering competition among territories. It’s commonly used in businesses with multiple sales regions.
Territory Volume Commission can be motivating as it directly ties earnings to the sales performance of a specific geographic area, giving salespeople a sense of ownership and responsibility for their territory’s success.
9. Draw Against Commission
A Draw Against Commission is a sales compensation structure where salespeople receive regular advances or “draws” against their future commissions. It’s like getting paid a regular salary upfront, but it’s essentially a loan that must be repaid through future commission earnings.
This system helps provide financial stability, especially during slow sales periods when commissions may be low. However, sales reps need to generate enough commissions to cover these advances. If they don’t, they might end up owing the company money.
Draw Against Commission is a way to balance steady income with performance-based pay, ensuring sales team have a reliable source of income while still incentivizing them to sell.
Common Types of Sales Commission Structures
Base Pay Commission Structure
Base Pay Structure offers salespeople a consistent fixed salary without additional earnings based on sales performance. It provides financial stability with a predictable income regardless of sales achievements.
Base Pay Commission Structure Example
Consider a salesperson with a monthly base rate of $3,000, regardless of their sales performance.
Pros
Financial Stability
Lower Risk
Attraction of Sales Reps Seeking Stability
Employee Retention
Simplified Administration
Cons
Limited Incentives
Potential Lower Sales Motivation
Higher Fixed Costs
Ideal Sales Teams and Company Types –
Ideal Sales Teams: Customer Support Teams
Ideal Company Types: Businesses with Lengthy Sales Cycles
Base Pay + Commission Structure
Base Pay + Commission percentage combines a fixed base salary with additional earnings based on sales performance. It offers financial stability with the potential for additional income based on sales achievements.
Base Pay + Commission Structure Example
Imagine a salesperson with a $3,000 monthly base salary and a 5% commission rate on $20,000 in sales. Their commission for the month would be $1,000. Thus, their total earnings for the month would be $4,000.
Note:
To calculate Commission Earned, use this formula: =C2*D2
To calculate Total Monthly Earnings, use this formula: =B2+E2
Pros
Financial Stability
Motivated Sales Reps to Close Deals
Balance of Guaranteed Income and Performance-Based Rewards
Talent Attraction and Retention
Flexibility
Cons
Fixed Costs
Potential Complacency
Complex Administration
Ideal Sales Teams and Company Types –
Ideal Sales Teams: Inside Sales Teams
Ideal Company Types: Small to Medium-sized Enterprises (SMEs)
Residual Commission Structure
Residual Commission Structure is a compensation model where salespeople continue to earn commissions over time for sales they made in the past. This model is often used in subscription-based or recurring revenue businesses.
Residual Commission Commission Structure Example
Consider a salesperson that sells software subscription for $100 per month. They earn a 10% commission on the initial sale and continue to earn 10% of $100 for each subsequent month the customer remains subscribed.
Note:
To calculate monthly commission, use the formula: =B2*100*10% + (SUM($B$1:B1)*100*10%)
to calculate cumulative commission, use the formula: =SUM($C$1:C2)
Pros
Ongoing Income
Motivation for Customer Retention
Reward for Building a Customer Base
Predictable Earnings
Potential for Long-Term Relationships
Cons
Slow to Build Significant Income
Dependence on Customer Retention
Administrative Complexity
Ideal Sales Teams and Company Types
Ideal Sales Teams: Account Management Teams
Ideal Company Types: SaaS (Software as a Service) providers, Subscription-Based Businesses
Tiered Commission Structure
Tiered Commission Structure is a compensation model where salespeople earn higher commission rates based on achieving predefined sales targets or tiers.
Tiered Commission Structure Example
Imagine a salesperson with three tiers:
Tier 1: 5% commission for sales up to $10,000
Tier 2: 7% commission for sales between $10,001 and $20,000
Tier 3: 10% commission for sales exceeding $20,000
If they make $25,000 in sales, they earn 5% on the first $10,000 ($500), 7% on the next $10,000 ($700), and 10% on the remaining $5,000 ($500), for a total commission of $1,700.
Note:
To calculate Tier 1 commission, use the formula: =IF(A2<=10000, A2*5%, 10000*5%)
To calculate Tier 2 commission, use the formula: =IF(A2>10000, IF(A2<=20000, (A2-10000)*7%, 10000*7%), 0)
To calculate Tier 3 commission, use the formula: =IF(A2>20000, (A2-20000)*10%, 0)
To calculate total sales commission, use the formula: =B2+C2+D2
Pros
Performance Incentives
Encourages Sales Growth
Rewards Top Performers
Clear Sales Targets
Motivation to Reach Higher Tiers
Cons
Complexity to Administer
May Discourage New Salespeople
Potential for Sales Focusing on Tiers, Not Customer Needs
Ideal Sales Teams and Company Types
Ideal Sales Teams: Sales team members with experienced members
Ideal Company Types: Businesses with tiered pricing structures or diverse product lines
Revenue Commission Structure
Revenue Commission Structure is a compensation model where salespeople earn commissions based on the total revenue generated from their sales, typically a percentage of the revenue.
Revenue Commission Structure Example
For instance, a salesperson earns a 5% commission on the total revenue generated from their sales. If they make $50,000 in sales, their commission would be $2,500 (5% of $50,000).
