[rcarrigan87]

It really depends on your biz model and there are many variations. At my company we do 1.5% of the monthly revenue of each client the sales person has "closed." Typical monthly value of a client is around $20k and we have no cap on commissions.

Reps are also the first line of defense when it comes to customer service for their clients. This works great for us because the reps who provide the best customer service typically get most of their new clients from referrals from existing clients.

[somehnreader]

Thanks. Just for your example, do they only get their commission after the client has paid?

Just general curiosity as I am technical and I have no idea how their models work. The three things that I am familiar with are:

1) I give you a small discount of my dayrate in exchange for a slice of equity (low single digit percentages)

2) You are an employee and take a paycut to participate in their vesting schedule with CAP table (the same as 1) really)

3) You are a cofounder and get a solid stake in the company but instead of providing capital as a technical person you are more likely to build an MVP for not much money in exchange for solid double digit percantages or equals pequals in the company.

Whereas their model is completely different and more comparable to real estate agents or similar.

[notahacker]

Generally the principle behind designing sales compensation works along these lines

(i) First figure out a notional target amount of revenue you would expect a salesperson doing reasonably well to generate over a time period. [1] (ii) Then offer sales role(s) with a base salary and a higher[2] OTE (on target earnings) figure reflecting their expected earnings (including salary) if they hit this notional target. This is what the compensation will be advertised as, and how it'll be benchmarked against rival company salaries (iii) In the simplest case, the salesperson gets paid the base salary plus (OTE - SALARY)/TARGET per unit of revenue they book during the course of a reporting period[3]... As they probably over or undershoot their target by quite a bit, chances are they earn more or less than the magical OTE Common variations on the simple case include increasing the commission percentage for sales over the target (or various other thresholds) to weight incentives in favour of the lowest performer, setting a base threshold so the salesperson doesn't earn any commission at all until they've reached this minimum tolerable level of performance, and offering fixed cash bonuses for various other achievements. Salespeople looking after a mixture of new and existing accounts might find their OTE composed of separate targets for new and retained business with different percentages, or they might have a single target with new sales required to cancel out the losses.

Either way, the compensation is usually calculated based on when the revenue gets booked and paid at the end of the quarter, month or week. So salespeople might get paid before client pays, but they might get paid three months after if they're on a quarterly commission scheme.

[1]Of course definitions of reasonable vary, and any kind of targeting might be more alchemy than science, especially in a startup. [2]Maybe a mere 15% above the base salary (if the sales role is mostly admin and the salesperson isn't expected to boost the figure through excellent work) or it might be more than triple the base salary (typically promoting above-market achievable earnings as an upside for accepting below-market base salary, much like the high-equity offers for developers) [3] the reporting periods is probably a quarter or a month, but possibly weeks for very transactional sales or years for the 4-deals-a-year enterprise roles).