Articles from January 2025

I’ve had some great sales training experiences throughout my career, including live coaching, online courses, and stacks of books from sales gurus. But are a lot of ideas around how to skill up your team, but the sales training ideas that I found most memorable and effective included elements of competition, reward, and relevance to my day-to-day role.

If you are a sales manager, you are responsible for fostering a culture of continuous learning on your team. It’s up to you to motivate your reps to take full advantage of the sales training resources you provide and apply what they learn in their sales engagements. But don’t just enroll your team in training and wait for the learning to sink in. Be sure to participate along with them so you can enrich your one-to-one coaching sessions.

Since there are so many sales training options out there, I’ve made a list of the best sales training ideas, activities, and games. Read through the list to determine the best tactics and programs to use when training your sales team.

Table of Contents

• Sales Training Ideas
• Interactive Sales Training Ideas
• Sales Team Training Games
• Sales Team Building and Sales Meetings Games
• Can you also use games for sales training?
• Benefits of Sales Training Games

1. Use a sales training template. [Featured Resource]

A sales training and onboarding plan consolidates role expectations, training timelines, and resources into one place for your newly hired salespeople.

Every sales team has different goals and expectations, so it’s important to craft a custom training plan specifically for your new sales hires.

For instance, I completed IBM Sales Finishing School several years ago, and it involved a series of online and in-class sessions. For the last couple of months of the training, I had mock sales calls with retired IBM salespeople, which led to a sales presentation to the General Manager of IBM Canada. The experience was stressful, but it was the best sales training experience I ever had.

Pro tip: If you’re looking to start your sales training program, use this sales training plan template. It was developed with the sections you’ll find on most sales training plans. You can use it to build out a more detailed and specific onboarding plan for your organization.

2. Subscribe to industry publications, newsletters, and podcasts.

At HubSpot, one of our mottos is “Always be learning.” When a sales rep is complacent and not motivated to build their sales skills, it can be demoralizing and encourage them to seek out a new role elsewhere.

Encourage your sales team to stay engaged.

They can listen to sales podcasts like Sales Gravy and Conversations with Women in Sales.

You can also try adopting AI coaching agents and tools that assess sales conversations in real time, and use this to coach the salesperson on how to improve their approach.

Skill-building is crucial for salespeople regardless of where they are in their careers. As the industry shifts and new thought leaders emerge, reps can use the knowledge from these leaders and publications to stay in touch with new best practices and continuously build their knowledge base.

When I was selling a SaaS CRM product years ago, I brought up a common objection in a sales training session that customers mentioned on every discovery call or live demonstration.

However, the sales executive insisted that what customers were looking for wasn’t important and that the company’s proprietary forecasting feature was more important. Unfortunately, most prospects disagreed, and they subscribed to the competitor solution that offered the feature they wanted.

Listening to customers and keeping your finger on the pulse of your industry are two crucial ways to stay on top of your game.

3. Have the team do objection-handling training exercises.

I once spoke to a software engineer who described his job as “coming in and figuring out how to break our software every day.” In other words, he and his team worked to determine the best ways to ensure that the break or breach wouldn’t happen to a customer at a critical moment.

Why not take a similar approach with your sales team in your next sales meeting or kickoff event?

Have your reps nominate the objections they hear from customers about your products or services. Then, have them develop — on their own, or in groups — the most convincing ways to overcome those objections. That way, they’ll be prepared when someone brings that concern up on a call.

4. Get certified.

Strengthen your team’s understanding of selling best practices by requiring or suggesting they acquire a useful sales certification.

For example, HubSpot Academy has a free Inbound Sales Certification and Course available online, including insights and advice from industry experts. The course has been taken thousands of times and can be a helpful step in making salespeople better at their jobs.

You can explore other sales courses available in HubSpot Academy as well.

5. Share stories of success and failure from the field.

In your sales meetings, encourage your sales team to share their success stories and give them a safe space to describe deals that went by the wayside.

Reps can open up about a deal they closed by adopting something they learned in sales training. Or they can describe how they fell short, or didn’t achieve the outcome they were expecting.

Like any great storytelling experience, help them recognize the moral or lesson learned from the experience. It will improve how they handle the problem next time or give them confidence that they are on the right track.

Sharing wins and losses can serve to guide and inspire new and existing salespeople. They can even give your product management, customer success, and marketing teams ideas for:

• How to best address product functional gaps or modify their pricing models.
• New use cases for your products or services that can add value for existing customers.
• Marketing campaigns, blog posts, or case studies that address topics your prospects and customers are interested in.
• Updating competitive battle cards or sales playbooks.

6. Listen to recorded calls to develop conversational intelligence.

This sales training exercise involves playing recorded sales calls or meetings and discerning the good, the bad, and the ugly. Try to maintain a coaching mindset throughout these sessions, meaning recognizing the strengths and weaknesses of each call, and how to improve on similar calls next time.

Listen to the call alongside your rep, with each of you writing down what you heard that could have been said better, or what was said that stuck out in a great way.

Discuss alternative sales call approaches if you listen to ones that go off the rails despite a rep’s best efforts.

Compare notes to see how attentive your rep is and to hear their opinion on how the call went. There may be missing context from emails or previous phone calls that set the stage for how the call went, so make sure you have a complete picture before passing judgment on what you hear.

Constructive feedback equips reps to go into future calls with more confidence and the right tone and messaging.

7. Present your buyer’s journey.

First, allow new hires to complete onboarding and have several months of experience under their belt to draw insights from. Then, when they are keeping pace with their more experienced colleagues, task them with presenting what the typical buyer’s journey looks like for your product or service.

The presentation could follow one of your buyer personas as they realize their problem and look for solutions. It could also describe how they discovered your business and what their deciding factors were for choosing to do business with you.

This will make salespeople sympathetic to their future customers’ problems, get a grip on the entire sales cycle, and understand how your product/service is actually helpful.

8. Conduct a competitive analysis.

Chances are, your company has some competitive intelligence. Your company might even have a competitive analysis team. However, new sales hires might not know all of your comparative strengths and weaknesses, even though those points may come up on their very first sales call.

Have reps conduct their own competitive analysis through online research and by asking prospects for their opinion on their investment. Competitive intel offers many benefits for you and your company. It:

• Equips your team with competitive battle cards or analyst reports that can help them overcome objections and emphasize your relative strengths.
• Can focus on one specific aspect of your product/service for a more thorough deep dive.
• Compares you to your competition with a fresh set of eyes, which could offer new talking points and arguments for future sales situations.

9. Provide opportunities for mentoring or shadow programs.

Here’s where you’ll pair a new sales rep with a more established, successful one. The existing rep can walk new hires through the job’s day-to-day, show what success looks like, and serve as a mentor for personal and professional growth.

10. List your potholes.

Dan Tyre, prior sales director here at HubSpot, recommends a tactic to foster self-reflection and personal growth in new hires.

He suggests new reps set up a written list or spreadsheet of the three “potholes” they fall into each day, as a way of holding themselves accountable, taking risks, and reviewing growth opportunities.

11. Brainstorm sales call icebreakers.

Even the most seasoned reps need a little help breaking the ice with new contacts and prospects.

A great way to keep contacts engaged (aside from sending the dreaded “checking in” emails) is to send relevant articles to your contacts, which may spark further conversation.

It may sound simple, but there is an art and a science to using this method to keep contacts engaged. It’s ideal if you send information that addresses a specific topic you discussed. However, the occasional ebook or article that can help your customer or prospect build a business case for doing business with you is a good way to keep your company in mind.

Spend some time with your team, taking them through different engagement methods to help them avoid being ghosted by their contacts. This could also be a great time to have some of your senior reps share best practices with newer members of the team.

Pro tip: If your sales team needs a more robust solution for keeping the conversation going, consider training your team to use software such as Icebreaker by UpContent. Icebreaker integrates directly with your CRM to track and log the effectiveness of third-party content shared with your leads.

1. Decision-Making Simulations

The ability to influence a prospect or customer’s decision-making is a key sales skill that can be practiced in role-playing exercises.

Create realistic scenarios where participants (acting as the prospect) are faced with a complex decision about a scenario that could be addressed by your products or services. These scenarios could include role-playing a client with a limited budget but would be a strong customer fit, or selling a custom enterprise solution to a large client.

The goal here is to encourage your team to think critically about how to influence or even disrupt a prospect’s business decision.

For example, if buying decisions are made by committee or by specific executives, help your champion to build a business case for a web conference or meeting with all of the key stakeholders.

2. Sales Negotiation Workshops

Once your sales team has completed formal training, this interactive enrichment exercise is the perfect follow-up.

Conduct an interactive workshop where participants can practice negotiation techniques they learned through role-playing exercises. Provide feedback and guidance on the effectiveness of the negotiation strategies they used.

3. Sales Boot Camps

Learning in a community of your peers is a great way to absorb lots of information in a short period of time.

If your sales onboarding is fast-paced, try a sales boot camp at a yearly kickoff meeting or retreat to traditional and interactive learning curriculums.

Host a multi-day immersive sales training program that includes workshops, team challenges, and simulations, focusing on various aspects of the sales process. End this program with a celebration or certificate of completion to end the experience on a grand note.

4. Sales Technology Demos

It‘s one thing to read marketing materials about the product you sell. It’s another to try it out for yourself.

To give your sales reps an authentic selling experience, conduct sales tech demos as part of the sales training process.

Arrange hands-on demos of different sales tools and technologies, allowing participants to explore and understand their benefits and functionality.

5. Cross-Department Shadowing

Turn interaction on its head with the shadowing technique.

Pair up sales team members with colleagues from other departments (e.g., marketing, customer service) to promote collaboration and understanding of the entire customer journey.

Sales reps will walk away from this training with a different perspective on the way a customer interacts with the business when making a purchase.

6. Industry Conference or Trade Show Networking Role-Playing

Conferences like Inbound are great opportunities to initiate sales conversations and catch up with partners and customers. They are concentrated gatherings of your target audience who are open to learning about the product or service you sell.

I often used events like Microsoft Ignite to meet prospects I wouldn’t otherwise get the chance to meet face-to-face. I often introduced existing customers to prospects that I was working with to close a deal. The advocacy of an existing customer is often just what you need to convert a prospect that has been waffling on a decision even when you both know your solution ideally suited to their needs.

Use this role-play exercise as a warm-up for your booth team.

Can you also use games for sales training?

The short answer? Yes, you can.

Sales professionals are competitive by nature, and they are driven by rewards and prizes. Gamification is a great way to improve sales performance when morale is low, or even when you need a way to liven up your sales meetings.

The games and competitions on the list below can be motivating and a fun change of pace, yet I always looked forward to sales SPIF (sales performance incentive fund) contests for KPIs like highest revenue attainment or highest deal volume.

I also enjoyed contests (and rewards) for getting customers to attend my company’s annual customer conferences. I attended a couple of events after bundling event tickets into sales, and they were memorable, motivating experiences like no other.

I can still remember a team building exercise from Open Text where we learned how to apply sales tactics by using a new sales playbook that was developed by our sales enablement team. The trainer was a high-energy, comical presenter and the topics were presented in an off-the-wall way. Even mundane topics seemed fun at the time, and the games and role-plays made them more memorable.

Benefits of Sales Training Games

No matter what sales training ideas, games, or activities you’re using in your office, they should serve the ultimate purpose of helping salespeople become high performers.

Ross Nibur, director of onboarding operations at Toast, proposes a four-step process to developing and implementing any sales training idea.

Sequentially, sales trainers should answer these four questions:

1. What knowledge or skill do I want salespeople to acquire?
2. Why are those skills important to them and to business growth?
3. How can we ensure salespeople retain this knowledge?
4. How can we support salespeople if they are struggling to learn the skill?

So, for example, you may decide you want your salespeople to improve their product knowledge. That answers question one. This information is important so reps can speak knowledgeably about products to prospects, set proper expectations for the end-user, and earn the trust of those they’re talking to, answering question two.

Question three is where you match a training activity or game to teach or outline the learning you want to highlight, so maybe you decide that a sales rep giving a successful product demo is the best training idea for addressing this need.

As for question four, new reps who fall short on their demo might be given access to additional documentation, recordings of successful demos, or demo coaching sessions to strengthen their skills.

That’s an example of a training idea implemented with purpose, a clear goal, and actionable next steps to ensure the knowledge and skills are retained.

It’s also how you take a sales training game that might seem silly on the surface, and use it to infuse your reps with confidence and experience. It’s also a great way to help sales pros remember complex topics and new strategies.

Check out some of my favorite sales team training games below.

1. Sell Me This Pen

Ever seen The Wolf of Wall Street?

As real-life investor (and crook) Jordan Belfort, Leonardo DiCaprio delivers this line to a group of colleagues in an impromptu selling exercise, challenging them to create a need in the eyes of a potential buyer.

The challenge could involve picking anything in the room or office. Task your reps with identifying what the problem is to which the obscure item is the solution.

From there, in a mock selling situation with a prospect (either another new rep or someone on the training team), have the rep try to get the prospect to identify the need themselves and provide the solution (in this case, the obscure product).