Pros
Directly Tied to Company Revenue and Upsells
Aligns Sales Goals with Business Objectives
Encourages Salespeople to Pursue High-Value Deals
Easily Measurable Performance
Motivates Sales Growth
Cons
Potential Focus on Larger Deals at the Expense of Quantity
May Not Reward Efforts for Lower-Priced Products
Can Create Pressure for Consistently High Sales
Ideal Sales Teams and Company Types
Ideal Sales Teams: Sales teams targeting high-value or enterprise-level customers
Ideal Company Types: Businesses with a focus on high-revenue deals or premium products and services
Gross Margin Commission Structure
Gross Margin Commission Structure is a compensation model where salespeople earn commissions based on the gross margin of the sales they generate. Gross margin is calculated as the difference between the selling price of a product or service and the cost of goods sold (COGS).
Gross Margin Commission Structure Example
For example, a salesperson earns a 15% commission on the gross margin of their sales. If they sell a product for $1,000 with a COGS of $600, the gross margin is $400 ($1,000 – $600). The salesperson’s commission would be 15% of $400, which is $60.
Note:
To calculate the Gross Margin, use the formula: =A2-B2
To calculate the Commission, use the formula: =C2*15%
Pros
Rewards for Profitable Sales
Encourages Salespeople to Focus on High-Margin Products
Aligns with Company Profitability Goals
Motivates Cost-Efficient Selling
Can Promote Long-Term Customer Relationships
Cons
Complex Calculation Method
May Discourage Sales of Low-Margin Items
Potential for Disputes Over COGS Determination
Ideal Sales Teams and Company Types
Ideal Sales Teams: Sales teams dealing with a mix of high and low-margin products/services
Ideal Company Types: Businesses with a range of products/services with varying margins
Commission Only Structure
Commission-Only Structure is a compensation model where salespeople receive no fixed base salary and earn their income solely through commissions based on their sales performance.
Commission Only Structure Example
A salesperson earns a 10% commission on each sale they make. If they make a $5,000 sale, they earn $500 in commission. With no base salary, their income is entirely dependent on their sales.
Pros
High Incentives for Performance
Potential for Unlimited Earnings
Minimal Fixed Costs for Employers
Self-Motivation and Entrepreneurial Spirit
Attracts Highly Driven Salespeople
Cons
Financial Uncertainty
Risk of Income Fluctuations
May Attract Less Experienced Salespeople
Ideal Sales Teams and Company Types
Ideal Sales Teams: Independent Sales Contractors, Startups with Limited Budgets
Ideal Company Types: Businesses with Limited Resources, High-Commission Products or Services
Territory Volume Commission Structure
Territory Volume Commission Structure is a compensation model where salespeople earn commissions based on the volume of sales within a specific geographic or market territory they manage.
Territory Volume Commission Structure Example
Imagine a salesperson responsible for a particular region. They earn a 5% commission on all sales made within their designated territory. If the total sales in their territory for a month amount to $100,000, their commission would be $5,000 (5% of $100,000).
Pros
Encourages Territory Growth
Rewards Salespeople for Expanding Market Presence
Clear Sales Targets for Specific Regions
Motivates Focused Sales Efforts
Can Foster Regional Expertise
Cons
May Lead to Competition Among Salespeople for High-Volume Territories
Potential for Neglected Territories
Complex to Administer for Large Sales Teams
Ideal Sales Teams and Company Types
Ideal Sales Teams: Territory Sales Teams, Regional Sales Teams
Ideal Company Types: Businesses with Distinct Market Regions, Multi-territory Sales Operations
Draw Against Commission Structure
Draw Against Commission Structure is a compensation model where salespeople receive an advance or “draw” against future commissions. They are paid a fixed amount regularly, typically monthly, and their commissions earned are deducted from this draw. Once their commissions exceed the draw, they begin earning additional income.
Draw Against Commission Structure Example
Consider a salesperson who receives a monthly draw of $3,000. If they earn $2,500 in commissions that month, they still receive the full $3,000 draw. However, if they earn $4,000 in commissions the following month, they would receive the excess $1,000 as additional income.
Note:
To calculate the Payout, use the formula: =IF(C2>B2, C2, B2)
To calculate the Carryover/Excess, use the formula: =C2-B2
Pros
Provides Financial Stability
Minimizes Income Fluctuations
Attracts Salespeople to Commission-Heavy Roles
Helps in Talent Retention
Encourages Consistent Sales Efforts
Cons
Potential Repayment Obligation
Complex Tracking and Administration
Can Create Dependency on Draws
Ideal Sales Teams and Company Types
Ideal Sales Teams: Sales roles with variable sales cycles
Ideal Company Types: Industries with seasonality or variable revenue patterns
How to Measure the Effectiveness of the Sales Commission Structure?
Measuring the effectiveness of salesforce commission structures is crucial for optimizing sales team performance and achieving business objectives. In this section, we’ll explore key metrics and methods to gauge the impact and efficiency of your commission plan.
1. Track Sales Metrics Before and After
To assess your commission plan’s impact, track KPIs before and after implementation, including revenue, sales volume, profit margins, and individual performance.
Coefficient offers an extensive library of free B2B sales dashboards to help you visualize these metrics at a glance.
2. Analyze Compensation Costs
To assess your commission plan, check total expenses, including base pay and bonuses, against sales revenue. If costs greatly outweigh revenue, it could signal an ineffective structure. Adjustments might be necessary for better alignment with business goals. Improve your sales commission plan’s effectiveness.
