An Account Executive compensation plan that pays a flat bonus for every deal closed by the rep regardless of deal size.
For the most basic bonus format, apply the single rate bonus structure to all deals. Single rate bonuses reward a flat amount of money for every deal closed. Whether it’s a small contract, or the largest the company has ever seen, the bonus remains the same. Note: This plan is both easily explained and understood amongst reps. A single rate bonus sales compensation plan can also be quickly adjusted to drive certain selling behaviors by increasing or decreasing the bonus base rate. However, this comp plan doesn’t account for discounting. So, your reps will be more likely to offer discounts because their bonus isn’t impacted which affects your average sales price. We generally only recommend this plan if your company has a very consistent contract value.
A Quota to OTE Ratio of 4 - 8 is best.
This plan only has one path: Single Rate Bonus (Quantity). The same, flat bonus amount is paid out on every deal regardless of size.
When we were first starting out we cared about logos above everything else, so we used a per-deal bonus. It worked so well for us, so we’ve kept it!
10 deals per month
Base rate bonus per deal:
12 deals per month
Base rate bonus per deal:
30 new customers per quarter
Base rate bonus per customer:
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.
First you need to figure out how many deals you would like your reps to close during the quota period you chose. This can be done by either guessing (not ideal!) or by solving for how many deals your reps should close to hit a financial target.
Once you have that determined, you would find the applicable bonus for your quota period. If you have an annual quota, that’s easy – it’s the same as your annual variable. If you have a quarterly or monthly quota, you’ll divide the annual bonus by 4 or 12, respectively.
So say you have a target of 10 deals per quarter and an annual bonus of $80k. Dividing $80k by 4 gives you a quarterly bonus of $20k, which you would then divide by the 10 deals giving you a $2,000 bonus per deal closed.
A quantity-based compensation plan is one of the easiest to understand for reps in sales compensation. You get a set bonus for every single deal you close, no matter how big or small the deal is, the bonus is the same. There are two major reasons why companies use this plan. First, because they have a consistent contract value with minimal variation in contract size. The second reason is that the company is trying to close as many logos as they can, regardless of how big the deals are. This is done occasionally as companies are first starting out and want to make a splash in the market.
In sales comp, a quantity-based single rate bonus plan means that reps earn the same bonus amount on every single sale. A bonus pay example might include earning $250 per booked deal.
The quantity-based bonus is tied to every deal closed, whereas the Revenue Based Single Rate Bonus depends on the rep’s quota attainment progress. So, under the first, a rep is paid $200 on every sold deal. Under the latter, the rep receives a set bonus amount for each point of quota attainment, for example a $50 bonus for each point of quota attainment.
A milestone bonus is earned when the rep meets designated stipulations and is paid a set amount, as a result. 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. Additionally, the rep is not eligible for additional bonuses within the same quota term after earning the first bonus. With a single rate bonus plan (quantity), however, the rep receives the same, predetermined flat rate on every deal sold within the quota period. No cap.
Sales bonuses differ from commissions in that bonuses are based on a set amount of money for completing a task. Meanwhile, commissions consist of a percentage of the total revenue from a deal. For example, If a rep gets 10% of every deal closed, that’s commission. If a rep earns $300 for every deal they close, that’s a bonus — a single rate bonus!
When it comes to sales compensation and commissions calculations best practices, the best thing you can do as a leader is clearly communicate the methodology behind your sales compensation model to your team. A close second would be to provide every stakeholder tied to commissions with a single source of truth that democratizes the often siloed commission process.
An Account Executive compensation plan that includes accelerators dependent on quota attainment and a milestone bonus for achieving 100% quota.
An Account Executive compensation plan that pays the same bonus rate in dollars per-attainment point achieved regardless of quota attainment.