I played this game in a great sales training course. It was a great way to learn how to focus on uncovering the prospect’s needs instead of selling the product based on features.

2. Match Game

If your business sells multiple products, software, or upgrades, make a list of the key ones. Then, write out a one or two-sentence scenario where a potential customer would benefit from it.

Shuffle both lists and have salespeople match the problem to the solution so they can determine when someone is a good candidate for a certain solution. Here’s an example of what that might look like.

3. Elevator Pitch (or E-Pitch)

The concept of the elevator pitch (or e–pitch) is simple — you’re in an elevator with somebody you’re trying to sell to, and have only 30-60 seconds to make your case before that person gets off the elevator.

E-pitch competitions are a staple for new hire training, as they force reps to get the value of a product out clearly and quickly. However, you can also run e-pitch competitions for continued sales training, putting random objects or ideas in a hat and challenging existing salespeople to pick one at random and brainstorm a pitch to work on their public speaking, persuasion, and brevity skills.

4. Pop Quiz

One of the best ways for your reps to retain information could be for you to reinforce it during the training. Spontaneous pop quizzes during training and onboarding sessions can keep your salespeople engaged, particularly if the testing is gamified.

You can use mobile-based quiz platforms like Kahoot to put the quiz right in the hands of your trainees, ensure everyone’s involvement, and analyze where the gaps in data are in your group afterward.

Source

5. Cold Call Bingo

Have one of your reps make a cold call while the rest of the team listens on speakerphone.

Each listening rep has a Bingo card with common sales tactics and milestones (such as “price objection” or “need/pain identified”). The point is to get the team actively listening for and identifying prospect handling techniques while learning from a live example.

If you don’t want to put one salesperson under the microscope, have your team pair off and listen to their colleagues’ calls on a one-to-one basis. Speaking to prospects and customers is an acceptable level of pressure on a sales call.

I think having my whole team listening in on my call would give me stage fright, but a single teammate would be fine.

Reward the Bingo winner and the cold caller for a successful Bingo row or column covered.

1. Common Ground

This game works particularly well for teams working in virtual environments. Split members of your team into smaller groups via your virtual meeting software’s conference room feature and have them come up with three things they all have in common that don’t involve work.

Ideally, members of each group will explore a variety of topics before figuring out what they all have in common. This exercise helps build trust and familiarity among team members, which is essential for creating a supportive work environment.

2. Product Jeopardy

How well does your team know your company’s product or service? Help them brush up on their skills by creating your own Jeopardy game focused on your company history and products. Start by creating five categories related to your company’s offerings. Sample categories can include specific product names, company mission, and values, or customer stats.

Then create five questions for each category with assigned point values between 100 and 500 correlated to the difficulty of the question. If you’re in need of a Jeopardy! style template, Lifewire has compiled a resourceful list of templates you can use to quiz your salespeople on product training.

You can also make this game remote work-friendly by creating a template using PowerPoint or Google Slides.

Pro tip: This game is particularly effective with a big onboarding class or for retraining a large group of existing reps.

Go Forth and Train Your Sales Team

Sales kickoff events can feel like death by PowerPoint after a couple of days, so gamification exercises are great ways to motivate sales reps to be more engaged in what they are learning, or even in their day-to-day sales pursuits.

I know firsthand that breaks in routine — like sales contests or team-building games — can refuel motivation when closing deals or connecting with interested prospects is challenging.

These exercises and games are perfect ways to sharpen the skills of your existing team, onboard a team of new sales hires, and foster friendly competition for morale and team-building.

Editor’s note: This post was originally published in September 2019 and has been updated for comprehensiveness.

Entrepreneurs are more likely to self-report having mental health struggles, which makes sense—starting a business from scratch can be risky, exhilarating, and exhausting, often all at once.

What’s most important is that mental health stressors can be dealt with and don’t have to get in the way of your success.

In this piece, I’ll dive deeper into entrepreneur mental health and outline what entrepreneurs told me about their most pressing mental health stress, and their anecdotal advice for rising above.

Table of Contents

• Entrepreneurship and Mental Health: What’s the Connection?
• State of Entrepreneur Mental Health
• How Entrepreneurs Can Improve Their Mental Health (Expert Insight)

Entrepreneurship and Mental Health: What’s the Connection?

Dr. Michael Freeman, a Psychiatrist and researcher at UC San Francisco, conducted a study that illustrates how different founders are from the rest of the population.

Freeman, who was once a co-founder and CEO, identified the need for this type of research through that experience. “Everybody can hold a job, some can lead a team or club, but very few people can start and grow a business,” he says. “I thought there had to be a difference between job holders and even leaders within organizations and those who start a business — and the research we’ve conducted validates that hypothesis.”

Results of his study showed that entrepreneurs were much more likely to report mental health conditions than non-entrepreneurs: 72% and 48%, respectively.

Source

The +40% likelihood of mental health conditions among entrepreneurs raises the question of whether entrepreneurship spurs mental health issues or if individuals already susceptible to these conditions more regularly become entrepreneurs.

Freeman says that founding a business can compound stressors one would encounter normally and create weak points that might not matter in other professions or lifestyles. “Entrepreneurship affects people with and without prior mental health conditions, and personality has something to do with your vulnerability,” he explains. “If you are an introverted person, but as an entrepreneur, you can’t succeed without building relationships, that personality trait creates a vulnerability for you.”

State of Entrepreneur Mental Health

While Freeman’s findings might seem high, I’m not too surprised by them because entrepreneurship is challenging. I don’t think it means entrepreneurs are doomed to struggle perpetually, though.

I wanted to dig deeper into the current state of entrepreneur mental health, so I surveyed a group of small business and startup owners to see where they stand.

I first asked respondents to rate their current mental health on a scale of one (worst) to five (best), and the average response was four, which is a good sign.

Despite this, respondents admit to having struggled. Anxiety and depression were the most common struggles, as well as burnout.

The top stressors that respondents experience that likely contribute to mental health struggles are financial concerns (61%), followed by day-to-day stress (41%), uncertainty about the future (35%), and fear of failure or rejection (25%).

How Entrepreneurs Can Improve Their Mental Health

Even though founders shared their own experiences with me, 89% say there is still a stigma around mental health in the business community — with 27% saying that, while the stigma does exist, it’s getting better.

This stigma could be to blame for the lack of mental health support for founders: 34% of respondents say there are resources to take advantage of, but not enough.

The mental health struggles entrepreneurs can face can be overcome and dealt with healthily. Respondents told me that their most common coping mechanism is exercise (55%), followed by engaging in hobbies (51%) and talking with friends/family (46%).

All this being said, I still wanted to learn more about how entrepreneurs deal with the stress they may feel, so I asked exactly that. Here’s how entrepreneurs recommend dealing with mental health based on their own experiences.

1. Celebrate all of your progress.

Toccara Karizma, CEO of Karizma Marketing, told me: “Big wins, small wins—I celebrate them all! From landing a new client to simply checking off a challenging task, I take the time to acknowledge my efforts and accomplishments. It‘s so easy to focus on what’s next, but I‘ve found that celebrating progress keeps me motivated and reminds me that I’m moving in the right direction.”

It can be easy to forget how far you’ve come when you’re in the throws of it, so take time to celebrate your progress and wins. It helps you take a step back to see that you have had achievements along the way, even small ones. Having this perspective can leave you feeling motivated to continue on your journey.

2. Remember to take breaks.

Entrepreneurs wear a lot of hats. This is especially true if you’re just starting and acting as a salesperson, marketer, recruiter, and support specialist.

So, take steps to protect your mental health by consciously stepping back and taking breaks. “I’ve learned that stepping away is essential for gaining perspective. Despite the never-ending nature of work, taking breaks is crucial. Whether it’s a day off, a few hours with loved ones, or a vacation, these moments of respite are invaluable,” says Charles Johnson, Principal at Kansas City Office Design.

I understand you might feel pressed for time, but these breaks don’t have to be long. If you get off a stressful phone call, your break can be stepping away for 10 minutes to take a deep breath and collect your thoughts. A break could be sitting in a different room to eat lunch to put yourself in a different environment or, of course, something longer like taking a vacation.

3. Set boundaries.

Setting boundaries is essential to life, and it can be especially helpful for entrepreneurs.

You can set different kinds of workplace boundaries to ensure you’re not always “on” and actually have time for yourself. For example, you can establish work hours and stick to them (like 9-5) or create a daily schedule to structure your time.

Angela Pidala, LCSW and owner of Adored Mothers Perinatal Therapy Center, PLLC, says, “Stick to [your] boundaries and remain consistent. I can testify to how easy it can be to just answer this one phone call or respond to one more email, but the more I blurred my boundaries, the more I felt resentment and burnout.”

Boundaries outside of work can include setting time aside for hobbies, seeing friends and family, and generally doing anything that doesn’t require you to think about work. Raffaello Antonino, Counselling Psychologist and Clinical Director at Therapy Central LLP recommends using physical cues, like changing clothes after work hours and having dedicated spaces for work vs. leisure.

A big part of setting boundaries is also becoming comfortable saying no, but, as John Lattanzio, Owner of John Angelo Photography, says, “Boundaries aren‘t just about saying no to others; they’re about saying yes to your well-being.”

4. Build a support network.

Many entrepreneurs told me that having a support network is a great tool for sustaining your mental health, and this makes sense to me: it gives you an outlet for advice, insight, and feedback that can bring you clarity, help you stay balanced, or push you to think about things in a new life.

Heidi Weinberg, Founder & CEO of Successful Fashion Designer, shared this anecdote with me: “Networks take time to build, but having friends who face the same problems and challenges you do is priceless. I have a handful of women who I can call out of the blue to vent to, celebrate with, or ask for help when things get tough.”

“Seek support from friends, family, or other business owners who understand your challenges…running a business can be isolating, but remember, you’re not alone in this journey,” advises Lattanzio. A network of people you trust can make all the difference.

5. Accept failures and imperfections as part of the process.

Failure and imperfection come with the territory of entrepreneurship, and understanding that is part of managing one’s mental health.

Kristin Marquet, Founder and Creative Director of Marquet Media, told me that she’s learned to embrace imperfection. She said, “Focusing on progress, not perfection, allows me to make and grow from mistakes. By taking care of my mental health and seeking balance, I can stay resilient and keep my businesses thriving.”

A great way to embrace failures as part of the process is to view setbacks as learning opportunities that teach you to take a different approach to reach a new outcome.

Joseph Passalacqua, Owner & CEO of Maid Sailors, keeps a “Wins and Worries” journal. He says, “Rather than just celebrating successes or dwelling on problems, I document both in equal measure. This balanced perspective has helped me maintain emotional equilibrium during business ups and downs. Last year, reviewing this journal helped me realize that 80% of my worries never turned into anything, which dramatically reduced my anxiety about future challenges.”

6. Get professional help if needed.

As I mentioned above, nearly 90% of respondents to the survey I ran say there’s mental health stigma in the business community. I’d bet that much of that stigma impacts people’s willingness to get professional help if things feel too challenging to manage alone.

The truth is that a professional is a professional because they know what they’re doing. They know how to talk you through whatever is on your mind and identify strategies to help you overcome any issues. Iqbal Ahmad, CEO of Britannia School of Academics, told me this: “Seeking therapy or counseling is not a sign of weakness but of strength. During a particularly stressful business expansion, engaging with a counselor provided me with strategies to handle pressure and maintain balance, ultimately improving both my personal and professional life.”

I also want to note that something doesn’t have to be “wrong” to seek out professional help. If you’re in a more positive period, maybe they can act as a sounding board. If you’re struggling, they can help you develop coping mechanisms.

Julia North, Founder of Wigonia, says that professional help was a game-changer: “I found a therapist who specializes in working with entrepreneurs, and it‘s been the best investment I’ve made besides my initial inventory.”

7. Be able to separate yourself from the work.

Okay, I know many entrepreneurs are entrepreneurs because they’re pursuing something they’re passionate about. Something that means a lot to them and who they are, and they invest their money, time, and resources into helping it succeed.

Because of this, separating yourself from your work might seem impossible, but I mean it in terms of separating your perception of yourself from the success of your business.

Tyson Downs told me: “I remind myself that my self-worth isn‘t tied to my business’s performance. It‘s hard not to take your successes and failures personally, but business has challenges; it’s just part of the deal…Taking care of yourself isn‘t selfish—it’s what makes you a better leader.”

Most of the entrepreneurs I spoke to shared a version of the seven strategies above, but I want to share a few unique and fun tips that I recommend trying out:

• Lauren Diana Scalf’s energy audits: “Every Friday, I look back at my week and assess which tasks energized me and which drained me. The draining ones go on a list for delegation or automation.”
• Raffaello Antonino’s worry windows: “Dedicated 30-minute slots for processing concerns, then park them. When worries resurface, remind yourself they’ll be addressed at their allocated time.”
• Joseph Passalacqua’s CEO sanctuary hour: “A non-negotiable daily period before the workday begins. During this time, I completely disconnect from business operations and focus on mental preparation.”
• Austin Stouffer eats his frogs: “I have adopted the strategy of “Eating My Frogs” as soon as possible. Tackling your biggest or most stressful task early in the day or the week helps take more off your plate and eases the mind.”