3. Review Quota Attainment
To check your commission plan’s effectiveness, review sales targets against actual performance. If many meet or exceed sales quotas, it’s motivating. If not, adjust the structure for better goal alignment and incentives. Regularly monitoring quota attainment keeps your plan on track to encourage desired sales team performance.
4. Consider Sales Rep Retention
Think about sales rep retention. If many salespeople leave, it can cost your business. High turnover suggests the commission structure might not be motivating or rewarding enough. A well-designed sales incentives plan keeps talented salespeople, ensuring stability and growth.
5. Review Sales Forecasts
Review sales forecasts by comparing predictions with actual results under the commission structure. If forecasts consistently match or exceed actual sales, it indicates an effective structure. If there’s a big difference, consider adjustments for better motivation. Regular scrutiny helps align the structure with business goals and accurate sales predictions.
6. Conduct Periodic Reviews
Periodic reviews are crucial to gauge your commission structure’s effectiveness. Regularly assess if it matches business goals and motivates the sales team. Review metrics, costs, quota achievements, sales rep retention, and sales forecasts at set times. This ongoing assessment helps you adjust the structure as your business changes, ensuring it keeps motivating your team and achieving sales goals.
7. Model Modifications
Modeling changes is vital for improving a sales commission structure. Use spreadsheets or software to test alterations before applying them. This helps you see how changes might affect costs, sales results, and overall success.
By modeling, you make smart decisions that align with your goals and benefit your sales team. It prevents surprises and ensures adjustments boost motivation, performance, and profits, making it a valuable part of your evaluation and improvement process.
How to Calculate Sales Commissions in Google Sheets?
Calculating sales commissions in Google Sheets can be a straightforward process when you have the right tools.
For a deeper dive, check out our comprehensive guide and a ready-to-use sales Commission Calculator for Google Sheets. It comes with step-by-step instructions and a pre-built template to help you calculate commissions effortlessly and accurately.
Streamline Sales Commissions Management with Coefficient
Competitive sales compensation plans are essential in driving your sales team towards success, with their performance having a direct influence on your bottom line.
For sales organizations, ensuring the right commission structure is crucial, especially in a platform as intricate as Salesforce.
However, establishing typical sales commission rates or determining an individual rep’s commission can be a daunting task. That’s where Coefficient steps in, simplifying the complexities. It streamlines sales commission management, offering a wide range of free templates that help sales managers save time and maintain accuracy.
While HubSpot is one of the most widely used customer relationship management (CRM) platforms, it has gaps. Despite its versatility, ease of use, and extensive integrations, HubSpot commission tracking is easier said than done.
Fortunately, there are workarounds that sales leaders can use to track and manage commissions. This blog covers two methods: Google Sheets and dedicated commission management software.
Let’s dive in.
Does HubSpot Have an In-Built Commission Tracking Feature?
No. Despite its strengths, HubSpot does not have in-built commission tracking capabilities.
The inability to track commissions in HubSpot can result in difficulty measuring the effectiveness of incentives and reduced transparency for sales teams.
Even worse, it increases reliance on workarounds like time-intensive, error-prone manual reporting and/or expensive third-party commission management software.
Top Two Ways to Automate HubSpot Commission Tracking
Google Sheets + Coefficient Data Connector
Dedicated Commission Tracking Software
1. Google Sheets + Coefficient Data Connector
Coefficient is a no-code add-on for Google Sheets that allows sales professionals to sync live data from HubSpot directly into their spreadsheet.
With just a few clicks, you can import HubSpot data, select specific tables and datasets, and build an automated sales commission tracking calculator.
Let’s explore how it works.
Step 1: Install the Coefficient app by clicking Extensions on the top menu in Google Sheets.
Then, select Add-ons > Get add-ons.
Type in Coefficient in the Google Marketplace search bar and select it from the menu.
Step 2: Open a new sheet and create a set of tables similar to the ones below.
Table 1: Quarterly Sales Commission Rates
Tier
Start Tier
End Tier
Commission
Table 2: Sales Commission – To Be Paid
Sale Rep
Q1 2024
Q2 2024
Q3 2024
Q4 2024
Step 3: Import your HubSpot data.
Navigate to the Coefficient menu and select ‘Import from…’
Choose HubSpot as your data source.
Select ‘From Objects & Fields.’
Under New Import, choose the Deals object.
Click ‘Next’ to select your fields: Amount, First name (Deal owner), Last name (Deal owner), and Close Date.
Scroll down, name your import, and click the ‘Import’ button to proceed.
Your data will now populate your spreadsheet.
The final step is to group our data by full name and quarter.
Create two new columns, ‘Full name’ and ‘Quarter-Year,’ in cells 2E and 2F.
Click into the empty cell beneath ‘Full name’ and enter the formula: =B3&” “&C3
Press enter and accept the suggested autofill to apply the formula down the column.
As the final step, click into the empty cell beneath ‘Quarter-Year,’ and enter the formula: =IF(AND(B3=””,C3=””),,”Q” &INT((MONTH(D3)+2)/3)&”-“&YEAR(D3))
This will reformat account close dates by quarter and fiscal year.
Now, you can create your HubSpot commissions tracker.
Navigate to the worksheet with your Quarterly Sales Commission Rates table.
Click into the empty cell next to your first rep and enter this formula:
Note: Replace ‘HubSpot Import’ with the name of your Coefficient import. Otherwise, it won’t work.
Click enter, and the formula will calculate the Q1 2023 sales commission for Bob Tone.
Drag the formula across the rest of the table to give you the sales commission calculations for your reps across the 2023 fiscal year.
