Glossary

Commission

In B2B sales, Commission is the variable portion of compensation paid to salespeople, partners, or intermediaries based on revenue, margin, or other measurable outcomes they generate. Commission typically involves AEs, SDRs/BDRs, account managers, partner/channel reps, sales leadership, finance, HR/people ops, and RevOps, and comes into play from opportunity creation through deal close and revenue recognition. Related terms and jargon include sales commission, variable comp, incentive pay, OTE (on‑target earnings), bonus, and commission plan.

Importance in B2B Sales

Commission is significant because it directly links seller behavior to company revenue and profit goals, shaping how aggressively reps prospect, which deals they prioritize, and how they negotiate. A well-designed Commission model encourages focus on ideal customer profiles, healthy pricing, multi‑year contracts, and expansion, while a poorly designed one can drive discounting, short‑termism, or gaming of the system. Commission also affects hiring and retention: competitive, transparent plans help attract top talent and reduce churn in the sales organization. Operationally, Commission influences CRM discipline, forecast accuracy, territory design, and how RevOps structures deal data. Strategically, Commission is a key lever for go‑to‑market design—supporting shifts to new products, markets, or motions (e.g., from license to SaaS, or from new logo to expansion focus).

FAQ

Q1: How is Commission usually structured for B2B sales reps?

Most B2B reps have a base salary plus Commission tied to metrics like bookings, ARR/MRR, or gross margin. Plans often include accelerators (higher Commission rates) for over‑performance and may differentiate between new logo, upsell, and renewal Commission.

Q2: When is Commission typically paid—on booking, invoicing, or cash collection?

It depends on company policy and risk tolerance: many pay Commission on booking or on contract signature, while others pay partially or fully on cash collection to reduce risk. Whatever model you choose, the Commission trigger should be clearly defined and consistently applied.

Q3: How transparent should we be about our Commission plan and calculations?

Commission rules should be fully documented, easy to understand, and accessible to all impacted roles. Reps should be able to calculate their expected Commission for a deal using CRM data and the written plan, minimizing disputes and confusion.

Q4: How does Commission work for SDRs/BDRs who don’t close deals?

SDRs/BDRs often earn Commission (or variable pay) based on qualified opportunities accepted by AEs, pipeline created, or meetings that convert to opportunities. Tying SDR Commission to downstream quality, not just meetings booked, reduces misalignment with AEs.

Q5: How often should we review and update our Commission plans?

Most organizations review Commission annually, and also when there are major shifts in strategy (new products, new pricing, different target market). Changes to Commission should be communicated before a new period starts, with examples that show impact on common deal scenarios.