Over To You

Being a founder isn’t always glamorous — the pressure of running a business can take its toll on your mental health.

Leverage the advice from the entrepreneurs I spoke to and develop a strategy that helps you keep a hold on your professional success and maintain mental clarity.

Editor’s note: This post was originally published in April 2022 and has been updated for comprehensiveness.

Entrepreneurs are more likely to self-report having mental health struggles, which makes sense—starting a business from scratch can be risky, exhilarating, and exhausting, often all at once.

What’s most important is that mental health stressors can be dealt with and don’t have to get in the way of your success.

In this piece, I’ll dive deeper into entrepreneur mental health and outline what entrepreneurs told me about their most pressing mental health stress, and their anecdotal advice for rising above.

Table of Contents

• Entrepreneurship and Mental Health: What’s the Connection?
• State of Entrepreneur Mental Health
• How Entrepreneurs Can Improve Their Mental Health (Expert Insight)

Entrepreneurship and Mental Health: What’s the Connection?

Dr. Michael Freeman, a Psychiatrist and researcher at UC San Francisco, conducted a study that illustrates how different founders are from the rest of the population.

Freeman, who was once a co-founder and CEO, identified the need for this type of research through that experience. “Everybody can hold a job, some can lead a team or club, but very few people can start and grow a business,” he says. “I thought there had to be a difference between job holders and even leaders within organizations and those who start a business — and the research we’ve conducted validates that hypothesis.”

Results of his study showed that entrepreneurs were much more likely to report mental health conditions than non-entrepreneurs: 72% and 48%, respectively.

Source

The +40% likelihood of mental health conditions among entrepreneurs raises the question of whether entrepreneurship spurs mental health issues or if individuals already susceptible to these conditions more regularly become entrepreneurs.

Freeman says that founding a business can compound stressors one would encounter normally and create weak points that might not matter in other professions or lifestyles. “Entrepreneurship affects people with and without prior mental health conditions, and personality has something to do with your vulnerability,” he explains. “If you are an introverted person, but as an entrepreneur, you can’t succeed without building relationships, that personality trait creates a vulnerability for you.”

State of Entrepreneur Mental Health

While Freeman’s findings might seem high, I’m not too surprised by them because entrepreneurship is challenging. I don’t think it means entrepreneurs are doomed to struggle perpetually, though.

I wanted to dig deeper into the current state of entrepreneur mental health, so I surveyed a group of small business and startup owners to see where they stand.

I first asked respondents to rate their current mental health on a scale of one (worst) to five (best), and the average response was four, which is a good sign.

Despite this, respondents admit to having struggled. Anxiety and depression were the most common struggles, as well as burnout.

The top stressors that respondents experience that likely contribute to mental health struggles are financial concerns (61%), followed by day-to-day stress (41%), uncertainty about the future (35%), and fear of failure or rejection (25%).

How Entrepreneurs Can Improve Their Mental Health

Even though founders shared their own experiences with me, 89% say there is still a stigma around mental health in the business community — with 27% saying that, while the stigma does exist, it’s getting better.

This stigma could be to blame for the lack of mental health support for founders: 34% of respondents say there are resources to take advantage of, but not enough.

The mental health struggles entrepreneurs can face can be overcome and dealt with healthily. Respondents told me that their most common coping mechanism is exercise (55%), followed by engaging in hobbies (51%) and talking with friends/family (46%).

All this being said, I still wanted to learn more about how entrepreneurs deal with the stress they may feel, so I asked exactly that. Here’s how entrepreneurs recommend dealing with mental health based on their own experiences.

1. Celebrate all of your progress.

Toccara Karizma, CEO of Karizma Marketing, told me: “Big wins, small wins—I celebrate them all! From landing a new client to simply checking off a challenging task, I take the time to acknowledge my efforts and accomplishments. It‘s so easy to focus on what’s next, but I‘ve found that celebrating progress keeps me motivated and reminds me that I’m moving in the right direction.”

It can be easy to forget how far you’ve come when you’re in the throws of it, so take time to celebrate your progress and wins. It helps you take a step back to see that you have had achievements along the way, even small ones. Having this perspective can leave you feeling motivated to continue on your journey.

2. Remember to take breaks.

Entrepreneurs wear a lot of hats. This is especially true if you’re just starting and acting as a salesperson, marketer, recruiter, and support specialist.

So, take steps to protect your mental health by consciously stepping back and taking breaks. “I’ve learned that stepping away is essential for gaining perspective. Despite the never-ending nature of work, taking breaks is crucial. Whether it’s a day off, a few hours with loved ones, or a vacation, these moments of respite are invaluable,” says Charles Johnson, Principal at Kansas City Office Design.

I understand you might feel pressed for time, but these breaks don’t have to be long. If you get off a stressful phone call, your break can be stepping away for 10 minutes to take a deep breath and collect your thoughts. A break could be sitting in a different room to eat lunch to put yourself in a different environment or, of course, something longer like taking a vacation.

3. Set boundaries.

Setting boundaries is essential to life, and it can be especially helpful for entrepreneurs.

You can set different kinds of workplace boundaries to ensure you’re not always “on” and actually have time for yourself. For example, you can establish work hours and stick to them (like 9-5) or create a daily schedule to structure your time.

Angela Pidala, LCSW and owner of Adored Mothers Perinatal Therapy Center, PLLC, says, “Stick to [your] boundaries and remain consistent. I can testify to how easy it can be to just answer this one phone call or respond to one more email, but the more I blurred my boundaries, the more I felt resentment and burnout.”

Boundaries outside of work can include setting time aside for hobbies, seeing friends and family, and generally doing anything that doesn’t require you to think about work. Raffaello Antonino, Counselling Psychologist and Clinical Director at Therapy Central LLP recommends using physical cues, like changing clothes after work hours and having dedicated spaces for work vs. leisure.

A big part of setting boundaries is also becoming comfortable saying no, but, as John Lattanzio, Owner of John Angelo Photography, says, “Boundaries aren‘t just about saying no to others; they’re about saying yes to your well-being.”

4. Build a support network.

Many entrepreneurs told me that having a support network is a great tool for sustaining your mental health, and this makes sense to me: it gives you an outlet for advice, insight, and feedback that can bring you clarity, help you stay balanced, or push you to think about things in a new life.

Heidi Weinberg, Founder & CEO of Successful Fashion Designer, shared this anecdote with me: “Networks take time to build, but having friends who face the same problems and challenges you do is priceless. I have a handful of women who I can call out of the blue to vent to, celebrate with, or ask for help when things get tough.”

“Seek support from friends, family, or other business owners who understand your challenges…running a business can be isolating, but remember, you’re not alone in this journey,” advises Lattanzio. A network of people you trust can make all the difference.

5. Accept failures and imperfections as part of the process.

Failure and imperfection come with the territory of entrepreneurship, and understanding that is part of managing one’s mental health.

Kristin Marquet, Founder and Creative Director of Marquet Media, told me that she’s learned to embrace imperfection. She said, “Focusing on progress, not perfection, allows me to make and grow from mistakes. By taking care of my mental health and seeking balance, I can stay resilient and keep my businesses thriving.”

A great way to embrace failures as part of the process is to view setbacks as learning opportunities that teach you to take a different approach to reach a new outcome.

Joseph Passalacqua, Owner & CEO of Maid Sailors, keeps a “Wins and Worries” journal. He says, “Rather than just celebrating successes or dwelling on problems, I document both in equal measure. This balanced perspective has helped me maintain emotional equilibrium during business ups and downs. Last year, reviewing this journal helped me realize that 80% of my worries never turned into anything, which dramatically reduced my anxiety about future challenges.”

6. Get professional help if needed.

As I mentioned above, nearly 90% of respondents to the survey I ran say there’s mental health stigma in the business community. I’d bet that much of that stigma impacts people’s willingness to get professional help if things feel too challenging to manage alone.

The truth is that a professional is a professional because they know what they’re doing. They know how to talk you through whatever is on your mind and identify strategies to help you overcome any issues. Iqbal Ahmad, CEO of Britannia School of Academics, told me this: “Seeking therapy or counseling is not a sign of weakness but of strength. During a particularly stressful business expansion, engaging with a counselor provided me with strategies to handle pressure and maintain balance, ultimately improving both my personal and professional life.”

I also want to note that something doesn’t have to be “wrong” to seek out professional help. If you’re in a more positive period, maybe they can act as a sounding board. If you’re struggling, they can help you develop coping mechanisms.

Julia North, Founder of Wigonia, says that professional help was a game-changer: “I found a therapist who specializes in working with entrepreneurs, and it‘s been the best investment I’ve made besides my initial inventory.”

7. Be able to separate yourself from the work.

Okay, I know many entrepreneurs are entrepreneurs because they’re pursuing something they’re passionate about. Something that means a lot to them and who they are, and they invest their money, time, and resources into helping it succeed.

Because of this, separating yourself from your work might seem impossible, but I mean it in terms of separating your perception of yourself from the success of your business.

Tyson Downs told me: “I remind myself that my self-worth isn‘t tied to my business’s performance. It‘s hard not to take your successes and failures personally, but business has challenges; it’s just part of the deal…Taking care of yourself isn‘t selfish—it’s what makes you a better leader.”

Most of the entrepreneurs I spoke to shared a version of the seven strategies above, but I want to share a few unique and fun tips that I recommend trying out:

• Lauren Diana Scalf’s energy audits: “Every Friday, I look back at my week and assess which tasks energized me and which drained me. The draining ones go on a list for delegation or automation.”
• Raffaello Antonino’s worry windows: “Dedicated 30-minute slots for processing concerns, then park them. When worries resurface, remind yourself they’ll be addressed at their allocated time.”
• Joseph Passalacqua’s CEO sanctuary hour: “A non-negotiable daily period before the workday begins. During this time, I completely disconnect from business operations and focus on mental preparation.”
• Austin Stouffer eats his frogs: “I have adopted the strategy of “Eating My Frogs” as soon as possible. Tackling your biggest or most stressful task early in the day or the week helps take more off your plate and eases the mind.”

Over To You

Being a founder isn’t always glamorous — the pressure of running a business can take its toll on your mental health.

Leverage the advice from the entrepreneurs I spoke to and develop a strategy that helps you keep a hold on your professional success and maintain mental clarity.

Editor’s note: This post was originally published in April 2022 and has been updated for comprehensiveness.

You’re selling something to someone who just wouldn’t budge. No matter how you angle your pitch, how well you attempt to align your solution with their needs, or how many glowing testimonials you share, they’re just not buying it. Literally. Somehow, the deal slips through your fingers, and so does the prospect. You’re left wondering where it all went wrong. If I just described a familiar struggle – one you might know all too well – I’m here to share a solution that might be the answer to your prayers: Gap selling.

Truthfully, gap selling takes patience, practice, and persistence to master. However, once you’ve done so, you won’t be stuck in the endless loop of pitching and hoping something sticks. Instead, you take on the role of a fearless problem-solver — no capes required. In this blog post, I’ll break down what gap selling is, why it’s the secret sauce for successful sales, and how you can use it to connect with prospects on a deeper level.

Let’s get into it.

Table of Contents:

• What is gap selling?
• The Gap Selling Identification Chart Explained
• How to Use The Gap Selling Methodology in Your Sales Strategy [With Examples]
• Sales Statistics You Should Know Before Trying Out Gap Selling
• Gap Selling: Benefits and Challenges
• So, Does Gap Selling Really Work?

The framework “gap selling” was coined by Keenan (yes … just Keenan; before you question me, he only goes by his last name) in 2018 in his best-selling book titled — yep, you guessed it — Gap Selling. In his book, he explores how gap selling has the potential to:

• Generate more leads
• Increase customer conversion rates
• Minimize sales cycles
• Maximize the average deal size

Despite what you might be thinking, gap selling doesn’t involve a whole lot of strong-arming prospects or dazzling them with fancy features to achieve these results. Instead, it’s all about playing detective.

As a salesperson utilizing the gap selling technique, you’re really responsible for digging into the gap between where your prospect is now (their current situation) and where they really want to be (their ideal situation). The more significant the gap, the more they’ll need you to help them bridge it.

Now, Keenan covers lots of gems in his book … I can’t share all of them, but I can highlight the ones that really matter, check out some of his must-know info below:

1. Know your prospect’s intrinsic motivation.

Keenan advises that every salesperson should know their prospect’s intrinsic motivation(s). This is their definable, objective goal. Whether it be to maximize a prospect’s company growth rate by a specific percentage or to reduce operational inefficiencies to save time and money, this very particular, very strategic reason is behind what Keenan acknowledges as a prospect’s “future state” (more on this later).

Nevertheless, once you’ve identified your prospect’s intrinsic motivation and can understand their desired future state, Keenan suggests that “all that’s left is to make sure they not only believe that that future state can happen, but that you can make it happen better than anyone else.”