Finish by setting up an automatic data refresh to ensure your spreadsheet’s HubSpot data is updated daily. This will ensure that Q2, Q3, and Q4 commission data will progressively populate as new deals emerge throughout the year.
Start by opening up your HubSpot import on the Coefficient sidebar.
Select ‘Edit’ on the dropdown menu.
Toggle on Refresh Schedule.
Configure the Refresh Schedule: Daily at 7am.
Click Save to continue.
The HubSpot data will update automatically every day at 7am. The sales commission calculator will recalculate how much you owe each sales rep in parallel.
And that’s it!
In just a few minutes, you’ve just built an automated HubSpot commission tracker in Google Sheets. Use our free template to do it in seconds!
2. Dedicated Commission Tracking Software
Many businesses may require solutions with robust commission management capabilities extending beyond HubSpot’s commission tracking.
Here’s a closer look at a few options.
Quotapath
QuotaPath specializes in customizable compensation plans, projecting commissions, and displaying insights on a singular dashboard.
Features include:
Commission Planning and Tracking
Sales Compensation Management
Variable Pay Management
Incentive Motivation
Commissionly
Commissionly is a cloud-based sales commission and compensation management web app for small to medium businesses.
It specializes in residual payment calculations, making it a great fit for insurance brokers, merchant services companies, and financial services organizations.
ElevateHQ is a sales commission software that helps growing sales teams boost sales performance and motivate sales teams. It offers an easy-to-use interface with a wide range of customizations, features, and automations.
Features include:
Sales Incentive Designer
Compensation Management and Automated Reconciliation
Commission Plan Simulator and Testing
Dashboarding and Incentive Motivators
Everstage
Everstage is a sales commission software that helps businesses maximize the ROI of their commission programs. It provides a transparent and gamified incentive experience to their customer-facing teams.
Features include:
Commissions Tracking
Incentive Planning
Automated Reconciliation
Reporting and Analytics
How are HubSpot Power Users Using Coefficient to Save Time on SalesOps?
“This app has saved me countless hours. Now instead of manually exporting data, I can have the data pulled into Google Sheets each morning and my Queries do the rest!”
“With some limitations in HubSpot on reporting on mulitple pipelines and teams, coefficient easily exports this data to a google sheet for us to use and report on effectively! so imple and the auto update is a game changer!”
“Coefficient solves custom reporting issues that HubSpot has! Need to combine multiple reports to present a better story? Coefficient solves this issue!”
The love is real! Visit this link to see what other users have to say about Coefficient.
HubSpot Commission Tracking: It’s Possible with Coefficient
While HubSpot is great at many things, tracking commissions isn’t one of them.
Fill that gap without lifting a finger with Coefficient’s free HubSpot commissions tracking template. Coefficient gives sales leaders visibility into yearly commissions by automatically syncing HubSpot data to Google Sheets.
And that’s only stretching the surface of what’s possible. Install Coefficient for free today and discover how it streamlines sales data workflows for yourself.
If Sales is the machine that drives a business, a well-structured sales compensation plan is its silent engine.
Not only do sales compensation plans reward hard work, they are pivotal in motivating and retaining top talent.
This guide offers insights into sales compensation, its importance to high-growth organizations like startups, and best practices to follow when building them.
Let’s dive in.
Sales Compensation
Sales compensation is the combination of incentives, base salary, commissions, and bonuses provided to sales reps as a reward for driving revenue at a company. It reflects a salesperson’s achievements in hitting targets aligned with company objectives.
What is a Sales Compensation Plan?
Sales comp plans are a structured strategy that details how reps are rewarded for meeting their sales goals. It’s tailored based on various factors, including the rep’s role, seniority, sales cycle length, and the nature of their sales engagements.
When structured effectively, sales compensation plans ensure salespeople are continually driven to meet or exceed their sales quotas and contribute to the bottom line.
Importance of a Well-Structured Sales Compensation Plan
MotivatingSales Reps. A clear compensation plan is crucial for motivating your sales team. With a clear incentive plan tailored for performance, sales representatives are more driven to meet and exceed their sales quota.
Alignment with Business Goals. The perfect compensation plan keeps the sales team on track with the company’s big objectives. Whether the focus is on bringing in new customers, holding onto current ones, or rolling out new products, the right rewards make sure everyone’s aiming for the same targets.
Retention and Attracting Top Talent. Top performers are likely to stay with a company that rewards their efforts adequately. Moreover, a competitive compensation package can attract top sales talent to your organization.
Flexibility and Fairness: A great plan can adjust to different sales cycles, making sure everyone gets fair pay, no matter the product or time frame.
Key Components of a Sales Compensation Plan
Base Salary. The amount of money paid to sales reps regardless of performance. It provides predictability and stability to team members.
On-target earnings (OTE).OTE is an estimation of total earnings if salespeople hit their targets. It’s a combination of base salary plus commission.
Sales Incentives. Companies can offer other incentives outside of regular pay or commissions, including:
Spiffs (Sales PerformanceIncentive Funds) orshort-term motivators that encourage specific sales behaviors or outcomes. For example, you could give a a cash prize for the first rep to close a specific number of deals.
Contests or competitions that might reward salespeople for hitting specific targets, like improving customer retention rates.
Rewards can be monetary, like cash bonuses, or non-monetary, such as dinners, trips, or other experiences.
Benefits and Perks. Beyond the monetary components, benefits and perks play a significant role in attracting and retaining top sales talent. These can include:
Health and wellness benefits likehealth insurance, gym memberships, or wellness programs.
