How to build a commission plan
A commission plan turns rep behavior into revenue by paying for the outcomes you want. The best plans are simple, aligned to company goals, and transparent enough that a rep always knows what a deal is worth. Complexity is the enemy: confused reps sell to the plan they misunderstand.
Short answer
Build a commission plan by setting the pay mix and OTE, choosing the commission rate and structure, defining accelerators above quota and any floors, deciding what triggers payment and clawbacks, then modeling the cost of sales across attainment scenarios. Keep it simple enough that a rep can calculate their own paycheck.
Step by step
Set the pay mix and OTE
Decide on-target earnings and the split between base and variable. Higher variable suits transactional, high-control roles; higher base suits complex, long-cycle sales.
Choose the commission structure
Pick the rate and shape: flat rate on revenue, tiered rates, or per-deal. Tie it to the metric you want to drive.
- Base plus commission with a defined rate
- Accelerators above quota to reward overachievement
- Optional decelerators or floors below threshold
Add accelerators above quota
Pay a higher rate past 100 percent attainment so top reps are pulled to overperform rather than sandbagging into next period.
Define triggers and clawbacks
Decide whether commission pays on booking, invoice, or cash, and set clawback rules for early churn so you do not pay for revenue that evaporates.
Model the cost of sales
Run the plan across attainment scenarios to confirm the total commission cost stays within your target cost-of-sales percentage.
Common mistakes
Overcomplicating the plan with too many modifiers so reps cannot compute their own commission. If they cannot, they cannot let it motivate them.
Capping commissions, which quietly tells your best reps to stop selling once they hit the cap.
How Ardovo helps
Ardovo calculates commissions from live deal data, applies accelerators and clawbacks automatically, and lets Rook model plan cost across attainment scenarios, so reps see real-time earnings and finance sees the cost of sales before the plan ships.
Frequently asked questions
Should I cap sales commissions?
Generally no. Caps tell your best reps to stop selling once they hit the ceiling, which costs you your most productive revenue. If you worry about windfall deals, use decelerators on unusually large deals rather than a hard cap on total earnings.
When should commission be paid?
Common triggers are on booking, on invoice, or on cash collected. Paying on cash protects against churn but delays reward; paying on booking motivates but risks paying for revenue that later churns. Add clawbacks for early churn to balance the two.
What is a good pay mix?
It depends on role. High-control, transactional roles often run a more aggressive variable split, while complex, long-cycle enterprise roles use a higher base because the rep controls less of the outcome. Match the variable to how much the rep influences the result.