2. Consider thinking about your customers’ future state as a three-part entity.

Keenan recommends that salesfolks consider a prospect’s future state in three parts:

• Technical future state (ex: A new software that could increase sales, improve workflows, simplify the buying process, etc.)
• Business future state (ex: How technical improvements will increase customer satisfaction, WOM will spread, etc.)
• The core of the future state (ex: How the technical and business improvements will help your company beat the competition)

Ultimately, the point here is this: All of these individual components contribute to an overall goal, one that positively impacts all parties involved.

The Gap Selling Identification Chart Explained

Additionally, the gap selling problem identification chart emerged as an extension of Keenan’s gap selling methodology. In short, this chart is a tool designed to help sales professionals clearly map out and understand the gap between a prospect’s current situation and their desired future state.

Here’s how it works:

1. It clarifies the future state.

The gap selling problem identification chart helps you detail your prospect’s current situation, including their challenges, inefficiencies, and pain points. This step is crucial for understanding what isn’t presently working for them.

2. It defines the future state.

This part of the chart helps uncover your prospect’s goals, aspirations, and desired outcomes. This is where you learn what the prospect ultimately wants to achieve.

3. It highlights the gap.

In this section of the gap selling problem identification cart, you’ll compare the current state with the desired future state; the chart visually represents the gap, aka what’s missing or preventing your prospect from reaching their goals.

4. It pinpoints the root cause.

At this point, you’ll have completed the chart enough to identify the underlying reasons for your prospect’s problems, which is key to demonstrating how your solution addresses these issues at its core.

5. It quantifies the impact.

Finally, with all of the information you’ve gathered, the gap selling problem identification chart will prompt you to assess the problem’s business or personal impact (e.g., financial, operational, or emotional). This helps to emphasize the urgency of addressing the gap your prospect is experiencing.

And, if you’re more of a visual learner like me, take a look at a version of the infamous gap selling problem identification chart below:

How to Use The Gap Selling Methodology in Your Sales Strategy [With Examples]

As I mentioned above, refining your own spin on gap selling really does take a few tries. But if you’re feeling 100% ready to give it a try, here are a few tips I can offer on behalf of Sean Muccio, Small Business Account Executive at HubSpot:

1. Be constantly curious.

Sean’s biggest piece of advice? “Be genuine when you’re asking a customer questions,” he revealed to me.

In Sean’s eyes, reps should “earn the right” for prospects to give them an honest, real answer, one that’ll help them solve their customer’s problems. “You have to earn the right for them to give you an answer versus brushing you off, and earning this right comes from displaying some relevance.”

Now, “earning the right” to chat with a prospect could be done in many ways. Sean recommends sticking with the “show them you know them” technique (aka heavily researching a customer before you cold call or email them, then leading with that specific information in your prospecting conversations). This technique can also be done through social proofing.

2. Use the “probe and provoke” method (coined by Ronan Pessar).

I asked Sean about any other Sean cites Ronan Pessar’s “probe and provoke” methodology as a great way to implement the basics of gap selling into your sales approach.

“It starts with basic generalized questions to understand where the prospect is currently at from a tech adoption standpoint. Then, sales reps can ask ‘probing questions’ to uncover any potential value,” he explained. “Questions should be so clear and simple — with no marketing jargon — so they can make the prospect really think.”

Here’s an example of what the probe and provoke method could look like:

3. How you say things is way more important than what you say.

Sean’s last recommendation for employing the gap selling approach is, believe it or not, pretty simple. It doesn’t involve memorizing complex scripts or following rigid sales tactics. Instead, it’s all about syntax.

“How you say things is more important than what you say,” he told me. Oftentimes, rephrasing information can completely change the way it’s received. It’s not just about the words themselves but the tone, delivery, and timing that make an impact.

So, whether you’re tailoring language based on who you’re prospecting with or adjusting your delivery to fit the sales situation, the way you communicate can mean the difference between connection and confusion. In sales especially, mastering how you say something is a game-changer.

Sales Statistics You Should Know Before Trying Out Gap Selling

If you’re curious whether adopting the gap selling approach is worth it, check out some HubSpot Sales Trends Report statistics. These insights shed light on what prospects are both thinking and doing pre-discovery, as well as how sales professionals are strategizing to close deals:

• The top methods for building rapport on a sales call are being attentive and engaged (38%), finding common ground (29%), and researching the prospect before calling (25%)
• 42% of B2B sales pros say researching a prospect’s company to determine its challenges and opportunities is the most effective way to make the sale
• Only 25% of prospects do significant research before taking a sales call
• 66% of sales professionals believe AI helps them better understand customers and provide personalized experiences
• 48% of sellers struggle with effectively communicating value to potential customers
• 36% of sales managers think follow-ups sent to high-quality leads are the most important tracking metric
• 82% of sales professionals see building strong relationships as the most crucial and rewarding aspect of the sales process

Given all of this information, it’s clear that gap selling aligns perfectly with building strong relationships and deeply understanding your prospects, all of which, according to HubSpot’s Sales Trends Report, are non-negotiable for successful selling in this day and age.

Gap Selling: Benefits and Challenges

1. Pro #1: Gap selling can deepen your relationships with your customers.

Gap selling focuses on understanding your prospect’s current challenges and goals and the “gap” between them, naturally fostering a deeper connection. By taking the time to listen and uncover what truly matters to them, you position yourself as a trusted advisor, not just another salesperson pushing a product.

2. Pro #2: Gap selling takes a value-driven approach, which makes prospects feel more seen.

Instead of leading with tangents about product features, gap selling highlights how your solution solves specific problems and delivers real value. This approach makes your prospects feel understood and validated, demonstrating that their challenges are important and not just another checkbox on your sales call agenda.

3. Pro #3: Gap selling positively impacts close rates.

When you identify a meaningful gap between your prospect’s current situation and their desired future state, the urgency of solving that problem becomes clear. By focusing on outcomes and impact, you create a compelling reason for prospects to take action, which can lead to faster decisions and higher close rates.

1. Con #1: Getting good at gap selling takes some time.

As I’ve already noted, gap selling is a skill you have to polish. Over time, you learn to ask the right questions to uncover root problems. If you’re an emerging sales professional, developing the confidence and expertise may take a few attempts to execute this method effectively.

2. Con #2: Gap selling doesn’t always work for every sales environment.

Gap selling shines in consultative or complex sales where uncovering problems and solutions is key, but it’s less effective in transactional environments. This approach can feel overly involved or unnecessary for quick, low-cost sales with minimal decision-making.

3. Con #3: Your prospects may put up a fight.

Truthfully, not every prospect will be open to discussing their challenges or admitting a problem to solve. Some people may resist answering probing questions or present as defensive, making it harder to identify their gaps and effectively align your solution. If the gap selling technique will become a regular strategy that you revisit, this is something you’ll need to get used to.

Pro Tip: To make things easier, build a solid prospecting strategy using HubSpot’s Sales Plan Template. You can also refine and identify lots of other sales essentials with this resource, including a budget, your target market, and a sales cadence.

So, Does Gap Selling Really Work?

So, does gap selling really work? Absolutely. Will it require you to do a lot of work to secure your prospects? Yes, it will.

But when done right, gap selling shifts your focus from pushing a product to solving real-world problems. It helps you connect with prospects on a more meaningful level and drives results that matter. By leaning on gap selling, you can effectively discover what your prospect needs, what challenges are holding them back, and what success truly looks like for them.

Everything considered, gap selling is worth giving a try — because who doesn’t want to go from just selling to actually solving?

No one accepts a position at a company without knowing how much money they’d be making. Sales compensation is an important factor when attracting and retaining talent on your sales team.

You want to give the best talent a reason to accept a position on your sales team and stay with your company long-term. In this guide, I’ll discuss the importance of a sales compensation plan, the types of sales compensation plans, and the steps you can take to create one of your own.

Table of Contents:

• What’s a sales compensation plan?
• Benefits of Sales Compensation Plans
• Sales Compensation Terms to Know
• Sales Compensation Structure Template
• How to Implement a Sales Compensation Plan
• Sales Bonus Structure
• Sales Bonus Examples
• Begin Creating Your Compensation Plan

Creating a solid sales compensation plan has tons of benefits — let’s go through them together next.

Benefits of Sales Compensation Plans

1. Sales compensation plans create structure within the team.

Sales teams are known for their high turnover. The stresses of selling to uninterested prospects and the general lack of advancement opportunities can make even the most seasoned of salespeople hop from team to team.

One way to lower turnover is to create a sales compensation plan that adds structure to the team, differentiating between junior, mid-level, and senior reps. In doing so, you’ll communicate to the reps that there are advancement opportunities within the team, and they won’t feel like they should leave.

Pro Tip: With HubSpot Sales Hub’s Breeze Prospecting Agent, newer sales reps (and more seasoned ones) can sell smarter and focus their outreach efforts on the leads that matter most. Plus, they’ll be able to develop personalized prospecting strategies designed to complement their efforts, helping them close deals faster and more efficiently.

2. Sales compensation plans incentivize individual reps.

Knowing that they could earn more if they sell more will be enough to incentivize reps. Plus, if you include additional benefits — such as an educational stipend — your reps will be way more incentivized to seek additional training, making them more effective salespeople.

3. Sales compensation plans help you budget better.

By knowing how much you’ll pay each rep, depending on their experience and performance, you can create budgets that better align with your company’s financial standing. That way, you know how much of the company’s earnings will be allotted for your sales reps’ compensation. This will allow you to better prepare if the team underperforms one quarter.

The structure of a sales compensation plan varies by business and is typically based on team organization, resources, and goals. For example, one sales organization might offer a higher base salary, while another might prioritize commission based on their budget, business structure, employee needs, and team targets.

There should be a compensation plan for every member of the sales team based on their role, experience, length of the sales cycle, and the type of deals they engage in. Here are some other factors to consider while thinking about your sales compensation plan:

• What’s your budget?
• Does your company culture impact how you compensate employees?
• What’s your competition paying?
• What are living costs like in your area?
• What are your team’s and organization’s goals?

[Free GTM Comp Planning – Comp Engine By our Partner Betts Recruiting]

Before I share how to create your compensation plan, let’s take a look at some important sales compensation terms to know.

Sales Compensation Terms to Know

Depending on how you structure your sales compensation plan, the following terms and concepts may come up as you start the development process.

1. Sales Quota

A sales quota is a time-bound revenue target set by sales managers — either individually or as a group. The most common time constraints for quotas are monthly, quarterly, and annually. They can be measured as the sales managers and company leadership see fit, whether that’s by profit, deals closed, or overall activity.

2. Sales Accelerators

A sales accelerator kicks in when one of your reps hits a specific amount over their quota. Quota attainment, number of products sold, and contract length are the most common types of sales accelerators.

This type of payoff is exponential for your reps. With this compensation plan framework, they may end up with a huge commission check if they have a highly successful month or quarter (so be aware of your resources and budget).

For example, let’s say a rep has a base salary of $100,000 and earns a 10% commission on their sales. If their monthly quota is $50,000 in revenue and they hit 110% of their quota (bringing in $55,000 in revenue), you’d pay them 1.0x on their performance above 100%.

Essentially, this means they’d earn their regular 10% commission on the $50,000 ($5,000) plus an additional 10% commission on the extra $5,000 ($500). In total, your rep would take home $5,500 in commission for that month.

However, if commission accelerates further for over-quota performance (e.g., 1.5x above 100%), that extra $5,000 could yield $750 instead of $500, bringing their total monthly commission to $5,750.

3. Sales Decelerators

Sales decelerators have the opposite effect as accelerators — they penalize underperforming reps. A decelerator may kick in between 40% and 60% of their quota. In other words, if a rep only hits 60% of their quota, their performance would be multiplied by a decimal (like 0.5) to calculate their compensation.

4. Clawbacks

A clawback kicks in when a customer churns (i.e., stop using your product or service) prior to hitting a specific benchmark. They cause the rep to lose their commission and are common among subscription companies in an effort to keep customer retention rates high.

5. On-Target Earnings

On-target earnings (OTE) provide salespeople with a realistic view of their total compensation for a position when their expected and reasonable goals and quotas have been reached. Typically, OTE would include the base salary and the realistic commission resulting from closed deals.

6. Sales Performance Incentive Fund or Sales Contests

Sales performance incentive funds (SPIFFs) or sales contests are ways to incentivize high performance among your salespeople.

These tactics are often used to change behavior and include monetary (such as a $500 cash prize to the first rep who closes 10 deals of a certain product) or non-monetary (a nice dinner for every team that increases their retention rate by the benchmark percentage).

These sales incentives and contests should run for short periods of time — about one to four weeks in total. If you run them any longer, reps will lose the necessary sense of urgency for this tactic to work.

Also, keep your sales contests limited. The more behaviors you reward, the likelier your team will be pulled into conflicting directions — making it difficult to drive specific outcomes.

Now, let’s review a sales commission structure template and examples of different types of compensation plans.

Sales Compensation Structure Template

Structuring your sales compensation plan is simple with this free template. In it, you’ll find seven different types of comp plans that could work for your business. Each of them is made up of several factors that create the total compensation plan:

Download the Free Template

• Base Salary: The compensation provided to a sales rep before they meet quota.
• Projected Sales: The number of deals that the sales rep is expected to close by the end of the selling period.
• Commission Rate: A commission amount expressed as a percentage of the revenue brought in by the sales rep.
• Bonus Amount: The compensation provided above the base salary that compensates a sales rep for the deals they’ve closed during the selling period.
• Commission Per Sale: The compensation amount paid to a sales rep per unit sold.

