An Account Executive compensation plan that pays a single milestone bonus once a rep hits quota.
Milestone Bonus
Use this commission structure to encourage quota consistency and maintain low financial risk. Milestone bonuses apply only when the rep meets certain stipulations. In this case, it would mean the rep earns their milestone bonus when achieving quota. No more. No less. This can encourage reps to strive for quota every month. Plus, from an organizational lens, this type of sales commission structure removes the risk of an inflated commissions because the maximum bonus payout is a set amount. Note: At QuotaPath, we typically try to avoid plans that only feature milestone bonuses. These types of plans often lead to sandbagging, because if a rep unlocks their milestone bonus this month they might purposely push the next deal to the following month in order to get ahead on that milestone. We recommend pairing a milestone bonus with an accelerator. For this type of comp plan, try the Account Excutive: Commission with Accelerators and Milestone Bonus.
$140K
On-Target Earnings
$175K
Quarterly Quota
$70K:$70K
Base:Variable
5x
Quota:OTE
Model your plan
Forecast Earnings
Split
50:50
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 Bonus
Path Description
Quota
Type
Earnings Rule
This plan only has one path: Milestone Quota Bonus. Within this path, the rep does not earn a milestone bonus (a pre-determined dollar amount), until the rep hits monthly quota. If the rep brings in deals within the quota period after hitting quota, they are not eligible for additional bonuses until the quota period resets.
We started off with a comp plan for our reps that only had milestone bonuses. This resulted in a bunch of deals intentionally pushing to the next month. We fixed this by adding a second milestone bonus of $1,000 if they booked another $10K in revenue by the end of the month.
- Alex S.
Finance Director
Plan Examples
Account Executive
Monthly quota:
$25,000 ARR
0-99% quota:
No bonus pay
100% quota and above:
flat $2,000 bonus
IT Sales Rep
Monthly quota:
$33,000 ARR
0-99% quota:
No bonus pay
100% quota and above:
flat $4,000 bonus
Insurance Rep
Monthly resale quota:
$20,000
0-99% quota:
No bonus pay
100% quota and above:
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 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.
Bonus Rate
Determining the bonus rate for milestone bonus is simple. Take the total variable compensation for your reps 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 a quarterly quota, you would divide $40k by 4 (there are 4 quarters in a year). Therefore the milestone bonus would be $10k/quarter.
Frequently Asked Questions
Why would I only include a milestone bonus in my comp plan?
The major reason to have your compensation plan be exclusively 1 milestone bonus is if you have a specific bar that you’re trying to have your reps hit. You don’t care about them overachieving. The only thing that matters is that they hit their quota every month/quarter/year. If that is the case for you, a milestone bonus could be fitting.
What is the point of milestone bonuses?
Milestone bonuses are typically paired with a commission path in order to encourage reps to hit some certain target. If you include a milestone bonus with your commission rate, this removes some of the concern of sandbagging and rep dissatisfaction.
What is a milestone bonus?
In sales compensation, a milestone bonus is earned when the rep meets designated stipulations and is paid a set amount. These bonuses do not vary if the rep is below or above these requirements. Meaning, anything less than the quota, and the rep earns nothing. And, for any deals that come in after hitting the quota target within the quota period, the rep would not earn any additional bonuses.
What’s the difference between sales commissions and bonuses?
The difference between commissions and bonuses is that bonuses are based on a set amount of money you earn for doing a specific task. Commissions, on the other hand, are a percentage of a revenue number you earn for closing a deal. For example, If a rep gets 20% of every deal closed, that’s commission. If a rep collects $200 for every deal they close, that’s a bonus.
Is this plan too complex?
This commission plan’s complexity (or lackthereof) is right up there with the Single Rate Commission plan. The milestone bonus and single rate commission plans both include flat amounts or commission rates. Some would argue the milestone bonus plan is even simpler because the rep can only earn a set amount if and only when they hit quota. In both cases, the math is simple to calculate and easy for reps to understand.