Professional development incentives such as courses, workshops, or subsidies for further education.
Flexible work arrangements can include remote work, flexible hours, or compressed work weeks.
Retirement plans with or withoutmatching 401(k) contributions.
Other perks like company phones, car allowances, or regular team outings and events.
Bonuses. Extra payouts that sales reps can earn based on their performance, achievements, or meeting specific criteria set by the company.
Sales Compensation Plan Examples
Trying to create a compensation plan but unsure of where to start?
Let’s walk through a few different types of sales compensation plans. Each example includes a free template for you to try out on your own!
Base Pay
Instead of rewarding sales reps for performance, base pay commission plans provide them with a fixed, regular salary. Base pay commission plans are generally liked for their predictability because they offer salespeople a consistent income.
Example: A salesperson earns a base salary of $3,000 per month.
Base Pay + Commission
In addition to earning a regular salary, base pay + commission plans offer salespeople extra earnings based on their sales performance.
Example: A salesperson has a $3,000 base salary and a 5% commission rate. If they achieve $20,000 in sales, they’d earn an additional $1,000 commission, making their monthly earnings $4,000.
Subscription-based businesses typically provide residual commissions on recurring sales over a period of time. It factors in base salary, rewards, and deductions to determine the net earnings.
Example: A salesperson sells a software subscription at $100/month, earning a 10% commission on the initial sale and an ongoing 10% for every subsequent month the subscription remains active.
Tiered sales commission plans adjust commission rates based on sales volume, rewarding sales reps to exceed their sales quotas.
Example: A tiered commission plan is composed of three levels:
Tier 1: 5% commission for sales up to $10,000
Tier 2: 7% commission for sales between $10,001 and $20,000
Tier 3: 10% commission for sales exceeding $20,000
If a salesperson makes $25,000 in sales, they earn 5% on the first $10,000 ($500), 7% on the next $10,000 ($700), and 10% on the remaining $5,000 ($500), for a total commission of $1,700.
Revenue commission plans compensate sales reps directly based on the total revenue they bring into the company. In other words, rep compensation directly relates to company revenue, creating a direct alignment between individual effort and earning potential.
Example: If a salesperson sells products worth $50,000 in a month at a commission rate of 4%, they’d earn a commission of $2,000 for that month.
Gross margin sales commission plans pay commissions based on a sale’s profit margin instead of its total value. It incentivizes salespeople to sell more and maximize the profitability of each sale.
Example: A salesperson earns a 15% commission on the gross margin of their sales. If they sell a product for $1,000 with a COGS of $600, the gross margin is $400 ($1,000 – $600). The salesperson’s commission would be 15% of $400, which is $60.
Territory volume commission plans calculate commission based on total sales volume in an assigned geographic or market area. They incentivize reps to maximize overall sales within their territory instead of high-value deals.
Example: A salesperson responsible for a specific region earns a 5% commission on all sales within their territory. If the total sales reach $100,000/month, they’d make $5,000.
In a draw against commission structure, sales reps get an initial “draw” or advance at the beginning of a pay period, reflecting anticipated commissions. As they make sales, this draw is balanced out by the actual commissions they earn.
Reps pocket the excess if their commissions surpass the draw, but if they earn less than the draw, they might have to repay the shortfall to the company.
Gather relevant data. Before creating your plan, you must have an idea of past sales performance, a thorough understanding of your business goals, and the nuances of your sales cycle.
Draft your plan. Set your target pay, base salary, commission, bonuses, and other incentives. From there, decide on the right pay mix – the base salary to incentives ratio. Adjust upside potential to reward sales reps who excel in closing deals and exceeding their sales quota.
Get buy-in from stakeholders. Engage with executives and sales leaders to gather feedback on your plan. Their insights can ensure it aligns with organizational goals.
Communicate your plan. Transparency is mission-critical. Organize a meeting to introduce the compensation plan to your sales force. Emphasize how it supports the business strategy and aligns with the sales cycle.
Implement necessary tools. Use a mix of your sales platforms like CRMs and other tools to track sales performance. Ensure your finance and payroll systems can handle payouts so your reps are paid accurately and on time.
Hold training sessions. Offer training sessions that get into plan specifics into how high-performance can maximize earnings.
Monitor and report performance. Keep a close eye on sales performance metrics. Establish regular check-ins and provide sales reps with intuitive dashboards that display sales milestones, potential bonuses, and accrued commissions at a glance.
Collect Feedback. Open the channels of communication. Regularly engage your sales force and solicit their feedback. Their hands-on experience with the plan can offer invaluable insights, spotlighting areas that might need recalibration.
Review and iterate. As business goals evolve, the plan should too. Periodically review and adjust your plan against real sales performance data.
Document and ensure compliance. Meticulously document every tweak, change, or overhaul of the plan and ensure that your sales compensation strategy is in strict compliance with industry standards and regulations.
Best Practices in Effectively Maintaining a Sales Compensation Structure
Set realistic sales quotas. Sales quotas should be both achievable and competitive. Past sales performance metrics will give you an idea of realistic goals. Roughly 60% of the sales team should be able to meet the set quotas.
Communicate clearly and often. Consistent and transparent communication is pivotal. Ensure everyone on the sales team understands the intricacies of the sales compensation plan. Detail any changes to the plan and emphasize the company’s goals.