These are some of the most common sales compensation factors you’ll take into account when developing your comp structure, but you may not use all of them in the same plan.

Below are some examples of compensation plans and how each of these elements fits into them.

Sales Compensation Plan Examples

There’s no one specific way to pay employees in sales. Many companies tailor their plans according to how they conduct business. Generally speaking, there are four main types of compensation: hourly wages, salary, commission, and bonuses. Compensation plans are more detailed and can contain different forms of commission or no commission at all. They are all tailored to the size and scope of the business it applies to.

The following examples include the most common types of sales compensation plans. Each example has a different structure, so you can tailor your plan to your specific sales team and business based on your needs, resources, and goals. Check them out below:

1. Base Salary Plus Commission Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

The most common sales compensation pay structure is the base salary plus commission plan. This structure provides reps with a fixed yearly base salary as well as commission. They get the security of a steady income with the economic incentive to sell.

In this plan, the commission percentage is lower because of the base salary.

To determine your base-variable (or fixed) compensation split, think about the following factors:

• How difficult the sale is
• How much autonomy is needed (i.e., are you providing your reps with leads, or are you asking them to generate their own? Are you giving them technical support or none?)
• How much experience is necessary

To determine the variable compensation, think about the following factors:

• How complex your sales cycle is
• How much influence the rep has over the purchasing decision
• How many leads reps work with at a given time
• Your team’s selling function

Essentially, the shorter and simpler a sale is and the less impact a rep has over the customer’s behavior, the smaller the percentage of variable compensation should be.

One standard ratio across industries is 60:40 — meaning 60% fixed to 40% variable. A less aggressive ratio (think 70:30 or 75:25) is common when reps are required to teach the prospect because they’re most likely selling a highly complex or technical product.

Account managers may have a similar ratio of fixed to variable pay, driving them to spend more time helping their existing customers than finding new ones.

Best for: Most businesses, as it provides greater clarity into expenses and allows for hiring highly-motivated, competitive salespeople while ensuring reps fulfill non-selling tasks. With this plan, you benefit from greater clarity into your expenses (since there’s less variability) and the opportunity to hire highly-motivated, competitive salespeople.

2. Base Salary Plus Bonus Compensation Plan

A base salary plus a bonus compensation plan is common when your reps tend to consistently hit their pre-set targets.

For example, you might pay $30,000 base and $15,000 for selling X amount per year. If you know about eight of your 10 employees will consistently hit quota, and total earnings are $55,000, you can set aside $440,000 in your annual budget for the bonuses. But again, this prevents reps from feeling any motivation to over-perform.

Best for: Companies with reps who consistently hit their pre-set targets. It offers a high level of predictability and motivation to close sales. This sales compensation plan approach offers a high level of predictability and still motivates your reps to close sales.

3. Commission Only Compensation Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

A commission-only structure means you pay reps purely based on their performance. If they don’t sell anything during a month, their salary is zero. If they sell $50,000 worth of products in a month, their salary may be anywhere between $15,000 and $22,500, depending on the commission percentage you offer your employees.

This type of plan also motivates reps by giving them the freedom to earn as much money as they can while saving you time trying to identify any poor performers on your team. However, commission-only plans can make it challenging to forecast your expenses and stick to a tight budget.

In terms of the commission percentage to pay reps, you may decide it’s anywhere between 5% to 45%, which is standard.

Additionally, the more support you expect reps to give customers (such as implementation help or account management), the higher their commission should be. Remember to factor in their level of involvement in the sale as well, meaning if they’re only producing leads (rather than closing them, too), you should allocate a smaller commission.

Best for: Companies looking to minimize risk and motivate reps to earn as much as they can while saving time by identifying poor performers. Due to the simplicity of a commission-only compensation plan, you forgo a lot of risks. Plus, when your salespeople succeed, revenue increases; if they fail, you lose nothing.

4. Gross Margin Commission Plan

Maybe your company will pay reps based on profit rather than sales. In other words, a rep would be compensated more for selling a product with a $2,500 gross margin than one with a $1,000 gross margin.

Additionally, gross margin commission plans promote the sales of specific product lines. Not all products are created equal, but paying on gross margin motivates your salespeople to sell more of your most profitable products.

However, there are three main things to keep in mind when it comes to gross margin commission plans.

• Revenue must be your priority if you use this plan. Perhaps you’re trying to build market share or attract the top 20 logos in your industry. You want salespeople to focus on those goals — compensating them for profit may distract them and cause them to pursue the wrong customers.
• Reps must have control over pricing. Reps have to be either selling multiple products at different price points or have discounting power.
• You must be able to track your gross margins. Shifting product and/or distribution costs, rebates, and territory changes can make calculating this extremely hard.

Best for: Companies prioritizing revenue and looking to discourage discounting, promote specific product lines, and motivate salespeople to sell more profitable products. This sales compensation plan works well because it discourages discounting. Reps can become reliant on discounts to close deals, which isn’t good for your business. Tying commission to the product’s final cost encourages reps to give fewer and smaller discounts.

5. Absolute Commission Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

An absolute (or set rate) commission plan requires you to pay your reps when they reach specific targets or milestones. For example, you might pay your salespeople $1,000 for every new customer they obtain or 15% of upsell and cross-sell revenue.

However, this structure doesn‘t take into account market penetration or the number of opportunities. For example, one rep may be getting twice as many leads as their peer, but they’d both be treated equally.

Additionally, you’ll need to carefully consider what’s best for the overall company when determining the commission. If you’re trying to drive the sales of a certain product line, you’ll need to compensate reps accordingly (hint: reps will often do whatever is most lucrative for them, regardless of greater business objectives).

Best for: Companies aiming to drive good results with easy-to-grasp plans that directly tie output to salary without setting quotas and instead focusing on benchmarks or recommendations. Because the output is directly tied to salary and there are no quotas involved, reps are usually highly motivated to perform.

6. Straight-Line Commission Plan

A straight-line commission plan rewards reps based on how much or little they sell. For example, if a rep reaches 86% of their quota, they’ll receive 86% of their commission. If they reach 140% of their quota, they receive 140% of their commission.

Although this approach is relatively easy to calculate, it’s not perfect. So, what’s the issue? You want to encourage over-performance as much as possible. If you’re already paying base, getting a rep to hit 140% of their quota from 120% has a greater financial impact than getting an under-performer to hit 100% of their quota from 80%.

Plus, a rep may be just fine making 80% of their quota — you don’t want to disincentivize any of your reps to sell because they’re content with a lower salary (which is when you’d incorporate an accelerator).

Best for: Companies that want to encourage over-performance, as getting a rep to hit 140% of their quota from 120% has a greater financial impact than getting an under-performer to hit 100% of quota from 80%.

7. Relative Commission Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

Unlike an absolute commission plan, a relative commission plan uses a quota or predetermined target. This target can be based on revenue (X dollars) or volume (X units).

When a rep hits 100% of quota, they make their OTE, which consists of either base salary plus commission or pure commission. For example, if a rep’s yearly quota is $60,000, their at-plan commission is $50,000, and their base is $80,000, then their OTE would be $130,000.

Best for: Companies that want to use a quota or predetermined target based on revenue or volume, with reps making their on-target earnings (OTE) when hitting 100% of quota.

8. ‘Draw Against’ Commission Plan

DrawAgainst commission plans are regularly occurring payments made in advance to the sales rep or subtracted from the rep’s total commissions. While they seemingly emulate salary schedule payments, they are regular commission payouts given to the employee before they need to earn that money back. If there are remaining commissions after a specific time period, you will pay the remainder.

There are two main Draw Against commission plans:

Recoverable Draws

Recoverable draw payouts are basically loans to employees that you expect to gain back from their earned sales commission. For example, if an employee draws $2,500 per month, they’re expected to earn a minimum $2,500 in commission each month so your business doesn’t lose money. If this threshold is not met, their debts roll over into next month’s pay period.

Nonrecoverable Draws

Typically suitable for newly beginning sales reps, this draw is a payment you will not expect to gain back. It is unlikely for these employees to earn much in commission from the start, so use this draw until their training period is over.

Best for: Companies looking to provide regular commission payouts to employees before they need to earn that money back.

9. Territory Volume Commission Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

With a territory volume commission plan, sales teams work with prospects and clients in clearly defined regions. Your reps are paid on a territory-wide basis versus an individual-sale basis. Once the compensation period is complete, the total sales are split among the reps who worked in that territory.

Best for: Team-based sales organizations where each rep works towards a common goal and focuses on a specific territory or region, with commissions split among the reps working in that territory. To attract reps to this type of plan and grow your sales teams, you may offer them an attractive commission paired with a well-developed territory.

10. Salary Only Compensation Plan

With a salary-only structure, you decide ahead of time how much you’ll pay your salespeople. It doesn’t matter how much (or how little) they sell; their take-home earnings are set.

A salary-only structure is fairly uncommon for sales teams. That’s because, without commission, reps are usually less motivated to go above and beyond. After they’ve hit quota, they may relax instead of pushing for the next deal because there’s no incentive or reason to continue onward.

Plus, many salespeople love the thrill of scoring commission — the high stakes and competitive nature of earning a commission is often part of the reason reps go into sales in the first place. Not to mention, your top-performing reps may just leave your company so they can make commissions elsewhere.

You’re likely wondering: Well, are there any positives to a salary-only compensation plan?

Here’s your quick answer: Yes. This type of compensation plan makes it simple to calculate sales expenses and predict hiring needs. Additionally, your reps may be less stressed because they don’t have to worry about the financial consequences of missing their target or the weight of the competition.

Best for: Companies that want to simplify calculating sales expenses and predict hiring needs, with reps potentially experiencing less stress due to not worrying about the financial consequences of missing targets or the weight of competition.

11. Multiplier Commission Plan

A multiplier commission plan incentivizes sales representatives to exceed their targets and drive revenue growth. You reward reps by multiplying their commission rate when they achieve a certain percentage above their sales target.

For example, if a rep’s standard commission rate is 10% and they achieve 150% of their target, their commission rate might be multiplied by 1.5, resulting in a 15% commission on all sales over the target.

Say a rep has a monthly target of $50,000 and earns a base commission of 10%. If they sell $75,000 worth of products (150% of their target), their commission would be:

• 10% commission on the first $50,000 = $5,000
• 15% commission on the additional $25,000 = $3,750
• Total commission earned = $8,750

Best for: Industries with intense competition or high-growth startups. It’s also effective for product launches, seasonal sales, and expansion into new markets where companies want to establish their footprint quickly. This plan encourages reps to push beyond their targets. The higher they go, the more they earn. Ultimately, it’s an excellent option for companies looking to drive aggressive growth and reward top performers.

12. Milestone-Based Commission Plan

A milestone-based commission plan rewards sales representatives for achieving specific milestones throughout the sales process.

Instead of focusing on the final sale, this plan incentivizes reps to complete key activities that lead to successful deals — like setting up demos, securing contracts, or reaching revenue thresholds. Each milestone carries a specific commission amount or percentage.

For example, a milestone-based plan might offer:

• $500 commission for setting up a qualified demo
• $1,000 for securing a signed contract
• 5% commission on the first year’s revenue once the deal closes

This structure keeps reps focused on moving prospects through the pipeline and encourages them to prioritize high-value activities.

Let’s say a rep sets up 10 qualified demos ($5,000), closes 5 contracts ($5,000), and generates $100,000 in first-year revenue ($5,000) in a quarter. Their total commission would be $15,000.

Best for: Industries with complex sales cycles, like B2B or financial services, where multiple touchpoints and milestones are required to close a deal.

Now, let’s look at how to implement one of these types of sales compensation plans on your team.

How to Implement a Sales Compensation Plan

1. Use a sales compensation planner.

There are dozens of potential approaches to and combinations of sales compensation strategies. To ensure you land on the best plan for your sales team, use a sales compensation planning template to calculate how much revenue you can expect and how much reps will be paid.

Featured Resource: Sales Compensation Planner

Download Now for Free

2. Determine your sales compensation plan goals.

The first part of developing a sales compensation plan strategy includes setting your goals — laying out your business objectives is a critical part of any strategy.

So, here are some common primary and secondary goals of sales compensation plans for your consideration. Clarifying your priorities will help you decide how to compensate your salespeople in a way that works for your business.

Remember, your goals may mix the examples below or look completely different — your targets should reflect what you hope to get out of the sales compensation plan and your unique needs. Check out the chart below for some insight on how to segment these goals:

3. Choose a type of sales compensation plan.

Now that you have your goals, it’s time to choose which compensation plan you’ll implement at your company. Refer back to the sales compensation plan examples to review the most common options.

While determining which plan is best for your business, ask yourself the following questions:

• What is my overall budget?
• How many reps do I have?
• What types of compensation plans do my competition use?
• What will my salespeople expect out of the plan implemented?

