Sales Management
The wrong comp plan drives the wrong behavior. It can also drive your best rep to a competitor. Here's how to build a plan that attracts strong performers, rewards results, and doesn't cap the upside that motivates top sellers.
By Louie Bernstein · Published · Updated
Every component has a purpose. Understanding how they interact is how you build a plan that motivates the right behavior.
These ranges apply to B2B companies at $1M–$15M ARR with ACV between $10K and $100K.
| Metric | SMB AE ($50K–$100K ACV) | Mid-Market AE ($100K+ ACV) |
|---|---|---|
| OTE (quota attainment at 100%) | $60K–$90K | $90K–$140K |
| Base as % of OTE | 50–60% | 45–55% |
| Commission rate on closed ARR | 8–12% | 6–10% |
| Quota as multiple of OTE | 4–5x | 5–6x |
| Accelerator kicks in at | 100% of quota | 100% of quota |
| Accelerator rate | 1.25–1.5x base commission | 1.5–2x base commission |
Caps tell your best reps to stop selling. Remove them. You want reps motivated to exceed quota, not coast once they hit it.
Nothing destroys sales culture faster than moving the goalposts. Lock the plan for 12 months and communicate changes well in advance for the next cycle.
If 80%+ of your reps hit quota every month, quota is too low. You're over-paying for average performance. Quota should be attainable but stretching.
A flat commission rate with no accelerator gives your top performer zero extra incentive. Build in a 1.5x rate at 120% and watch what happens.
Building out your full sales team? How to build a sales team after $1M ARR →
The components above are the parts list. These five decisions are how you put them together so the plan pays for the outcome you actually want.
For a closing role at $1M–$10M ARR, start at 50/50. Too heavy on base (70/30, 80/20) and reps coast through a soft quarter. Too heavy on variable and reps discount to win, close deals that shouldn't close, and burn out within a year.
Decide what moment pays out: signed contract, invoice, or cash collected. Pay 100% on signature and reps sign anything; pay 100% on cash and they avoid slow-paying accounts. Most companies at this stage pay 50% at signature and 50% when cash arrives within 90 days.
Accelerators reward performance above quota. A decelerator — a lower rate below a threshold, such as 0.5x under 60% of quota — makes missing uncomfortable. Caps do the opposite of what you want: the moment your best rep hits one, they stop selling.
SPIFFs (short-term bonuses for a specific behavior right now), MBOs (quarterly bonuses for non-revenue outcomes like CRM hygiene), and team bonuses can steer behavior without rewriting the plan. Use one at a time. Reps can't optimize for three competing incentives.
Before publishing, run last year's actual deals through the plan. Would your top rep have earned more? Would your bottom rep have starved? Check your cost of sales — total comp paid divided by revenue closed. For B2B at this stage it should land between 12% and 20%. Fix it on paper before you ship it.
I'm Louie Bernstein — I have 50 years in business experience, including 22 as a bootstrapped founder. My Fractional Sales Leadership business has been helping founders since 2017.
I've designed sales compensation plans for dozens of small teams — from a single first rep to 10-person sales organizations. The most common mistake I see is founders who are afraid to pay their reps well. The right comp plan is the best investment in revenue growth you can make.
For most B2B SMB sales roles, 8–12% of closed ARR or deal value is the range. The right number depends on your average deal size, sales cycle length, and OTE. If a rep closes $500K at 10% commission, they earn $50K in commission on top of their base.
Start by working backwards from the rep's OTE. If their OTE is $80K and you want a 4x quota-to-OTE ratio, quota is $320K annually — about $27K/month in closed revenue. Adjust based on your average deal size and cycle length to make sure the math is achievable.
For most small teams, pay on bookings (signed contract or closed deal). Paying on cash collected creates cash flow delays that frustrate reps and complicates tracking. Use a clawback clause for deals that cancel within 90–180 days instead.
Capping commissions. Founders fear uncapped commissions because they imagine a rep earning more than the CEO. In practice, a rep who earns $200K because they closed $2M in ARR is one of the best problems a small company can have. Caps send your top performers to competitors.
In 30 minutes I can review your current compensation structure and tell you whether it's competitive, whether it's driving the right behavior, and what to change.