Track metrics diligently. Use sales dashboards and spreadsheets to monitor sales performance metrics, sales quota attainment, and compensation payouts in real time. This gives you the ability to course correct and adjust your sales strategy when needed.
Conduct regular audits. Frequently check your sales targets and payouts to ensure reps’ payouts are accurate and in line with your compensation plan.
Evaluate and adjust. Always collect feedback and benchmark against industry standards. This helps make sure your sales commission plan remains competitive.
Collaborate Cross-Functionally. Involve teams like Finance, HR, and Sales Ops to get a well-rounded view and create a comprehensive compensation strategy.
Free Sales Compensation Calculator for Google Sheets
While creating the perfect sales compensation plan is challenging, accurately calculating and tracking against it can be even harder.
Commission plays a central role in fueling the drive of a sales team, acting both as a reward and a measure of performance. In fact, commission payments can boost performance by up to 44%.
Sales leaders are responsible for making sales compensation plans that keep salespeople excited about their work and ensure they hit their targets. But while sales commission management sounds simple—making sure team members get the right payouts—is not always easy to do.
This presents an opportunity for sales leaders to develop sales compensation plans that help keep salespeople motivated and on target. But sales commission management is often easier helps to ensure accurate payouts for team members but it’s easier said than done.
In this blog post, we’ll walkthrough how to handle commission tracking in the Salesforce CRM and share some third-party sales commission software that can make things smoother.
Let’s dive in!
Three Ways to Do Commission Tracking with Salesforce
Salesforce CRM
Salesforce commission tracking is a challenge because the platform lacks native tracking abilities. But with a few clever tricks, it is possible! We’ll walk through how to create custom objects and fields to track commissions in Salesforce.
Spreadsheets
Google Sheets and Microsoft Excel are a tried and tested way for Sales leaders to monitor incentive plans and track commissions. In the past, this method was time-consuming and prone to error.
Now, thanks to connected spreadsheets, you can sync data from Salesforce, ensuring up-to-date tracking and payouts.
Third-Party Apps
Salesforce’s AppExchange offers a range of third-party solutions like Cloudcomp, Spiff, Performio, and Xactly to make up for its lack of native commission tracking. They come with perks like real-time data and in-depth reports, making the whole process smoother and clearer.
Step-by-Step Walkthrough of Setting up Commission Tracking in Salesforce
Before setting up commission tracking in Salesforce, you must decide on your commission structure and how it fits into your company’s sales process.
For example, your incentive plan could be a simple percentage per deal, quotas per rep, thresholds, variable commission percentages based on certain conditions, etc.
Step 1: Create a Custom Object for Commissions.
Log into your Salesforce account. Click the wheel icon and select Setup to open Setup.
Click the Object Manager tab.
Navigate to the top right corner of the Object Manager page, and click Create > Custom Object.
Create a new custom object named “Commission.”
Add custom fields to this object:
Date (carried over from the opportunity)
Opportunity (to link the commission to the specific opportunity)
Commission Name (a custom naming convention)
Commission Amount (calculated based on the opportunity amount)
Step 2: Set Up a Flow to Trigger Commission Record Creation.
Return to the Setup homepage.
Navigate to the search bar and enter “Flows.” Click the first option that appears.
Click New Flow > Record-Triggered Flow > Create.
Create an “Opportunity Record Triggered Flow.”
Workflows are made of three parts: a trigger, the criteria, and the actions.
Trigger: Set the flow to trigger “after” an opportunity record is created or edited.
Criteria:
The opportunity should be “Closed Won.”
The flow should only trigger when the record is updated to meet the “Closed Won” condition.
Action:
Create a new commission record.
Set the Opportunity field in the commission record to link to the triggering opportunity.
Set the Date field in the commission record to the close date of the opportunity.
Use a formula to set the Commission Name (e.g., “Opportunity Name – Owner Alias – Close Date”).
Use a formula to calculate the Commission Amount (e.g., 10% of the opportunity amount).
The final workflow should look something like this:
Step 3: Test the Flow in the User Interface (UI):
Find an opportunity that is not “Closed Won,” and manually update it as a Closed Won deal.
This will automatically create a commission record.
Check the opportunity’s related list to ensure the commission record matches the calculated amount.
Note: Depending on your commission structure, you might need to add more conditions, formulas, or actions to the flow.
Challenges of Tracking Sales Commissions in Salesforce
Custom Object Creation and Maintenance
Salesforce requires creating custom objects and fields to track commissions. This manual task can be time-consuming. Continuously tweaking these customizations while managing a growing team can be a challenge for sales leaders.
Payroll Systems Integration
Combining Salesforce data and payroll systems to ensure timely commission payouts can be challenging.
Limited Visibility on Calculations
Commission calculations vary from company to company and can be complex in certain cases. Without the right tools or processes in place to handle these unique calculations, it can be hard to see and understand how commissions are worked out.
Reporting Limitations
Salesforce is an incredibly robust CRM, but it has reporting limitations that prevent sales leaders from easily tracking commissions.
Cost of More Salesforce Licensing
As organizations grow, many purchase additional Salesforce licenses. Ensuring the right permissions can lead to higher-tier license packages, increasing costs.
Salesforce Commission Tracking in Google Sheets
While setting up commission tracking in Salesforce is a challenge, maintaining it at scale is nearly impossible.
This is where Coefficient and Google Sheets come into play, allowing sales leaders to consolidate commission track and report in a single view.
