Most sales leaders cite the standard 60:40 ratio of salary to commission. Too often, leaders build compensation plans in disconnected spreadsheets, separated from territory design, quota setting, and the overall GTM strategy. The result is predictable: Slack threads arguing over payouts, reps running shadow spreadsheets, and forecasts you cannot defend.
Treat compensation as a strategic lever inside one revenue operations system, not a payroll line item. Use these five steps to align pay with your GTM, drive consistent performance, and tie every dollar to your revenue targets.
Step 1: Align Your Compensation Plan with Your GTM Strategy
Never create your sales compensation plan in isolation. Build it from your business objectives and the operating model of your revenue engine.
Connect your plan directly to your Go-to-Market goals. Are you focused on new logo acquisition, net revenue retention, or geographic market expansion? Should reps be incentivized to pursue a specific high-value Ideal Customer Profile (ICP)? Is the priority to push a new product line or drive upsells with existing customers? Answering these questions ensures your compensation plan actively drives your strategy.
A compensation plan that is not aligned with the GTM is just a payroll calculation. This alignment is a core principle of effective GTM planning. We advocate for a model of continuous GTM planning where the compensation plan can be adjusted as your strategy evolves, rather than remaining a static annual document.
Step 2: Define Key Components and Metrics
Define the rules up front so reps know exactly how to win, and finance knows exactly what it will cost. With strategy set, specify the building blocks that make the plan unambiguous. These components provide the structure and clarity your sales team needs to perform with confidence.
On-Target Earnings (OTE): Base vs. Commission
On-Target Earnings represent a seller’s total potential compensation, combining their base salary with their variable, at-risk pay. The ideal pay mix varies by role. For example, an SDR’s OTE might have a higher base salary component, while a seasoned Account Executive’s compensation will lean more heavily toward variable pay to reward closing deals.
Quotas and Performance Metrics
Set quotas that stretch the team without breaking trust. A data-driven quota setting process is critical for establishing targets that are perceived as fair and motivating. While revenue is a primary metric, consider incorporating others that align with your GTM strategy, such as profitability, multi-year deal structures, or product-specific sales targets.
Accelerators, Decelerators, and Clawbacks
These mechanisms allow you to fine-tune incentives and protect the business.
- Accelerators reward top performers with higher commission rates for exceeding their goals, driving them to overachieve.
- Decelerators can protect the company from over-payment on unusually large “bluebird” deals that fall outside the normal sales process.
- Clawbacks define the conditions for reclaiming commissions, such as when a new customer churns within the first 90 days.
Step 3: Choose the Right Sales Commission Structure
The commission model you choose directly influences sales behavior. Select the right structure to motivate your team and prevent gaps between planning and execution.
Common Commission Models
Several models can be effective, depending on your business goals:
- Straight Commission: This simple model pays reps a percentage of the revenue they generate. While easy to understand, it can create income instability.
- Tiered Commission: This structure motivates reps to push past their quota with increasing rewards. For example, a tiered commission example might involve reps earning 5% on sales up to their goal, then 8% on all sales after that point.
- Gross Margin Commission: This model aligns the sales team with profitability by basing commissions on the margin of a deal, not just its total revenue.
- Territory Volume Commission: Often used in team-based selling environments, this structure rewards the collective performance within a specific territory or segment.
The best structure often depends on your industry. For instance, tech commission rates typically account for longer sales cycles and larger average deal sizes. The structure of a compensation plan is just as important as the quota number itself. Our 2025 Benchmarks Report found that even after quotas were reduced, nearly 77% of sellers still missed their targets, highlighting a critical disconnect in plan design.
Step 4: Model, Test, and Forecast Your Plan’s Impact
If you build the plan in a spreadsheet, you cannot see its real financial and operational impact. Before deployment, model various scenarios to ensure the plan is both motivating for reps and sustainable for the business.
Ask these guiding questions:
- What is the total commission cost if 100% of the team hits quota?
- What is the financial impact if 20% of reps become top performers and hit accelerators?
- How does this plan affect our overall capacity planning, and headcount budget for the next fiscal year?
Scenario modeling transforms compensation planning from a reactive expense calculation into a proactive strategic exercise. This is where a dedicated platform becomes essential. For example, Udemy reduced its GTM and territory planning time from months to weeks by replacing manual Excel processes, freeing up valuable time for strategic modeling and analysis.