You’ll also need to determine when to pay employees. Typically, there are four standard options for paying commissions:

When a Customer Signs a Contract

Paying when the customer signs the contract is good motivation for the salesperson at hand because they immediately see the monetary impact of closing the deal.

However, this payment plan can also lead to cash flow problems if there’s a significant delay between the signed agreement and the first payment (especially if you’re an early-stage business or it‘s a large deal that’s being closed).

When You Receive the Customer’s First Payment

Compensating reps when you’re paid is the most common payment method. There’s less lag between the time of the commission and revenue payments. You can also use clawbacks to incentivize salespeople to focus on good customer fit (rather than just anyone who will buy), which often boosts retention rates.

Note: If you’re a subscription-based business, this timeline can disrupt your cash flow. After all, if you give a rep commission on the entire contract when you get the first check, you’re paying in advance of the customer’s subsequent payments.

Every Time a Customer Pays

Paying each time you get an invoice is ideal if you want to protect your cash flow. Nonetheless, it can be complex to plan if you’re on a tight budget, especially if you have a large sales team of reps closing and managing deals.

When Deal Goals are Reached

Also referred to as a tiered commission structure, this compensation plan motivates reps and rewards top performers who close a certain number of deals monthly. After reps exceed a predetermined benchmark, their commission rate increases. This model can also implement commission reductions for those who underperform.

4. Base your decisions on research and data.

Collect data on sales rep performance, customer visits, and segmentation using a tool like HubSpot Sales Hub to identify areas where your team’s efforts may not align with your priorities.

Josh Miller, Head of Sales Compensation at CVS Health, explained why this is important, especially when it comes to salespeople gaining trust from their prospects, in The Sales Compensation Show:

“To be successful in sales comp, you have to legitimately understand the business to a certain level of depth,” Miller explained. “We have to be able to speak the language; we have to understand the various factors that they [prospects] have to look out for … I think it requires a lot of listening, it requires a lot of asking questions that may sound dumb … I think when we ask those questions, it sets sales comp professionals apart from other functions.”

Just like Josh affirmed, having this information builds credibility and support for your compensation plan revamp. For example, analyzing the volume of activity and customer visits relative to different customer segments reveals misalignments between your sales team’s efforts and the areas you’ve identified as most important.

Also, create a framework that collects feedback on individual sales rep performance. Sales compensation professionals have visibility across all organizations and teams, allowing them to identify top performers based on the deals they close and the feedback they receive. Compare this information to current compensation rankings to uncover discrepancies you need to address in your plan design.

5. Prioritize simplicity in sales compensation plans.

Keeping sales compensation plans simple is crucial — but it’s especially important for large organizations. At HubSpot, even with 8,000 employees, we keep commission plans straightforward for sales representatives. This is in line with industry best practices since 86% of companies standardize their compensation plans.

Kat Walenty, a Senior Manager at HubSpot, underscores the importance of this simplicity in a podcast:

“There’s a lot of nuances around the other things, the benefits that go with it, how we’re paying against the market, finance, like, what are we looking to stiff on? There’s just a lot more to it,” Walenty said. “Whereas, maybe we go to the reps with a very simple plan, but all of the other things around it and getting there are the things that make it very complex and complicated.”

The larger the organization grows, the more variables involved, making sales compensation an increasingly complex optimization problem.

Trying to incentivize every behavior can lead to incentivizing none, so it’s essential to find the right balance within teams and segments.

For example, your sales compensation plan could consist of a base salary and a commission rate of 10% on all sales. Set a clear quota for each representative based on their territory and experience level. If a representative achieves their quota, they earn their full commission. If they exceed their quota, they earn an additional 5% commission on the excess amount.

Prioritizing simplicity in the front-facing aspects of the plan helps keep sales representatives focused and motivated.

6. Choose a payroll software.

Once you’ve determined your plan goals, type, and payment plan, you can choose a payroll software to assist in compensating your salespeople.

Depending on how long your company has been established and whether or not you have an HR team that handles pay and benefits, you may or may not already have payroll software. If you do, it should be easy for you to incorporate your new sales compensation plan into the software.

If not, you might consider one of the following three popular payroll software options to help you carry out your plan.

• Gusto: This software offers an all-in-one service, including payroll, HR, and benefits, so you can handle all payment-related work from a central location.
• Intuit QuickBooks Payroll: This option offers automatic payroll tax calculations, paycheck accuracy, and native payroll integration for your accounting software, allowing you to focus your time and attention on other important tasks.
• Patriot Software Payroll: Patriot is a great option for anyone with a low budget who needs the bare minimum payroll-related features and capabilities.
• Xoxoday Compass: Xoxoday has a ton of different integrations that work well with your existing ERP, CRM, HRMS, HCM, Spreadsheets, or any sales tech stack to centralize and manage all your commission data in one place.
• Incfile’s Employer Tax Calculator: While not strictly software, this employer payroll tax calculator tool can estimate tax deductions and withholdings. Incfile’s tool can also estimate hiring costs, pay employees accurately and on time, and better manage temporary and/or seasonal employee payroll.

7. Set quotas and expectations for compensation.

Now it’s time to set your quotas for your individual reps and/or your team as a whole. This will allow you to establish expectations for compensation with your salespeople so everyone knows what’s expected of them and how they’ll have the opportunity to make money.

Of course, this begs the question: How do I decide what the quota should be?

Well, there are two main approaches to setting quotas:

Bottoms-Up Approach

The bottoms-up approach requires you to consider your team‘s capabilities and the perceived market opportunity to determine each territory’s or salesperson’s quota. The more data you have, the easier this will be.

Your inputs will vary depending on your product and type of sale, but generally, you’ll want to consider the following when using the bottoms-up approach to establish quota:

• Average contract value (ACV) or average deal size
• Average revenue per salesperson
• Number of salespeople
• Number of qualified leads (per month or quarter)
• Percentage of qualified leads that close

These considerations will tell you how many deals a rep should be working on and, thus, what a reasonable quota should be.

Alternatively, you can simply multiply the typical number of closed deals by the average deal size. This will give you a baseline number to use for your quota.

But beware: The more successful and experienced your salespeople become, the more deals they‘ll be able to work on and the bigger their contracts will be. This means their quota may quickly become inaccurate, so you’ll want to consistently evaluate it if you take this approach.

Top-Down Approach

With a top-down approach, you combine market data with your revenue targets to figure out what your team needs to bring in.

So, if most companies in your space pay their salespeople in the X to Y range, and your reps need to close Y amount in total for your business to hit the established goal, you can determine a reasonable OTE and your optimal team size.

8. Maintain your sales compensation plan.

As your business goals evolve, teams grow, product lines change, and competition adjusts over time, your compensation plan will need to be revisited. Like any business strategy, it’s not going to stay relevant forever — what works now might not suit your needs a year from now.

Review and analyze your compensation plan to keep your reps happy and motivated. At the same time, don’t revise your compensation too frequently. Research suggests that confidence drops when comp plans are changed frequently. It shows you aren’t confident in the plan.

Ensure you’re implementing a plan that helps you positively impact your business’s bottom line. Build it right the first time and stick with it unless there are significant changes that require revisions.

Sales Bonus Structure

Many companies offer bonuses to sales reps based on certain criteria to encourage business growth, customer retention, or employee satisfaction.

If you’re confused, here’s a quick disclaimer on how sales bonuses and sales commission differ: Sales reps earn commission based on the volume of units sold or the revenue obtained from a new customer. For instance, perhaps a sales rep earns a 5% commission on every $1 sold (it’s important to note that commission is one type of bonus that you can offer).

A sales bonus, on the other hand, can be tied to revenue (for instance, maybe your sales reps receive a $10,000 bonus for every $100,000 worth of revenue they bring into the company), but it doesn’t have to be.

Sales bonuses can be tied to other achievements as well, such as if a sales rep increases a customer’s lifetime value or if a sales rep has worked at your company for five years.

In 2022, the most popular formula calculation method was a bonus formula tied to quota performance.

There are different ways to structure your bonus structure. These include:

1. Variable bonus: Your sales rep earns a certain bonus (or commission) for a certain amount of revenue obtained or when they reach a certain pre-identified achievement.
2. Above-plan incentive (also known as SPIFFs): Your sales rep earns a bonus when they meet certain criteria for a specific product or service.

To explore these two bonus options more in-depth, I’ll share some bonus examples.

Sales Bonus Examples

1. Bonus Off Commission (Variable Bonus)

In this first example, a sales rep will earn a bonus based purely on the revenue they bring to the company. If a sales rep makes a $100,000 deal, they might earn $10,000.

Alternatively, perhaps you give a commission based on units sold. For example, if a sales rep makes 10 deals in one month, they might receive a $1,000 bonus.

2. Bonus Off Customer Lifetime Retention (Variable Bonus)

If your goal is to reduce customer churn, you might want to motivate your sales reps to increase customer lifetime value through up-selling or cross-selling to existing customers. One way to do this is by offering bonuses for customer lifetime retention.

For instance, perhaps you award your sales reps a bonus of $5,000 for every customer who signs a 3-year contract and $10,000 for every customer who signs a 5-year contract.

3. Bonus Off Annual Performance (Variable Bonus)

This type of bonus awards employees who’ve gone above and beyond for the business over the past year.

An example of this would be a bonus given to each sales rep who reached 120% of the quota over the past year.

4. Bonus Off Sales for Specific Products or Services (Above-Plan Incentive)

If you’ve just launched a new product, it could be a good opportunity to offer SPIFFs to your sales reps.

SPIFFs have pre-defined time frames and criteria. For example, perhaps your sales reps earn $500 each time they sell your new product to a customer. Alternatively, maybe every sales rep who sells 100 units of your new product receives a $1,000 gift card.

SPIFFs typically last only a short period of time. For instance, you might offer SPIFFs to your sales rep for six months to encourage a quick burst of sales on a new product.

Begin Creating Your Compensation Plan

Remember, no sales compensation plan is perfect. Your priorities are constantly shifting, your reps are always looking for new loopholes, and your prospects are periodically changing their preferences.

Follow the tips above and develop a sales compensation strategy to fit your specific business needs and resources to help drive your bottom-line success.

This post was originally published in July 2020 and has been updated for comprehensiveness.

No one accepts a position at a company without knowing how much money they’d be making. Sales compensation is an important factor when attracting and retaining talent on your sales team.

You want to give the best talent a reason to accept a position on your sales team and stay with your company long-term. In this guide, I’ll discuss the importance of a sales compensation plan, the types of sales compensation plans, and the steps you can take to create one of your own.

Table of Contents:

• What’s a sales compensation plan?
• Benefits of Sales Compensation Plans
• Sales Compensation Terms to Know
• Sales Compensation Structure Template
• How to Implement a Sales Compensation Plan
• Sales Bonus Structure
• Sales Bonus Examples
• Begin Creating Your Compensation Plan

Creating a solid sales compensation plan has tons of benefits — let’s go through them together next.

Benefits of Sales Compensation Plans

1. Sales compensation plans create structure within the team.

Sales teams are known for their high turnover. The stresses of selling to uninterested prospects and the general lack of advancement opportunities can make even the most seasoned of salespeople hop from team to team.

One way to lower turnover is to create a sales compensation plan that adds structure to the team, differentiating between junior, mid-level, and senior reps. In doing so, you’ll communicate to the reps that there are advancement opportunities within the team, and they won’t feel like they should leave.

Pro Tip: With HubSpot Sales Hub’s Breeze Prospecting Agent, newer sales reps (and more seasoned ones) can sell smarter and focus their outreach efforts on the leads that matter most. Plus, they’ll be able to develop personalized prospecting strategies designed to complement their efforts, helping them close deals faster and more efficiently.

2. Sales compensation plans incentivize individual reps.

Knowing that they could earn more if they sell more will be enough to incentivize reps. Plus, if you include additional benefits — such as an educational stipend — your reps will be way more incentivized to seek additional training, making them more effective salespeople.

3. Sales compensation plans help you budget better.

By knowing how much you’ll pay each rep, depending on their experience and performance, you can create budgets that better align with your company’s financial standing. That way, you know how much of the company’s earnings will be allotted for your sales reps’ compensation. This will allow you to better prepare if the team underperforms one quarter.

The structure of a sales compensation plan varies by business and is typically based on team organization, resources, and goals. For example, one sales organization might offer a higher base salary, while another might prioritize commission based on their budget, business structure, employee needs, and team targets.

There should be a compensation plan for every member of the sales team based on their role, experience, length of the sales cycle, and the type of deals they engage in. Here are some other factors to consider while thinking about your sales compensation plan:

• What’s your budget?
• Does your company culture impact how you compensate employees?
• What’s your competition paying?
• What are living costs like in your area?
• What are your team’s and organization’s goals?

[Free GTM Comp Planning – Comp Engine By our Partner Betts Recruiting]

Before I share how to create your compensation plan, let’s take a look at some important sales compensation terms to know.

Sales Compensation Terms to Know

Depending on how you structure your sales compensation plan, the following terms and concepts may come up as you start the development process.

1. Sales Quota

A sales quota is a time-bound revenue target set by sales managers — either individually or as a group. The most common time constraints for quotas are monthly, quarterly, and annually. They can be measured as the sales managers and company leadership see fit, whether that’s by profit, deals closed, or overall activity.

