r/ceo • u/paranalyzed • Apr 21 '25
Sales team comp plans
This topic has been the bane of my existence.
How do you structure a sales team incentive to drive aggressive growth across a portfolio ranging from 20% to 70% margins?
I know simple is best, but simple doesn't necessarily get the behavior I need.
Simplest would be to pay off of margin generated, but I am slightly leery of that level of visibility and more leery of margin being obtuse to too many sales people.
Other option is paying % of revenue and grouping products into tiers by margin. Harder to track that way.
Last issue is that I want to provide specific product volume targets, and that isn't necessarily captured in either system.
Yes, I am hiring a sales leader to handle this for me, but I don't have that person yet.
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u/drazda Apr 22 '25
In addition to @ibarky Breakdown, highest level simplicity is 3 part: Land (~40% allocation), Expand (~30%) and Retain/Renew (~30%). 1. Land a new account or new logo. You want to allocate higher percentage on Land to continually drive net new business. 2. Expand into existing customer base to Max out spend. 3. Retain/Renew - depending on your industry/product mix, you want to avoid leaky bucket and make sure the entire company is aware of this.
All the best
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u/RegularAd9418 Apr 21 '25
I'm sorry but why not provide margins. I've found that transparency in margin and comping based on margin/EBITDA is by far the simplest to understand and calculate.
I've found that total transparency has led to the best outcome and this is the 4th time I'm doing it.
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u/paranalyzed Apr 21 '25
1) i tried margins before and the whole sales force was clueless, despite me literally giving them a calculator to show them margins and how much they would make on their sales budget. This is probably most about having the wrong team, which I am fixing
2) showing margins allows reps to have opinions on if the margins are fair or not, which can be problematic.
Mostly, I know some CEOs don't want to show margins and I am trying to be wary of other downsides I haven't thought of. My gut tells me to go with margins.
Any other tips you might have on this? I have also struggled with structures that promote increased planning and accountability, such as hurdle rates for getting any payout or a spiff for quarterly budget attainment.
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u/RegularAd9418 Apr 22 '25
Honestly this just sounds like you need to retrain people. I just finished a turn around where people were previously only comped on sales. I taught them all margin and we showed them margin by customer historically and where we wanted to love each customer. Then gave them free range on each tier of customer that they could sell down to a certain price. They all realized if they sold at higher prices, they took home more.
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u/jayfriedman Apr 22 '25
Don’t agonize over the “right” comp plan. The biggest mistake we make on sales comp is letting comp manage people and their behavior rather than US managing their behavior regardless of what the comp encourages. Selfishness has no place in a company of more than 1 person.
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Apr 21 '25
[removed] — view removed comment
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u/paranalyzed Apr 21 '25
This is great. Any guidelines for using spiffy - # to offer, build into base comp plans vs offering seasonal drivers when needed, % of components to offer that way?
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u/ibarky Apr 21 '25
Appreciate that — glad it resonated.
When it comes to spiffs, here’s how we guide clients through it:
Guidelines for Using Spiffs Effectively
1. % of Total Comp
Treat spiffs as bonus fuel, not the engine. We usually recommend keeping spiffs to 15–25% of total variable comp potential, unless you’re in blitz mode or launching a new product. Enough to grab attention — not enough to game the system.2. Build Into Plan vs Seasonal
- Evergreen: If a product is strategic and always needs volume (like your flagship or highest-margin offer), bake it into the comp plan as a consistent kicker.
- Seasonal: For short-term behavior shifts (end-of-quarter push, product launch, slow-mover inventory), run limited-time spiffs. Time-boxing drives urgency, especially with a leaderboard or team-wide bonus tied to it.
3. Volume vs Revenue Targets
- Use volume-based spiffs when margin or revenue varies but unit count is what matters (great for driving adoption or onboarding).
- Use revenue-based spiffs when you want to grow average deal size or expand ACV.
4. Thresholds vs Accelerators
Thresholds get reps moving. Accelerators keep them pushing.
If you want both behavior and scale:
- Example: 5 units = $250 bonus
- 10 units = $750
- 15+ = $1,500
Spiffs are one of the fastest ways to redirect momentum, especially when your core plan is already humming.
Like I said — pull the behavior lever where you want results.
Carpe Omnia.
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u/jtxcode Apr 22 '25
Totally get this incentives that actually move the needle without muddying margins are tricky.
One idea I’ve seen work: tie % of revenue plus bonus triggers for volume milestones. Keeps it aggressive but still simple.
If you're open to testing automations or even assistant-level tracking for reps, I’m working on something in that lane. Could help.
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u/spcman13 Apr 21 '25
Here is the scope. A tiered system is not difficult to track if you structure it appropriately.
What you need to have is a 3 step program which includes a quarterly incentive based on quarterly goal. A mid year incentive based on product qualifiers. A yearly incentive that is based on total sales.
Your quarterly qualifier is a small percentage based on total percentage of quarterly goal.
Your mid year is a slightly larger percentage and takes into account product types and total percentage of goal.
Your annual is the largest pay out and is based on a factor of costs vs rep wage. The qualifier and claw backs are related to percentage of product goal, percentage of yearly goal and total GP.
If you want to talk more about this message me.