And the best part? Coefficient enables you to import live Salesforce data into Google Sheets on an automatic schedule. That way, the sales commission calculator is refreshed daily.
Let’s walk through how to use Google Sheets, Coefficient, and Salesforce to create a sales commission calculator that updates automatically.
Note: Replace ‘Salesforce Import’ with the name of your Coefficient import in the above formula.
Otherwise, it won’t work.
The formula will calculate the Q1 2022 sales commission for Michael Brown.
Now drag the formula across the rest of the table. This will give you the sales commission calculations for all of your sales reps across Q1, Q2, Q3, Q4.
The final step is to set up automatic data refreshes.
This ensures that the Salesforce data in your spreadsheet will update on a daily basis.
To set up automatic refreshes, open your Salesforce import on the Coefficient sidebar.
Select ‘Edit’ on the dropdown menu.
Enable the Refresh Schedule.
Configure the Refresh Schedule: Daily at 7am.
The Salesforce data will update every day at 7am. At the same time, the sales commission calculator will recalculate how much you owe each sales rep.
This makes paying out commissions easy and straightforward. As the year goes on, your sales commissions will fill in for each quarter automatically.
Third-Party Apps for Salesforce Commission Tracking
Cloudcomp
Cloudcomp is a comprehensive commission management tool that provides automation, real-time commission calculations, and deep integration with Salesforce.
Benefits include:
A user-friendly interface, Cloudcomp allows sales reps to view their commissions in real-time.
Advanced analytics, enabling businesses to forecast sales and optimize their compensation plans.
Spiff
Spiff offers a robust platform for commission calculations, forecasting, and advanced reporting. The platform is designed to handle complex commission structures, overrides, and spiffs.
Benefits include:
Commission dashboards that allow teams to track performance against set targets.
Automated reconciliation features, ensuring that payouts are accurate and compliant.
Performio
Performio is known for its commission management and sales compensation functionalities. It offers features like dispute management, analytics, and advanced commission calculations.
Benefits include:
End-to-end commission management, from setting up compensation plans to making payouts.
Analytics dashboard provides insights into sales performance, helping businesses optimize their compensation strategies.
API integrations to ensure data is synchronized across platforms.
Everstage
Everstage focuses on sales performance and incentive compensation. It offers features like goal setting, performance tracking, and advanced analytics.
Benefits include:
An intuitive interface to help sales reps set and track their performance goals.
Scenario modeling features that allow reps to forecast potential earnings based on different performance metrics.
Xactly
Xactly is a leading SaaS platform that offers a suite of commission management features, including analytics, forecasting, and incentive compensation management.
Benefits:
AI-driven insights that allow businesses to actively optimize compensation plans
Native Salesforce integration allows businesses to leverage Salesforce’s robust reporting features in conjunction with Xactly’s commission data.
Automate Salesforce Commission Tracking with Coefficient
Commission plans offer a unique opportunity to motivate and reward your sales team, ensuring their goals align with those of the business. The challenge is maintaining accurate and up-to-date commission tracking to ensure accuracy and timely payouts.
With Coefficient, you can automate this process, eliminating manual commission tracking and more. Get started for free today to experience it for yourself.
Sales commissions are a key payment stream for sales reps. Commissions incentivize sales reps to perform at a superior level, lead to more closed deals, and generate higher revenue for the company.
However, calculating sales commissions is often a challenge for sales orgs. Although the process seems straightforward, there are many roadblocks to creating a flexible, transparent sales commission calculator.
Since our customers routinely face this problem, we’ve designed our own sales commission calculator for Google Sheets. And now we’re sharing it with you!
The following blog will show you how to build our sales commission calculator in Google Sheets.
Alternatively, you can simply download our free template for the sales commission calculator to skip the building part.
Important note: the sales commission calculator is based on your Salesforce CRM data.
Now let’s get started!
Sales Commission Calculator: Powered by Live Salesforce Data from Coefficient
Building a sales commission calculator is simple if you follow the steps in this guide. But the calculator isn’t helpful if you must copy-and-paste new Salesforce data to update the commissions every day.
What you actually need is live data — data that’s synced with your Salesforce CRM — so your sales commission calculator always stays up to date.
That’s where Coefficient comes in. Coefficient enables you to import live Salesforce data into Google Sheets on an automatic schedule. That way, the sales commission calculator is refreshed daily.
Coefficient empowers you to pull data from any company system — such as HubSpot, Tableau, and Snowflake — into Google Sheets and automatically update the data.
With fresh data from Coefficient, you can make daily calculations as to how much you owe salespeople, and share the calculator among your team at all times.
Here’s how you can combine Google Sheets and Coefficient to build a sales commission calculator that updates automatically.
How to Build a Google Sheets Sales Commission Calculator
Note: Replace ‘Salesforce Import’ with the name of your Coefficient import in the above formula.
Otherwise, it won’t work.
The formula will calculate the Q1 2022 sales commission for Michael Brown.
Now drag the formula across the rest of the table. This will give you the sales commission calculations for all of your sales reps across Q1, Q2, Q3, Q4.
As a last step, set up automatic data refreshes.
This ensures that the Salesforce data in your spreadsheet will update on a daily basis. Q2, Q3, Q4 will gradually fill in as new deals come in throughout the year.
To set up automatic refreshes, open your Salesforce import on the Coefficient sidebar. Select ‘Edit’ on the dropdown menu.
Enable the Refresh Schedule.
Configure the Refresh Schedule: Daily at 7am.