Step 5: Automate and Execute with a Unified Platform
Connect plan to pay in one system to remove disputes, speed payouts, and keep trust high. A perfectly designed plan is useless without accurate, timely, and transparent execution. Manual commission calculations create errors, trigger disputes, and erode trust between sales and operations.
The solution is an end-to-end platform that connects the “Plan” to the “Pay.” When you Automate GTM operations, the platform calculates commissions accurately and transparently, building confidence and motivation across the entire sales team. This system must also be agile enough to support plans built on a foundation of fair and balanced sales territories, ensuring every rep has an equitable opportunity to succeed.
Build a Plan That Performs and Pays Off
Great compensation is more than a commission rate. It requires GTM alignment, clear metrics, robust modeling, and automated execution. Disconnect these pieces and motivation craters, and your forecast turns into a guess.
The next step for revenue leaders is to move compensation strategy out of isolated spreadsheets and into an integrated Revenue Command Center. By doing this, you will pay your reps accurately while building a revenue system you can plan, fund, and trust.
This is how we help teams plan confidently and perform well. It is why we are the only company to guarantee improved quota attainment in six months and forecast accuracy within ten percent. By connecting your plan directly to performance, you create a system where every seller is motivated, every commission is transparent, and every revenue goal is within reach.
Ready to connect your plan to performance? See how Fullcast’s end-to-end platform can transform your revenue operations. Book a conversation, bring your current plan, and we will show you the impact before you change a thing.
FAQ
1. What is the standard sales compensation structure?
A common sales compensation structure follows a 60:40 ratio, with 60% of total compensation coming from base salary and 40% from variable commission. However, the way you structure that variable portion is what truly differentiates high-performing sales teams from average ones.
2. Why does sales compensation plan structure matter more than the ratio itself?
While many companies use similar salary-to-commission ratios, the specific design of the variable pay component, including how commissions are calculated, when they accelerate, and what behaviors they incentivize, is what separates top-performing teams from everyone else. A poorly structured plan can demotivate reps and lead to missed forecasts, even when the overall pay mix seems competitive.
3. How should a sales compensation plan align with business strategy?
A sales compensation plan should directly reflect your company’s core business objectives and Go-to-Market strategy, not exist as a standalone payroll calculation. The plan needs to incentivize specific strategic goals like acquiring new customers, improving revenue retention, or driving adoption of new product lines, ensuring that what reps are paid for matches what the business actually needs to achieve.
4. What are the key components every sales compensation plan should include?
A well-designed sales compensation plan includes several foundational elements: On-Target Earnings that define total expected compensation, data-driven quotas that set performance expectations, accelerators that reward over-performance, decelerators that manage outlier deals, and clawbacks that account for early customer churn. These components work together to create clarity and maintain motivation.
5. How does commission structure influence sales behavior?
The commission model you choose, whether straight commission, tiered rates, or gross margin-based, directly shapes how your sales team prioritizes opportunities and allocates their time. The structure of your compensation plan is just as important as the quota number itself, because even reasonable quotas can fail to drive results if the underlying incentive structure doesn’t align with desired behaviors.
6. What is scenario modeling and why does it matter for compensation planning?
Scenario modeling involves testing your compensation plan’s financial impact under different performance outcomes before you launch it. This proactive approach helps you ensure the plan will motivate your sales reps while remaining financially sustainable for the business, transforming compensation planning from a reactive expense calculation into a strategic exercise that supports growth.
7. Why should companies automate commission calculations?
Companies should automate commission calculations to ensure accuracy and build trust with their sales teams. Manual calculations in spreadsheets are error-prone and can erode trust, leading to disputes and demotivation, while automation provides transparency and connects planning directly to payment execution.
8. What are the risks of managing compensation plans in spreadsheets?
Disconnected planning in spreadsheets often leads to demotivated sales reps and missed forecasts because it’s difficult to maintain accuracy, ensure alignment across teams, and model the impact of plan changes. Spreadsheets also create silos between planning and execution, making it harder to connect strategic intent with day-to-day sales activities.
9. How does an integrated revenue platform improve compensation planning?
Moving compensation planning from isolated spreadsheets into an integrated platform creates a predictable revenue engine by connecting strategy to execution. This unified approach reduces planning time, improves accuracy, and ensures that your compensation structure consistently drives the behaviors and outcomes your business needs to grow.
