An Account Executive compensation plan that includes accelerators dependent on quota attainment and a milestone bonus for achieving 100% quota.
Commission with Accelerators and Milestone Bonus
Use this tiered commission structure to incentivize your team to sell beyond their quota attainment. Once they hit quota, they will earn a higher commission rate on all new deals within the quota term and collect a milestone bonus. Note: This plan combines Commission with Accelerators with the Milestone Bonus plans. Unlike the Milestone Bonus Plan, reps will earn a Single Rate Commission on deals leading up to quota and have the opportunity to make even more after unlocking the milestone bonus as well as the accelerated rate.
$140K
On-Target Earnings
$175K
Quarterly Quota
$70K:$70K
Base:Variable
5x
Quota:OTE
Model your plan
Forecast Earnings
Split
50:50
Quarterly Quota Commission
Quarterly Quota Bonus
$1-$30 million
ARR
Quota:OTE
A Quota to OTE Ratio of 4 - 8 is best.
Quarterly
Paths
Path 1: Quarterly Quota Commission
Path Description
Quota
Type
Earnings Rule
This plan includes two paths. The first includes a commission base rate for all deals that close between 0 and 100% quota. Once the rep passes quota, any new deals for the remainder of the quota period pay out 1.5x the base rate, non retroactively. This commission represents 75% of their total variable pay.
Path 2: Quarterly Quota Bonus
Path Description
Quota
Type
Earnings Rule
The second path rewards the rep with a pre-determined base rate bonus in dollars for achieving 100% quota. This bonus represents 25% of their total variable pay.
I like an accelerator and a bonus of some sort. Maybe it’s a fat cash bonus. A trip. I like having that reach for the stars moment, because if they’re doing that, I know my business is humming along.
- Amy Volas, Founder & CEO
Avenue Talent Partners
Plan Examples
Account Executive
Monthly quota:
$33,000 ARR
0-100% quota:
10% base rate
100% and above:
15% accelerated rate
100% quota:
flat $4,000 bonus
IT Sales Rep
Monthly quota:
$100,000 ARR
0-100% quota:
6% base rate
100% and above:
9% accelerated rate
100% quota:
flat $4,000 bonus
Insurance Rep
Monthly resale quota:
$20,000
0-100% quota:
10% base rate
100% and above:
15% accelerated rate
100% quota:
flat $2,500 bonus
How to customize this plan
As with most compensation plans, the two major components that will vary across sales teams are:
Quota
To set the quota for your sales team, you should first decide on the quota period or length. This dictates how frequently the quota resets for your reps.
We’ve found that about half of companies follow quarterly quotas, while the others split between annual and monthly quotas. We also occasionally see other quotas, such as weekly and semi-annual, but the quarterly frequency is most common.
Once you set your quota periods, next define your quota amount. This will be important in creating your on-target earnings (OTE). To help with this, we created the free Quota:OTE Ratio calculator.
Commission Rate
Next up is defining your commission rates.
Finding the ‘base rate’ is relatively easy: divide a rep’s on-target variable pay dedicated to their commission (we recommend 60%-85%) by their annualized quota. Note that you will need to determine your accelerator that extends from the base rate.
For quota attainment accelerators, you’ll want anywhere from 1.1x to 2x the base rate.
Bonus Rate
It’s actually quite easy to determine the bonus rate for milestone bonuses. Take the portion of the reps’ variable compensation you want to dedicate to the milestone bonus (we recommend 15%-40% of their total variable) and divide it by the number of quota periods you have throughout the year.
For example, if your reps have a $40k variable component to their on-target earnings (OTE) and you want 20% of that to go toward the Milestone Bonus, it would be $8k per year. With a quarterly quota, you would divide that $8k by 4 (there are 4 quarters in a year). Therefore the milestone bonus would be $2k/quarter.
Frequently Asked Questions
What is an accelerator in sales?
An accelerator pays reps a higher commission rate once they achieve a pre-determined percentage toward quota attainment, deal size, or total amount of sales in a month or quarter. Accelerators are also known as multiple rate commissions.
What is a milestone bonus?
A milestone bonus in sales compensation is earned once the rep achieves designated stipulations and is paid a set amount, as a result. These bonuses do not vary if the rep is below or above these prerequisites. Any deals that come in below quota, the rep earns nothing. Reversely, any closed/won opportunities that finalize after the rep his quota, the rep will not earn any additional bonuses.
Are accelerators necessary?
Accelerators (and decelerators) incentivize overachievement of quota and serve as rep motivation. Not only are they one of the most common compensation plan components (80% of comp plans use accelerators), but they’re very well understood by sales reps. If you’re hoping to see a lot of reps overachieve, we suggest including accelerators.
Is this plan too complex?
It’s considered one of the more complex sales commission structure examples. If you’re hesitant about this compensation plan being overly complicated, you could try one of our other commission plans like Account Executive: Commission with Accelerators or Single Rate Commission with Contract Term Multiplier.
How long are comp plans supposed to be for?
Typically, your comp plan will align with your fiscal calendar. But that doesn’t mean you set it and forget it until the year’s end. Instead, conduct ongoing evaluationss throughout the year. Measure its efficacy. Experiment with SPIFs, review team and individual attainments, note average contract values (ACV) and time to close, and adjust accordingly. Keep documentation and data on everything to inform the next comp plan.
What does compensation mean?
In sales, compensation is the amount a rep makes or can make when incorporating bonuses, commissions, and other forms of variable pay. Most sales positions today blend a base salary with sales incentive compensation. To learn the basics, check out our blog.
How can you automate the sales compensation processes?
QuotaPath can remove the manual entry of commission tracking and sales compensation by automating the entire process. Immediate visibility into real-time earnings data and forecasted deal and attainment views motivate reps and increase revenue. See your comp plan in QuotaPath today by booking a demo with the team.
