The commission plan is the clearest signal you send to your sales team about what behaviour you actually want. Not the values on your website, not the mission statement in the all-hands — the comp plan. Whatever it rewards, you’ll get more of. Whatever it ignores, expect less of.
Most founders design commission plans reactively. They copy something they’ve seen before, adjust it slightly, and roll it out without thinking through the second-order effects. Then they wonder why reps are chasing small, fast deals instead of strategic accounts, or why nobody is expanding existing customers, or why the top performer is gaming the system.
The plan shapes the behaviour. Build it deliberately.
The Most Common Mistakes
Before getting into structure, it’s worth naming what typically goes wrong.
Accelerators that kick in at the wrong level. Accelerators — increased commission rates above a certain threshold — are meant to reward overperformance. But if the accelerator threshold is set too low, you end up paying elevated rates for quota attainment, not for exceptional performance. If it’s set too high, nobody ever reaches it and the incentive is meaningless. The sweet spot is usually accelerators that trigger at 100% of quota, with meaningful step-ups at 120% and 150%.
Plans so complex reps can’t calculate their own earnings. If a rep can’t do a back-of-envelope calculation of what a deal is worth to them before they get on a call, the commission plan isn’t motivating behaviour in the moment — which is the whole point. Complexity doesn’t make a plan more fair. It makes it less useful.
No multi-year deal treatment. If a rep closes a three-year contract upfront, how do you comp them? If you comp on total contract value, you’re paying out commission on revenue you haven’t yet earned. If you comp only on year one, the rep has no incentive to negotiate favourable long-term terms. This needs a clear rule — most companies pay a modest uplift on year one for multi-year deals — and it needs to be in the plan before a multi-year deal lands.
No clawback clause. If a customer churns within 90 days, should the rep keep their commission? Most founders say no — and rightly so. A clawback provision recovers commission if a customer cancels within a defined window (typically 60–180 days), which incentivises reps to qualify properly and set accurate expectations rather than closing deals that won’t stick.
The Core Components
Every well-designed commission plan has the same basic architecture.
Base salary. The floor. In UK B2B sales, a junior AE base typically sits at £30,000–£40,000. A mid-market AE is £40,000–£60,000. A senior enterprise AE can be £60,000–£90,000. The base should be enough to remove financial anxiety — a rep who is worried about rent is not a rep focused on selling — but not so high that it removes the motivational impact of variable pay.
OTE (On-Target Earnings). The total compensation a rep earns at 100% of quota. OTE is the number you advertise in job specs and the one reps use to evaluate offers. At most B2B startups, the base/variable split is 50:50 or 60:40. A 70:30 split reduces motivation; a 30:70 split increases risk for the rep and makes it harder to recruit.
Quota. The revenue target a rep is expected to hit to earn their full OTE. The standard benchmark is a 5:1 ratio between quota and OTE — so if OTE is £80,000, quota should be around £400,000. This gives the business a reasonable return on its sales investment. At ratios below 4:1, you’re likely overpaying for the revenue being generated. At ratios above 7:1, you’re probably underestimating what the role requires or what the market will pay.
Commission rate. Typically expressed as a percentage of revenue (or ACV). If OTE is £80,000 with a 50:50 split, the variable component is £40,000. If quota is £400,000, the commission rate is 10% to get to target variable at 100% attainment. The maths should always check out.
Accelerators. Enhanced commission rates above quota. A common structure: 10% commission up to 100% of quota, 12.5% from 100–120%, 15% above 120%. The specific rates matter less than the principle — meaningful upside for exceptional performance.
Setting the Right Quota
Quota is the most important number in the plan, and the most common source of dispute between founders and sales teams.
Set it too low and you pay out for mediocre performance, which is expensive and culturally corrosive. Set it too high and you have a team of people who are perpetually at 70–80% of quota, earning less than their OTE, becoming demotivated, and eventually leaving.
The right quota is one where roughly 60–70% of your reps are hitting it in a given year. If everyone is hitting it, it’s too low. If only your top performer is hitting it, it’s too high. Either situation creates problems — either in cost or in morale.
To set quota intelligently, you need real data: average deal size, average sales cycle, number of deals a rep can realistically run in parallel, lead volume. If you’re setting quota for a first hire before you have this data, be conservative. You can always adjust upward. Adjusting downward after the fact is painful and damages trust.
Handling Different Deal Types
New logo, expansion, and renewal should usually be treated differently.
New logo carries the most risk and effort. Prospecting, qualifying, multi-stakeholder management, commercial negotiation — it’s where the most sales skill is deployed, and the commission rate should reflect that. Typically the highest rate.
Expansion (selling additional licences, modules, or services to existing customers) is valuable and worth incentivising, but it’s often easier than new logo because the relationship exists. A slightly reduced rate — say 75–80% of new logo rate — is common and reasonable.
Renewal is often handled separately from sales entirely, or by a customer success function. If AEs own renewals, they should be compensated for them, but at a lower rate than new logo — typically 25–50%. If you pay the same rate for renewals as new logo, your AEs will spend all their time on renewals (low effort, predictable) and neglect new business (high effort, uncertain).
When and How to Change the Plan
Commission plans should be stable for at least a year. Changing plans mid-year — even with good intentions — creates anxiety, triggers accusations of moving the goalposts, and damages the trust you need to have in your sales team.
The right time to update the plan is at the start of a new financial year. Give the team at least 30 days’ notice. Explain the reasoning. Be specific about what’s changing and why. If the change reduces expected earnings, acknowledge it clearly and explain the commercial rationale — don’t dress it up as a benefit.
Never retroactively change commission on deals that are already in negotiation. This is a trust-destroying move that will cost you good salespeople. Even if the deal terms are unusual and the commission payout feels wrong, pay it, then fix the plan for next year.
The Thing Most Founders Forget
Commission structures are not just reward mechanisms. They are communication tools.
Every element of the plan sends a signal about what you value. A plan that pays equally on new logo and renewal signals that keeping customers is as important as winning them — which might be true but might not be what you need right now. A plan with no expansion commission signals that growing accounts doesn’t matter. A plan with no accelerators signals that going beyond quota is just expected.
Before you finalise any commission plan, ask: what behaviour does this incentivise? Is that the behaviour I actually want? Run through a few scenarios. What does a rep earn if they close two very large deals and nothing else? What do they earn if they close lots of small, fast deals? Does that reflect what’s good for the business?
The best commission plans are simple, fair, clearly communicated, and designed around the commercial outcomes the business actually needs — not around what someone saw at a previous company. If you’re building your revenue function and want a clear view of the metrics that should sit alongside your compensation structure, B2B sales metrics that matter covers the numbers worth tracking. And if you’re thinking about what the broader revenue infrastructure should look like, the fractional CRO page explains how I work with founders to build this from the ground up.
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