An Account Executive compensation plan that includes two bonus tiers that pay per quota attainment point
This sales compensation plan model is like the revenue-based Single Rate Bonus plan but with an additional, higher bonus rate that takes effect after the rep achieves quota. What’s great about this one is that you’re motivating and rewarding reps for over performance. Note: This plan is very similar to the Multiple-Rate Commission Plan . If you prefer to have a commission percentage associated with your plan, head there instead!
A Quota to OTE Ratio of 4 - 8 is best.
The Multiple Rate Bonus (Revenue) plan has one path that features two rate bonuses. The first bonus is a flat rate that correlates directly to the rep’s quota attainment prior to achieving the full quota. The second bonus rate is 1.5x the first base rate and goes into effect for every attainment point earned after hitting quota.
After we implemented a second, higher bonus rate to reward the reps for additional deals after passing quota, we saw an immediate change in the sellers’ efforts.
VP of Sales
100% quota and above:
100% quota and above:
Monthly resale quota:
100% quota and above:
As with most compensation plans, the two major components that will vary across sales teams are:
Set the quota for your sales team by first determining the quota period or length. This will dictate when and how frequently the quota resets for your reps.
About half of the companies in our space follow quarterly quotas versus annual or monthly quotas.
Use our Quota:OTE Ratio calculator to define your quota amount.
First you need to determine the standard bonus rate.
This is easy to accomplish for the 0-100% attainment tier. Simply take the total bonus (monthly, quarterly, etc.) and divide it by 100. That gives you the amount that reps earn per attainment point from 0% to 100%.
Then apply some form of accelerator for anything beyond 100%. That can vary from 1.1x to 2.0x depending on your business needs.
For attainment point-based bonuses, calculate how much of the total bonus the rep earns based on the percentage of quota the rep achieved. For an example of an attainment point-based bonus, a rep has a monthly quota of $10,000. If they achieve 100% of quota, the rep collects a bonus of $1,000. However, if they only sell $6,000 of their total quota, the rep would earn a partial bonus of $600 versus the full $1,000. To take it one step further for the Multiple Rate Bonus (Revenue), should the rep continue to bring in revenue after hitting quota, the rep unlocks an additional bonus rate 1.5x the original rate. Meaning if they hit 110% of quota, they get the $1,000 bonus for the first 100% of quota and another $150 bonus for the additional 10% of quota attainment.
There are a few reasons why you might use a multiple-rate bonus. For example, if your reps' quotas change every period due to seasonality but you want to maintain the same bonus every period, this plan is right for you. That way you don’t have to change commission rates every quarter/month.
Reps earn a milestone bonus after meeting a stipulation in which they are paid a set amount as a result of their efforts. These bonuses do not change if the rep is below or above these requirements. Meaning, anything less than the quota, and the rep earns no variable pay. Plus, the rep is not eligible for additional sales incentive compensation within the same quota term after earning the first bonus. With a Multiple Rate Bonus (Revenue), however, the rep receives the same, predetermined bonus rate on revenue generated between 0-100 percent of quota and earns a higher set bonus rate after passing quota. No cap.
Sales commissions differ from sales bonuses in that bonuses are based on a set amount of money for completing a task. Commissions, on the other hand, 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.
Companies usually implement a commission bonus or an MBO “manage by outcome bonus.” Sometimes both! In the case of a sales commission bonus, a flat bonus is offered and rewarded for meeting a sales quota or based on revenue attainment points.
An Account Executive compensation plan that pays different sales commission rates based on quota attainment.
An Account Executive compensation plan that pays the same bonus rate in dollars per-attainment point achieved regardless of quota attainment.