2. Sales Accelerators

A sales accelerator kicks in when one of your reps hits a specific amount over their quota. Quota attainment, number of products sold, and contract length are the most common types of sales accelerators.

This type of payoff is exponential for your reps. With this compensation plan framework, they may end up with a huge commission check if they have a highly successful month or quarter (so be aware of your resources and budget).

For example, let’s say a rep has a base salary of $100,000 and earns a 10% commission on their sales. If their monthly quota is $50,000 in revenue and they hit 110% of their quota (bringing in $55,000 in revenue), you’d pay them 1.0x on their performance above 100%.

Essentially, this means they’d earn their regular 10% commission on the $50,000 ($5,000) plus an additional 10% commission on the extra $5,000 ($500). In total, your rep would take home $5,500 in commission for that month.

However, if commission accelerates further for over-quota performance (e.g., 1.5x above 100%), that extra $5,000 could yield $750 instead of $500, bringing their total monthly commission to $5,750.

3. Sales Decelerators

Sales decelerators have the opposite effect as accelerators — they penalize underperforming reps. A decelerator may kick in between 40% and 60% of their quota. In other words, if a rep only hits 60% of their quota, their performance would be multiplied by a decimal (like 0.5) to calculate their compensation.

4. Clawbacks

A clawback kicks in when a customer churns (i.e., stop using your product or service) prior to hitting a specific benchmark. They cause the rep to lose their commission and are common among subscription companies in an effort to keep customer retention rates high.

5. On-Target Earnings

On-target earnings (OTE) provide salespeople with a realistic view of their total compensation for a position when their expected and reasonable goals and quotas have been reached. Typically, OTE would include the base salary and the realistic commission resulting from closed deals.

6. Sales Performance Incentive Fund or Sales Contests

Sales performance incentive funds (SPIFFs) or sales contests are ways to incentivize high performance among your salespeople.

These tactics are often used to change behavior and include monetary (such as a $500 cash prize to the first rep who closes 10 deals of a certain product) or non-monetary (a nice dinner for every team that increases their retention rate by the benchmark percentage).

These sales incentives and contests should run for short periods of time — about one to four weeks in total. If you run them any longer, reps will lose the necessary sense of urgency for this tactic to work.

Also, keep your sales contests limited. The more behaviors you reward, the likelier your team will be pulled into conflicting directions — making it difficult to drive specific outcomes.

Now, let’s review a sales commission structure template and examples of different types of compensation plans.

Sales Compensation Structure Template

Structuring your sales compensation plan is simple with this free template. In it, you’ll find seven different types of comp plans that could work for your business. Each of them is made up of several factors that create the total compensation plan:

Download the Free Template

• Base Salary: The compensation provided to a sales rep before they meet quota.
• Projected Sales: The number of deals that the sales rep is expected to close by the end of the selling period.
• Commission Rate: A commission amount expressed as a percentage of the revenue brought in by the sales rep.
• Bonus Amount: The compensation provided above the base salary that compensates a sales rep for the deals they’ve closed during the selling period.
• Commission Per Sale: The compensation amount paid to a sales rep per unit sold.

These are some of the most common sales compensation factors you’ll take into account when developing your comp structure, but you may not use all of them in the same plan.

Below are some examples of compensation plans and how each of these elements fits into them.

Sales Compensation Plan Examples

There’s no one specific way to pay employees in sales. Many companies tailor their plans according to how they conduct business. Generally speaking, there are four main types of compensation: hourly wages, salary, commission, and bonuses. Compensation plans are more detailed and can contain different forms of commission or no commission at all. They are all tailored to the size and scope of the business it applies to.

The following examples include the most common types of sales compensation plans. Each example has a different structure, so you can tailor your plan to your specific sales team and business based on your needs, resources, and goals. Check them out below:

1. Base Salary Plus Commission Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

The most common sales compensation pay structure is the base salary plus commission plan. This structure provides reps with a fixed yearly base salary as well as commission. They get the security of a steady income with the economic incentive to sell.

In this plan, the commission percentage is lower because of the base salary.

To determine your base-variable (or fixed) compensation split, think about the following factors:

• How difficult the sale is
• How much autonomy is needed (i.e., are you providing your reps with leads, or are you asking them to generate their own? Are you giving them technical support or none?)
• How much experience is necessary

To determine the variable compensation, think about the following factors:

• How complex your sales cycle is
• How much influence the rep has over the purchasing decision
• How many leads reps work with at a given time
• Your team’s selling function

Essentially, the shorter and simpler a sale is and the less impact a rep has over the customer’s behavior, the smaller the percentage of variable compensation should be.

One standard ratio across industries is 60:40 — meaning 60% fixed to 40% variable. A less aggressive ratio (think 70:30 or 75:25) is common when reps are required to teach the prospect because they’re most likely selling a highly complex or technical product.

Account managers may have a similar ratio of fixed to variable pay, driving them to spend more time helping their existing customers than finding new ones.

Best for: Most businesses, as it provides greater clarity into expenses and allows for hiring highly-motivated, competitive salespeople while ensuring reps fulfill non-selling tasks. With this plan, you benefit from greater clarity into your expenses (since there’s less variability) and the opportunity to hire highly-motivated, competitive salespeople.

2. Base Salary Plus Bonus Compensation Plan

A base salary plus a bonus compensation plan is common when your reps tend to consistently hit their pre-set targets.

For example, you might pay $30,000 base and $15,000 for selling X amount per year. If you know about eight of your 10 employees will consistently hit quota, and total earnings are $55,000, you can set aside $440,000 in your annual budget for the bonuses. But again, this prevents reps from feeling any motivation to over-perform.

Best for: Companies with reps who consistently hit their pre-set targets. It offers a high level of predictability and motivation to close sales. This sales compensation plan approach offers a high level of predictability and still motivates your reps to close sales.

3. Commission Only Compensation Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

A commission-only structure means you pay reps purely based on their performance. If they don’t sell anything during a month, their salary is zero. If they sell $50,000 worth of products in a month, their salary may be anywhere between $15,000 and $22,500, depending on the commission percentage you offer your employees.

This type of plan also motivates reps by giving them the freedom to earn as much money as they can while saving you time trying to identify any poor performers on your team. However, commission-only plans can make it challenging to forecast your expenses and stick to a tight budget.

In terms of the commission percentage to pay reps, you may decide it’s anywhere between 5% to 45%, which is standard.

Additionally, the more support you expect reps to give customers (such as implementation help or account management), the higher their commission should be. Remember to factor in their level of involvement in the sale as well, meaning if they’re only producing leads (rather than closing them, too), you should allocate a smaller commission.

Best for: Companies looking to minimize risk and motivate reps to earn as much as they can while saving time by identifying poor performers. Due to the simplicity of a commission-only compensation plan, you forgo a lot of risks. Plus, when your salespeople succeed, revenue increases; if they fail, you lose nothing.

4. Gross Margin Commission Plan

Maybe your company will pay reps based on profit rather than sales. In other words, a rep would be compensated more for selling a product with a $2,500 gross margin than one with a $1,000 gross margin.

Additionally, gross margin commission plans promote the sales of specific product lines. Not all products are created equal, but paying on gross margin motivates your salespeople to sell more of your most profitable products.

However, there are three main things to keep in mind when it comes to gross margin commission plans.

• Revenue must be your priority if you use this plan. Perhaps you’re trying to build market share or attract the top 20 logos in your industry. You want salespeople to focus on those goals — compensating them for profit may distract them and cause them to pursue the wrong customers.
• Reps must have control over pricing. Reps have to be either selling multiple products at different price points or have discounting power.
• You must be able to track your gross margins. Shifting product and/or distribution costs, rebates, and territory changes can make calculating this extremely hard.

Best for: Companies prioritizing revenue and looking to discourage discounting, promote specific product lines, and motivate salespeople to sell more profitable products. This sales compensation plan works well because it discourages discounting. Reps can become reliant on discounts to close deals, which isn’t good for your business. Tying commission to the product’s final cost encourages reps to give fewer and smaller discounts.

5. Absolute Commission Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

An absolute (or set rate) commission plan requires you to pay your reps when they reach specific targets or milestones. For example, you might pay your salespeople $1,000 for every new customer they obtain or 15% of upsell and cross-sell revenue.

However, this structure doesn‘t take into account market penetration or the number of opportunities. For example, one rep may be getting twice as many leads as their peer, but they’d both be treated equally.

Additionally, you’ll need to carefully consider what’s best for the overall company when determining the commission. If you’re trying to drive the sales of a certain product line, you’ll need to compensate reps accordingly (hint: reps will often do whatever is most lucrative for them, regardless of greater business objectives).

Best for: Companies aiming to drive good results with easy-to-grasp plans that directly tie output to salary without setting quotas and instead focusing on benchmarks or recommendations. Because the output is directly tied to salary and there are no quotas involved, reps are usually highly motivated to perform.

6. Straight-Line Commission Plan

A straight-line commission plan rewards reps based on how much or little they sell. For example, if a rep reaches 86% of their quota, they’ll receive 86% of their commission. If they reach 140% of their quota, they receive 140% of their commission.

Although this approach is relatively easy to calculate, it’s not perfect. So, what’s the issue? You want to encourage over-performance as much as possible. If you’re already paying base, getting a rep to hit 140% of their quota from 120% has a greater financial impact than getting an under-performer to hit 100% of their quota from 80%.

Plus, a rep may be just fine making 80% of their quota — you don’t want to disincentivize any of your reps to sell because they’re content with a lower salary (which is when you’d incorporate an accelerator).

Best for: Companies that want to encourage over-performance, as getting a rep to hit 140% of their quota from 120% has a greater financial impact than getting an under-performer to hit 100% of quota from 80%.

7. Relative Commission Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

Unlike an absolute commission plan, a relative commission plan uses a quota or predetermined target. This target can be based on revenue (X dollars) or volume (X units).

When a rep hits 100% of quota, they make their OTE, which consists of either base salary plus commission or pure commission. For example, if a rep’s yearly quota is $60,000, their at-plan commission is $50,000, and their base is $80,000, then their OTE would be $130,000.

Best for: Companies that want to use a quota or predetermined target based on revenue or volume, with reps making their on-target earnings (OTE) when hitting 100% of quota.

8. ‘Draw Against’ Commission Plan

DrawAgainst commission plans are regularly occurring payments made in advance to the sales rep or subtracted from the rep’s total commissions. While they seemingly emulate salary schedule payments, they are regular commission payouts given to the employee before they need to earn that money back. If there are remaining commissions after a specific time period, you will pay the remainder.

There are two main Draw Against commission plans:

Recoverable Draws

Recoverable draw payouts are basically loans to employees that you expect to gain back from their earned sales commission. For example, if an employee draws $2,500 per month, they’re expected to earn a minimum $2,500 in commission each month so your business doesn’t lose money. If this threshold is not met, their debts roll over into next month’s pay period.

Nonrecoverable Draws

Typically suitable for newly beginning sales reps, this draw is a payment you will not expect to gain back. It is unlikely for these employees to earn much in commission from the start, so use this draw until their training period is over.

Best for: Companies looking to provide regular commission payouts to employees before they need to earn that money back.

9. Territory Volume Commission Plan

Create a custom version of this compensation plan with HubSpot’s free Sales Compensation Calculator Kit

With a territory volume commission plan, sales teams work with prospects and clients in clearly defined regions. Your reps are paid on a territory-wide basis versus an individual-sale basis. Once the compensation period is complete, the total sales are split among the reps who worked in that territory.

Best for: Team-based sales organizations where each rep works towards a common goal and focuses on a specific territory or region, with commissions split among the reps working in that territory. To attract reps to this type of plan and grow your sales teams, you may offer them an attractive commission paired with a well-developed territory.

10. Salary Only Compensation Plan

With a salary-only structure, you decide ahead of time how much you’ll pay your salespeople. It doesn’t matter how much (or how little) they sell; their take-home earnings are set.

A salary-only structure is fairly uncommon for sales teams. That’s because, without commission, reps are usually less motivated to go above and beyond. After they’ve hit quota, they may relax instead of pushing for the next deal because there’s no incentive or reason to continue onward.

Plus, many salespeople love the thrill of scoring commission — the high stakes and competitive nature of earning a commission is often part of the reason reps go into sales in the first place. Not to mention, your top-performing reps may just leave your company so they can make commissions elsewhere.

You’re likely wondering: Well, are there any positives to a salary-only compensation plan?

Here’s your quick answer: Yes. This type of compensation plan makes it simple to calculate sales expenses and predict hiring needs. Additionally, your reps may be less stressed because they don’t have to worry about the financial consequences of missing their target or the weight of the competition.

Best for: Companies that want to simplify calculating sales expenses and predict hiring needs, with reps potentially experiencing less stress due to not worrying about the financial consequences of missing targets or the weight of competition.

11. Multiplier Commission Plan

A multiplier commission plan incentivizes sales representatives to exceed their targets and drive revenue growth. You reward reps by multiplying their commission rate when they achieve a certain percentage above their sales target.

