Sales Commission Structures

IMO more orgs should tie AE comp to what happens AFTER signature. I mean, your reps get paid at close. Then they tend to disappear. CS inherits an overpromised deal. Customer realizes 8-week implementation was actually 16 weeks. ROI projection was complete bullshit. 6 months later customer submits their churn notice and your rep's already spent their commish on a bunch of On Clouds and a fancy humidor. Comp plans reward the signature. Period. Doesn't matter if customer goes live. Doesn't matter if they hit their goals. Doesn't matter if they expand or churn. Just get the signature and move on. So that's exactly what your reps optimize for. You can easily set up a 4-tier commish structure that fixes this: Tier 1 - Base commission at signature: 8% of ARR. - Rep closes deal. - Gets baseline comp immediately. Tier 2 - Go-Live bonus (+1%): Total 9%. - Customer completes onboarding within agreed timeline. - Must be actively using core features. - CS confirms product deployment. Tier 3 - Success metric achievement (+1%): Total 10%. - Customer hits outcome from business case within 90 days. - Examples: cost savings target, efficiency gain, revenue goal, etc. - Must be documented and verified. Tier 4 - Expansion unlock (+2%): Total 12%. - Customer adds seats, upgrades tier, or buys additional product within 12 months. - Minimum 20% ARR expansion from original deal. - Rep also earns standard 8% commission on the new expansion ARR. So, what changes with this? Reps start asking different questions during sale: - "What does success look like 90 days after launch?"  - "Who's responsible for implementation on your side?"  - "What would cause this to fail internally?" They stop overselling. They qualify harder. They care about customer readiness because their comp depends on it. They stay engaged post-sale. They check in with CS. They help remove blockers. They build relationships that lead to expansion. An SA member we worked with rolled this out a bit less than 18 months ago. Churn dropped 22%. Implementation time dropped 31%. Expansion revenue doubled. Same reps. Same product. Different incentives. Some reps pushed back: "Why should I get penalized if customer doesn't implement properly?" The answer: you're not getting penalized. You're getting baseline commission at close. Bonus is for making sure they succeed. If you're consistently selling to customers who can't implement or won't see value, that's a qualification problem. Fix it. Best reps loved it. They were already doing this work. Now they get paid for it. Mediocre reps weren't huge fans. They were used to dumping deals on CS and running. Suddenly they had skin in the game. Three of them quit. Fine. Don't let the door hit you in the ass on the way out. If you pay reps to care about customer outcomes, they'll start caring about customer outcomes. Plus, your CS team will appreciate not inheriting disasters anymore.

One of my first moves as Chief of Staff: fix the sales commission structure. Most companies pay lower commissions on renewals. 
They think renewals are easy and automatic. That’s bullsh*t. Renewals face churn risk every cycle.
 Customer success can drop the ball.
 Product bugs appear.
 Competitors undercut.
 Budget cuts hit. Economic shifts kill deals.
 Sales owns the outcome but controls almost none of it. I push for the same commission rate on renewals as the initial close.
 Better: pay on total contract value (TCV) from day one.
 Initial sale + all renewals and expansions at the same rate. Why it works: Reps stay engaged through the life of the account They fight harder to prevent churn They upsell naturally because it pays the same Team morale stays high; no resentment over “easy money” tiers Results: First: switched to flat 20% on TCV. Renewal rate rose 18% in 12 months. Pushed clients into 3 & 5 Year deals. Second: same rate on initial and renewal. Net retention jumped from 92% to 134%. Reps closed 25% more expansions. Your competitors cut renewal commissions.
 They lose deals they could have saved. Pay full rate on TCV.
 Align incentives with reality.

AE Tech Commission Plans: Choosing the Right Performance Indicators Get it wrong, and you risk: ❌ Confusing your sales team with complicated metrics ❌ Incentivizing the wrong behaviors ❌ Losing top talent to competitors with better commission plans Get it right, and you can: ✅ Increase sales performance ✅ Drive sustainable revenue growth ✅ Foster a high-performance sales culture 𝐒𝐭𝐞𝐩 𝟏️: 𝐊𝐞𝐞𝐩 𝐈𝐭 𝐒𝐢𝐦𝐩𝐥𝐞, 𝐏𝐫𝐢𝐨𝐫𝐢𝐭𝐢𝐳𝐞 𝐂𝐥𝐞𝐚𝐫, 𝐌𝐞𝐚𝐬𝐮𝐫𝐚𝐛𝐥𝐞 𝐈𝐧𝐝𝐢𝐜𝐚𝐭𝐨𝐫𝐬 The best commission plans use a small number of key performance indicators (KPIs) that are: ✔ Easy to measure (quantitative, not subjective) ✔ Directly tied to business revenue ✔ Transparent (so AEs understand exactly how they’re being evaluated) Top Performance Metrics for AEs: ✔ Annual Recurring Revenue (ARR) or Monthly Recurring Revenue (MRR) – These are the gold standards, ensuring AEs are incentivized to drive long-term, recurring revenue. This is the most common metric, used for 70% of AEs, as it directly reflects revenue impact. ✔ New Customers Signed – Used for 30% of AEs, great for companies focused on acquiring new users above all (even above revenue). Ideal for high-velocity sales cycles. 💡 Best Practice: Choose one primary metric (e.g., ARR) and one or two secondary indicators based on your sales strategy. 𝐒𝐭𝐞𝐩 𝟐 : 𝐔𝐬𝐞 𝐚 𝐇𝐲𝐛𝐫𝐢𝐝 𝐌𝐨𝐝𝐞𝐥, 𝐁𝐚𝐥𝐚𝐧𝐜𝐞 𝐈𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐚𝐧𝐝 𝐂𝐨𝐥𝐥𝐞𝐜𝐭𝐢𝐯𝐞 𝐆𝐨𝐚𝐥𝐬 Most companies focus only on individual quotas, but a growing number are adding team-based incentives to: ✔ Encourage collaboration ✔ Drive big-picture revenue growth ✔ Ensure a healthy, team-oriented culture How to Implement Team-Based Incentives: ✔ Global Revenue Bonus – If the entire sales team reaches a set revenue threshold, everyone receives a bonus. ✔ Big Deal Incentive – If the team lands a high-value account, all contributing AEs get rewarded. ✔ Cross-Team Collaboration Bonus – Incentives for working with marketing, SDRs, or customer success to close deals. 💡 Best Practice: A 70/30 or 80/20 split between individual and team-based incentives keeps AEs motivated while fostering teamwork. 𝐒𝐭𝐞𝐩 𝟑 : 𝐑𝐞𝐰𝐚𝐫𝐝 𝐌𝐮𝐥𝐭𝐢-𝐘𝐞𝐚𝐫 𝐃𝐞𝐚𝐥𝐬 & 𝐔𝐩𝐟𝐫𝐨𝐧𝐭 𝐏𝐚𝐲𝐦𝐞𝐧𝐭𝐬 One of the biggest mistakes companies make? Paying the same commission for short-term and long-term deals. How to Reward Long-Term Revenue: ✔ Multi-Year Contracts – Encourage AEs to secure long-term commitments by offering commission multipliers. Example: A 3-years deal earns 1.2x the commission of a 1-year deal. ✔ Upfront Payments – Reward deals where customers pay in full upfront. Example: Offer a 20 to 25% bonus on commission for one-time multi-years payments. 💡 Best Practice: Implement a tiered commission structure where AEs earn more for securing longer-term and upfront payment deals. How does your company structure AE commissions? Are you rewarding long-term value and team collaboration? Let’s discuss in the comments!