The Salesforce data will update every day at 7am. At the same time, the sales commission calculator will recalculate how much you owe each sales rep.
This makes paying out commissions easy and straightforward. As the year goes on, your sales commissions will fill in for each quarter automatically.
Let’s continue on to discuss other examples of sales commission calculators.
Base Pay + Commission Calculator
The base pay plus commission structure combines a fixed salary with commission based on sales performance.
It offers salespeople financial stability with the base pay and incentivizes higher sales with commission.
How to calculate:
Base Pay + (Total Sales * Commission Rate)
Example:
A salesperson makes a base salary of $3,000 a month and has a 5% commission rate. If they sold $20,000 in a given month, their commission for the month would be $1,000.
Territory Volume Commission Calculator
In this model, salespeople earn commissions based on total sales within their assigned territory.
Companies can use this structure to maximize sales in a specific region by creating healthy competition among territories.
How to calculate:
Total Sales in Territory * Commission Rate
Example:
A salesperson earns a 5% commission on all sales made within their designated territory. If the total sales in their territory for a month amount to $100,000, their commission would be $5,000 (5% of $100,000).
Revenue Commission Calculator
Common in B2B sales, revenue-based commission awards salespeople a percentage of the revenue from their sales. It’s a direct share of the company’s earnings from a sale.
How to calculate:
Total Sales * Commission Rate
Example:
Imagine a salesperson earns a 5% commission on the total revenue generated from their sales. If they make $50,000 in sales, their commission would be $2,500 (5% of $50,000).
Automate Sales Commissions: Combine Spreadsheets with Live Salesforce Data
With Coefficient, you can import real-time Salesforce data into Google Sheets, and build a sales commission calculator that updates automatically.
Follow the steps in this guide to build a Google Sheets sales commission calculator. Or download our free template to access the sales commission calculator, already built for you. Love this resource? Want more? Coefficient offers libraries of advanced reporting dashboards and simple spreadsheet templates for you to sift through as well.
Get started for free with Coefficient so you can create a flexible sales commission calculator with fresh Salesforce data.
Managing sales commissions is tricky. Do it right and improve sales team motivation and performance. Any delays or inaccuracies can drastically affect morale, resulting in decreased sales.
Sales commission templates give Revenue Operations professionals a standardized framework to capture, calculate, and report on sales-related earnings. They also ensure that salespeople are compensated transparently, accurately, and on time.
Let’s explore nine of the best sales commission calculators, specifically those across various commission structures.
Each calculator comes with a free Google Sheets template you can use immediately.
Let’s dive in.
1. Basic Sales Commission Calculator
The basic sales commission template is a tool used to calculate the commission an individual or sales team earns depending on their sales performance. It simplifies the complex calculation process, considering factors like potential bonuses, base salaries, commission rates, and sales revenue.
It’s especially beneficial for startups or businesses with simple commission structures.
2. Salary Plus Commission Calculator
The salary plus commission template provides a clear overview of total compensation by combining variable performance-based commissions with base salary. It includes deductions, rewards, tiered commission rates, and individual sales.
This commission calculation is used to reward high performers while ensuring a fair and transparent incentive structure that motivates reps to exceed their targets.
4. Residual Sales Commission Calculator
Subscription-based businesses often face challenges in calculating sales commissions due to recurring revenue.
The residual sales commission template solves this problem by estimating commissions on recurring sales over months or years. It uses base salary, subsidies, rewards, deductions, and commission amounts to compute the net salary for sales representatives.
It accounts for factors like base salary, specific commission rates, tax considerations, etc to give a comprehensive view of potential earnings. Revenue sales commission calculators are a win-win, aligning the goals of both the sales reps and the company.
6. Variable Revenue-Based Commission Calculator
The variable revenue-based sales commission template calculates commissions based on varying rates of revenue they generate. Instead of a flat rate, the commission rate adjusts based on predetermined criteria or performance tiers.
7. Gross Margin Sales Commission Calculator
The gross margin sales commission template calculates a salesperson’s commission from the sale’s profit rather than the total sale amount. It uses the sale’s cost, revenue, and other expenses to calculate total earnings and varies from deal to deal.
Gross margin sales commission structures incentivize reps to sell more and maximize the profitability of each sale. This can be particularly important for businesses where the cost associated with individual sales can vary widely.
8. Draw Against Commission Calculator
The draw against sales commission template estimates a sales rep’s earnings after deducting an advance or “draw” from their expected commissions. If their commissions are more than the draw, they receive the difference. Otherwise, they may owe the company, depending on the contract.
9. Territory Volume Commission Calculator
The territory volume sales commission template calculates commission based on total sales volume in an assigned geographic or market area. This approach incentivizes reps to maximize overall sales within their territory as opposed to high-value deals.
Build Custom Sales Dashboards with Coefficient in Google Sheets
Coefficient is a Google Sheets and Excel add-on that enables the power of live revenue operations data in spreadsheets from platforms like Salesforce, HubSpot, Pipedrive, Outreach, and Tableau directly at your fingertips.
Instead of juggling multiple tools, RevOps teams can use Coefficient to build custom dashboards, ensuring they have the most updated information when strategizing their sales approach.
Commission Tracking Templates for Google Sheets
Commission management is the heart and soul of an effective sales strategy. Still, many RevOps teams struggle to track commissions effectively.
Coefficient’s sales commission templates for Google Sheets are a reliable and automated way to stay on top of commission data. Coefficient also offers a library of free spreadsheet templates for all to use.