For example, if a rep’s standard commission rate is 10% and they achieve 150% of their target, their commission rate might be multiplied by 1.5, resulting in a 15% commission on all sales over the target.

Say a rep has a monthly target of $50,000 and earns a base commission of 10%. If they sell $75,000 worth of products (150% of their target), their commission would be:

• 10% commission on the first $50,000 = $5,000
• 15% commission on the additional $25,000 = $3,750
• Total commission earned = $8,750

Best for: Industries with intense competition or high-growth startups. It’s also effective for product launches, seasonal sales, and expansion into new markets where companies want to establish their footprint quickly. This plan encourages reps to push beyond their targets. The higher they go, the more they earn. Ultimately, it’s an excellent option for companies looking to drive aggressive growth and reward top performers.

12. Milestone-Based Commission Plan

A milestone-based commission plan rewards sales representatives for achieving specific milestones throughout the sales process.

Instead of focusing on the final sale, this plan incentivizes reps to complete key activities that lead to successful deals — like setting up demos, securing contracts, or reaching revenue thresholds. Each milestone carries a specific commission amount or percentage.

For example, a milestone-based plan might offer:

• $500 commission for setting up a qualified demo
• $1,000 for securing a signed contract
• 5% commission on the first year’s revenue once the deal closes

This structure keeps reps focused on moving prospects through the pipeline and encourages them to prioritize high-value activities.

Let’s say a rep sets up 10 qualified demos ($5,000), closes 5 contracts ($5,000), and generates $100,000 in first-year revenue ($5,000) in a quarter. Their total commission would be $15,000.

Best for: Industries with complex sales cycles, like B2B or financial services, where multiple touchpoints and milestones are required to close a deal.

Now, let’s look at how to implement one of these types of sales compensation plans on your team.

How to Implement a Sales Compensation Plan

1. Use a sales compensation planner.

There are dozens of potential approaches to and combinations of sales compensation strategies. To ensure you land on the best plan for your sales team, use a sales compensation planning template to calculate how much revenue you can expect and how much reps will be paid.

Featured Resource: Sales Compensation Planner

Download Now for Free

2. Determine your sales compensation plan goals.

The first part of developing a sales compensation plan strategy includes setting your goals — laying out your business objectives is a critical part of any strategy.

So, here are some common primary and secondary goals of sales compensation plans for your consideration. Clarifying your priorities will help you decide how to compensate your salespeople in a way that works for your business.

Remember, your goals may mix the examples below or look completely different — your targets should reflect what you hope to get out of the sales compensation plan and your unique needs. Check out the chart below for some insight on how to segment these goals:

3. Choose a type of sales compensation plan.

Now that you have your goals, it’s time to choose which compensation plan you’ll implement at your company. Refer back to the sales compensation plan examples to review the most common options.

While determining which plan is best for your business, ask yourself the following questions:

• What is my overall budget?
• How many reps do I have?
• What types of compensation plans do my competition use?
• What will my salespeople expect out of the plan implemented?

You’ll also need to determine when to pay employees. Typically, there are four standard options for paying commissions:

When a Customer Signs a Contract

Paying when the customer signs the contract is good motivation for the salesperson at hand because they immediately see the monetary impact of closing the deal.

However, this payment plan can also lead to cash flow problems if there’s a significant delay between the signed agreement and the first payment (especially if you’re an early-stage business or it‘s a large deal that’s being closed).

When You Receive the Customer’s First Payment

Compensating reps when you’re paid is the most common payment method. There’s less lag between the time of the commission and revenue payments. You can also use clawbacks to incentivize salespeople to focus on good customer fit (rather than just anyone who will buy), which often boosts retention rates.

Note: If you’re a subscription-based business, this timeline can disrupt your cash flow. After all, if you give a rep commission on the entire contract when you get the first check, you’re paying in advance of the customer’s subsequent payments.

Every Time a Customer Pays

Paying each time you get an invoice is ideal if you want to protect your cash flow. Nonetheless, it can be complex to plan if you’re on a tight budget, especially if you have a large sales team of reps closing and managing deals.

When Deal Goals are Reached

Also referred to as a tiered commission structure, this compensation plan motivates reps and rewards top performers who close a certain number of deals monthly. After reps exceed a predetermined benchmark, their commission rate increases. This model can also implement commission reductions for those who underperform.

4. Base your decisions on research and data.

Collect data on sales rep performance, customer visits, and segmentation using a tool like HubSpot Sales Hub to identify areas where your team’s efforts may not align with your priorities.

Josh Miller, Head of Sales Compensation at CVS Health, explained why this is important, especially when it comes to salespeople gaining trust from their prospects, in The Sales Compensation Show:

“To be successful in sales comp, you have to legitimately understand the business to a certain level of depth,” Miller explained. “We have to be able to speak the language; we have to understand the various factors that they [prospects] have to look out for … I think it requires a lot of listening, it requires a lot of asking questions that may sound dumb … I think when we ask those questions, it sets sales comp professionals apart from other functions.”

Just like Josh affirmed, having this information builds credibility and support for your compensation plan revamp. For example, analyzing the volume of activity and customer visits relative to different customer segments reveals misalignments between your sales team’s efforts and the areas you’ve identified as most important.

Also, create a framework that collects feedback on individual sales rep performance. Sales compensation professionals have visibility across all organizations and teams, allowing them to identify top performers based on the deals they close and the feedback they receive. Compare this information to current compensation rankings to uncover discrepancies you need to address in your plan design.

5. Prioritize simplicity in sales compensation plans.

Keeping sales compensation plans simple is crucial — but it’s especially important for large organizations. At HubSpot, even with 8,000 employees, we keep commission plans straightforward for sales representatives. This is in line with industry best practices since 86% of companies standardize their compensation plans.

Kat Walenty, a Senior Manager at HubSpot, underscores the importance of this simplicity in a podcast:

“There’s a lot of nuances around the other things, the benefits that go with it, how we’re paying against the market, finance, like, what are we looking to stiff on? There’s just a lot more to it,” Walenty said. “Whereas, maybe we go to the reps with a very simple plan, but all of the other things around it and getting there are the things that make it very complex and complicated.”

The larger the organization grows, the more variables involved, making sales compensation an increasingly complex optimization problem.

Trying to incentivize every behavior can lead to incentivizing none, so it’s essential to find the right balance within teams and segments.

For example, your sales compensation plan could consist of a base salary and a commission rate of 10% on all sales. Set a clear quota for each representative based on their territory and experience level. If a representative achieves their quota, they earn their full commission. If they exceed their quota, they earn an additional 5% commission on the excess amount.

Prioritizing simplicity in the front-facing aspects of the plan helps keep sales representatives focused and motivated.

6. Choose a payroll software.

Once you’ve determined your plan goals, type, and payment plan, you can choose a payroll software to assist in compensating your salespeople.

Depending on how long your company has been established and whether or not you have an HR team that handles pay and benefits, you may or may not already have payroll software. If you do, it should be easy for you to incorporate your new sales compensation plan into the software.

If not, you might consider one of the following three popular payroll software options to help you carry out your plan.

• Gusto: This software offers an all-in-one service, including payroll, HR, and benefits, so you can handle all payment-related work from a central location.
• Intuit QuickBooks Payroll: This option offers automatic payroll tax calculations, paycheck accuracy, and native payroll integration for your accounting software, allowing you to focus your time and attention on other important tasks.
• Patriot Software Payroll: Patriot is a great option for anyone with a low budget who needs the bare minimum payroll-related features and capabilities.
• Xoxoday Compass: Xoxoday has a ton of different integrations that work well with your existing ERP, CRM, HRMS, HCM, Spreadsheets, or any sales tech stack to centralize and manage all your commission data in one place.
• Incfile’s Employer Tax Calculator: While not strictly software, this employer payroll tax calculator tool can estimate tax deductions and withholdings. Incfile’s tool can also estimate hiring costs, pay employees accurately and on time, and better manage temporary and/or seasonal employee payroll.

7. Set quotas and expectations for compensation.

Now it’s time to set your quotas for your individual reps and/or your team as a whole. This will allow you to establish expectations for compensation with your salespeople so everyone knows what’s expected of them and how they’ll have the opportunity to make money.

Of course, this begs the question: How do I decide what the quota should be?

Well, there are two main approaches to setting quotas:

Bottoms-Up Approach

The bottoms-up approach requires you to consider your team‘s capabilities and the perceived market opportunity to determine each territory’s or salesperson’s quota. The more data you have, the easier this will be.

Your inputs will vary depending on your product and type of sale, but generally, you’ll want to consider the following when using the bottoms-up approach to establish quota:

• Average contract value (ACV) or average deal size
• Average revenue per salesperson
• Number of salespeople
• Number of qualified leads (per month or quarter)
• Percentage of qualified leads that close

These considerations will tell you how many deals a rep should be working on and, thus, what a reasonable quota should be.

Alternatively, you can simply multiply the typical number of closed deals by the average deal size. This will give you a baseline number to use for your quota.

But beware: The more successful and experienced your salespeople become, the more deals they‘ll be able to work on and the bigger their contracts will be. This means their quota may quickly become inaccurate, so you’ll want to consistently evaluate it if you take this approach.

Top-Down Approach

With a top-down approach, you combine market data with your revenue targets to figure out what your team needs to bring in.

So, if most companies in your space pay their salespeople in the X to Y range, and your reps need to close Y amount in total for your business to hit the established goal, you can determine a reasonable OTE and your optimal team size.

8. Maintain your sales compensation plan.

As your business goals evolve, teams grow, product lines change, and competition adjusts over time, your compensation plan will need to be revisited. Like any business strategy, it’s not going to stay relevant forever — what works now might not suit your needs a year from now.

Review and analyze your compensation plan to keep your reps happy and motivated. At the same time, don’t revise your compensation too frequently. Research suggests that confidence drops when comp plans are changed frequently. It shows you aren’t confident in the plan.

Ensure you’re implementing a plan that helps you positively impact your business’s bottom line. Build it right the first time and stick with it unless there are significant changes that require revisions.

Sales Bonus Structure

Many companies offer bonuses to sales reps based on certain criteria to encourage business growth, customer retention, or employee satisfaction.

If you’re confused, here’s a quick disclaimer on how sales bonuses and sales commission differ: Sales reps earn commission based on the volume of units sold or the revenue obtained from a new customer. For instance, perhaps a sales rep earns a 5% commission on every $1 sold (it’s important to note that commission is one type of bonus that you can offer).

A sales bonus, on the other hand, can be tied to revenue (for instance, maybe your sales reps receive a $10,000 bonus for every $100,000 worth of revenue they bring into the company), but it doesn’t have to be.

Sales bonuses can be tied to other achievements as well, such as if a sales rep increases a customer’s lifetime value or if a sales rep has worked at your company for five years.

In 2022, the most popular formula calculation method was a bonus formula tied to quota performance.

There are different ways to structure your bonus structure. These include:

1. Variable bonus: Your sales rep earns a certain bonus (or commission) for a certain amount of revenue obtained or when they reach a certain pre-identified achievement.
2. Above-plan incentive (also known as SPIFFs): Your sales rep earns a bonus when they meet certain criteria for a specific product or service.

To explore these two bonus options more in-depth, I’ll share some bonus examples.

Sales Bonus Examples

1. Bonus Off Commission (Variable Bonus)

In this first example, a sales rep will earn a bonus based purely on the revenue they bring to the company. If a sales rep makes a $100,000 deal, they might earn $10,000.

Alternatively, perhaps you give a commission based on units sold. For example, if a sales rep makes 10 deals in one month, they might receive a $1,000 bonus.

2. Bonus Off Customer Lifetime Retention (Variable Bonus)

If your goal is to reduce customer churn, you might want to motivate your sales reps to increase customer lifetime value through up-selling or cross-selling to existing customers. One way to do this is by offering bonuses for customer lifetime retention.

For instance, perhaps you award your sales reps a bonus of $5,000 for every customer who signs a 3-year contract and $10,000 for every customer who signs a 5-year contract.

3. Bonus Off Annual Performance (Variable Bonus)

This type of bonus awards employees who’ve gone above and beyond for the business over the past year.

An example of this would be a bonus given to each sales rep who reached 120% of the quota over the past year.

4. Bonus Off Sales for Specific Products or Services (Above-Plan Incentive)

If you’ve just launched a new product, it could be a good opportunity to offer SPIFFs to your sales reps.

SPIFFs have pre-defined time frames and criteria. For example, perhaps your sales reps earn $500 each time they sell your new product to a customer. Alternatively, maybe every sales rep who sells 100 units of your new product receives a $1,000 gift card.

SPIFFs typically last only a short period of time. For instance, you might offer SPIFFs to your sales rep for six months to encourage a quick burst of sales on a new product.

Begin Creating Your Compensation Plan

Remember, no sales compensation plan is perfect. Your priorities are constantly shifting, your reps are always looking for new loopholes, and your prospects are periodically changing their preferences.

Follow the tips above and develop a sales compensation strategy to fit your specific business needs and resources to help drive your bottom-line success.

This post was originally published in July 2020 and has been updated for comprehensiveness.