An Account Executive compensation plan that pays different sales commission rates based on the rep’s quota attainment and requires the rep to hit at least 60% quota before earning any commissions.
Use this commission structure with an accelerator and a cliff to drastically deter underperformance and reward over performance. The cliff ensures reps do not earn any commissions until reaching 60% of their quota. Then, at 60% quota, they begin earning the base rate, which applies to all revenue they have closed during that period. At 100% quota, the accelerator, or 1.5x the base rate, kicks in for all deals that come in for the remainder of the quota period above the quota. Note: At QuotaPath, we discourage using plans with cliffs. Motivating through punishment increases the likelihood of churn amongst your reps. It can also lead to reps striving to hit the minimum target versus aiming for 100% of quota, and finally it can encourage “sandbagging”. If you’re looking for a plan that includes accelerators without cliffs, try the Account Executive: Commission with Accelerators plan or the Account Executive: Commission with Accelerators & Decelerators plan.
A Quota to OTE Ratio of 4 - 8 is best.
This plan only has one path: Commission with Accelerators & Cliffs. Within this path, the rep earns zero commissions until achieving 60% of quota. Once a rep reaches 60% quota, the rep begins earning their base rate for all deals they have sold during that period. Then, when the rep hits 100% quota, the accelerator kicks in, awarding the rep with a commission rate 1.5x the base rate on all new deals for the remainder of the quota cycle.
A cliff in a comp plan sounds like a good idea from a business perspective, but it can be demoralizing for a rep who realizes they won’t hit the cliff goal midway through their quota period. This can lead to reps sandbagging deals into the next quota period so they can finally have a real chance to earn commissions.
100% and above:
100% and above:
Monthly resale quota:
100% and above:
As with most compensation plans, the two major components that will vary across sales teams are:
To set the quota for your sales team, you should first decide on the quota period or length. This determines when, and how frequently, the quota resets for your reps.
We found more companies follow quarterly quotas when compared to those with annual or monthly quotas.
Once you’ve chosen a quota length, use our Quota:OTE Ratio calculator to define your quota amount.
Determine your base commission rate next.
To calculate the ‘base rate,’ divide a rep’s on-target variable pay by their annualized quota. After that, you’ll need to determine a ‘multiplier’ on that base rate for this plan. For quota attainment accelerators, our suggestion is 1.1x to 2x the base rate.
As for the cliff, you’ll need to determine when your reps unlock any commissions. Most organizations keep this in the 30% to 60% attainment range. Anything above 70% is very risky.
In sales compensation, a cliff (also sometimes called a commission threshold or commission floor) is a rule that prohibits the rep from earning any commissions until achieving a set percentage of their total quota. For instance, in this plan, the cliff dissolves once the rep hits 60 percent of their quota. Upon doing so, the rep then earns their base commission rate on all deals sold during their quota period.
Probably not! There are two reasons why we discourage commission thresholds like this. First, it can be incredibly demotivating for a salesperson to sell all quarter only to miss their floor and not get paid anything on those deals. Secondly, if a sales rep knows they aren’t going to hit the minimum quota attainment to be paid, they might sandbag deals until the following month/quarter. This is dangerous behavior because you want to close deals as quickly as possible!
There are, of course, situations where a cliff makes sense. If your reps are more “order takers” and less value sellers, it might make sense to include a cliff in order to ensure that reps are doing the bare minimum. Cliffs are also fairly common in account management/customer success plans that use retention as their compensation mechanic.
Instead of a cliff, you might want to use a decelerator. While technically a cliff is a decelerator – one that reduces the commission rate to 0% – here’s a plan that might work better for you: Account Executive: Commission with Accelerators & Decelerators plan.
This plan features a 1.5x multiplier rate. That means that the commission rate above quota is 1.5 times the base rate below quota. Set your multiplier based on how much you want to incentivize your reps overachievement. An overly generous multiplier (ex. 3x) can create lumpiness in attainment. For example, a rep may hit 200% quota one quarter, then hit 50% of their goal the next quarter. For more consistency across quota periods, consider a lower multiplier, such as 1.25x the base rate.
This plan features 3 tiers: a 0% rate until 60 percent of quota is achieved, the base rate for deals that fall within 60% to 100% of quota, and the accelerated rate for all deals over 100% quota. Most plans that have accelerators feature 2 to 4 tiers. Any more than 4 tiers can become difficult for reps to remember which detracts from the purpose of the accelerator.
An accelerator rewards reps with a higher commission rate once they’ve passed a percentage toward quota attainment, deal size, or total amount of sales in a month or quarter. We also refer to accelerators as multiple rate commissions.
This commission plan is definitely more complex than the Single Rate Commission plan, as well as the Commissions with Accelerators. It’s also one we recommend avoiding as cliffs act more of a punishment than a motivator. If you are going to include a cliff in your commission plan, make sure to give your reps full visibility into their earnings, forecasted earnings, attainment, and projected attainment. You can use QuotaPath’s sales commission software to automate commissions calculations and provide that real-time transparency and forecasting toward attainment for your team.
An Account Executive compensation plan that pays different sales commission rates based on the rep’s quota attainment, including a decelerator if the rep is below 50% quota.
An Account Executive compensation plan that includes two bonus tiers that pay per quota attainment point