Let's talk about commission structure

I'd like to hear how your commission structure works and what you like/don't like about it, and get some feedback on my current situation.


I sell internal consulting and recruiting services. I currently earn 7.5% on any deal I close. Most deals land between $4,000 and $12,500. I've been in sales for less than a year, so still not closing a deal every week like I'd like.


My boss likes to change things a lot (Small company of about 12 people), and recently informed me I'd only get commission on new business I bring in. Which seems pretty bad to me. Obviously the real money and security of sales comes from the residual income, even if it's just 1-2% of all revenue generated by continued business you brought in.


His logic seems to be that my initial work brings in the business, but the team completing the project is what validates the continuation of the business.


I plan on investigating this, creating a layout of thoughts and new structures and presenting it to him.


What are your thoughts?

💰 Compensation
5
SalesSpectre
Opinionated
3
AE
Selling services is different than selling saas. I have sold both. 
I was never paid a residual amount for the services I sold. I could go back and upsell or cross-sell other services to current customers and get paid on that but I never had "residual" commission for stuff I sold in the past. 

Question: Are you not paid a base + commission? You mentioned "the real money and security of sales comes from residual" - that is not true in my experience. The real money comes when you close more and larger deals and temporary security is gained in a base pay in the beginning and eventually, security is found in your savings account that has 12 months of expenses and a full pipeline.

Also: You mentioned that you are not closing 1 deal per week and a large deal is 12,500 which pays you $937.50 before taxes. Even if you closed a large deal every week...you make less than 50k per year. Something feels off to me here. How many deals are top reps at your company closing per week? 
Thrillhouse
Valued Contributor
0
Business Development Specialist
Good info and insight there. Thanks! I'm planning on addressing the window for upselling and how soon after a project closes I can earn commission on the next sale.

Yes, I'm at a $47.5k base pay, so by security I was more thinking only in terms of commission, and revenue generated that might contribute to quota. Not sure what the standard is for that as well.

I am currently the only full time BD Rep. We have a few others that will jump in when they have capacity (Lack of work to do).
SalesSpectre
Opinionated
1
AE
Got it so your OTE is around 100k right? 47.5k base pay + the 7.5% commission on what you sell.

Seems fair to me I suppose. Depends on what is standard OTE in your industry. 

To your post...I don't think it's common to get a residual commission unless you are a financial advisor or selling insurance and those roles typically don't have base pays.

I would definitely want to be able to maintain relationships with the deals that I closed and sell them more services and get full commission on those. 
Thrillhouse
Valued Contributor
0
Business Development Specialist
Since I'm the only BD Rep OTE is fairly undefined. Owner mentioned once when I was hired that he was targeting $200k in revenue from me. So OTE is probably closer to $62.5k
ChunkyButters
Tycoon
2
AE
Are you involved in selling and maintaining the continued business, or once it's sold does another team take over?

I've been paid out on the 2nd and 3rd year of a contract IF I sold a multi-year agreement. I don't get shit on a renewal because I'm not involved in maintaining the account. I also don't care because I'm not spending time with that customer, so I can spend time on finding new business which is what pays me.
LordBusiness
Politicker
1
Chief Revenue Officer
How much of your current bookings are driven by renewal business? 
Thrillhouse
Valued Contributor
0
Business Development Specialist
So far everything I've brought in has been from new business anyway. Mostly emerging market and small cap. Our owner has been in the game a lot longer and brings in a lot more renewal business himself.
Savagedoge
Tycoon
1
Account Executive
This is interesting. I'm in SaaS and I get paid 5-6% of ACV of the deals I close. Nothing for renewals. Is this common practice or did I totally screw this up for myself by not doing enough research earlier?
jackodiamonds
Opinionated
1
Account Executive
This is not common in SaaS. There are at least two separate roles: Account Executives who close and get paid on new business, and Account Managers who grow and renew the deals and make money off that. Only caveat in my situation is that if they sign a multi year deal, I do get paid when they pay for future years that were part of the contract I sold them (not if they choose to buy another year later and it was only a one year agreement to start).
ElectricType
Valued Contributor
1
Sales Manager
I was a recruiter for a stint in my sales career. Base is a big deciding factor, as well as, are you full desk, or just recruiting, or just business development. To give you my break down to help I was a full desk recruiter focused on mechanical and electrical engineers. My base was 48K and my commission was 30% of each placement. However keep in mind I brought the business in and I recruited for it. I also did 50% splits with people within the company if they or I had candidates for an open role. Hope this helps. 
Thrillhouse
Valued Contributor
0
Business Development Specialist
Definitely helpful info. We have a full desk recruiter. I was a recruiter prior to this and have no interest in it though. I am full time BD.
LordOfWar
Tycoon
0
Blow it up
My attitude is if there is no commission on existing customers, where is my motivation to give them time, service, friendly face, take their calls, etc.? In my industry you don't just get orders from existing customers, you have to re-cost jobs, requote and keep up relationships in the interim. Most projects are open bid, very few are multi-year or long-term partnerships.

I negotiated a reduced tiered rate on annual recurring revenue and a higher rate on everything above and beyond their ARR. I also went for a larger base to provide security for my new family when moving to a new industry (same market/customer base but different products).

I doubled sales last year though, so now I think it's time for a renegotiation...
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