Sales Commission Calculator

Your sales quota is one thing; what that represents in your bank account another. And typically, the latter is obscured by confusing terms. Draws sound like safety net. Accelerators look like windfalls. But they’re accounting mechanics, devices to move risk from the company to you. If you don’t grasp this change of hands by the time payday arrives, it won’t matter.

Once you have inputted your plan information into the calculator (above), it will do all of the math for you. And guess what? It take away any wiggle room. It asks you to specify the crediting method. I.e., does your plan credit based on booked revenue or collected cash? That’s a big deal. On the surface, your possible payout appears huge when it’s crediting based off booked revenue. When it’s crediting on collected cash, that number becomes much smaller. Input the crediting method in line with your contract, not the one that makes you most happy at quarter end.

How Sales Pay Works

Most sales reps trip up on draws. A draw isn’t a gift. It’s a loan. You’re borrowing money for your present cash flow and paying back later when you earn more. That means if you don’t do well enough to cover the draw, it gets deducted from your next paycheck (which the tool will show you). This way, you know how much commission has been applied to pay down the draw. Alternatively, a non-recoverable draw works like a real guarantee: you’ll get paid the draw, or whatever you earned on commission, whichever is highest without having any drawn funds hanging over your head. Knowing whether you have one of these type of draw will tell you how aggressive you need to be selling during a slow month.

Spiffs and accelerators operate differently. Accelerators is based on volume. Once you reach a certain threshold (typically 100% of your quota) you get an accelerator. It rewards your momentum, meaning you are likely to sell more as you gain speed. Spiffs, on the other hand, are bonuses for specific behaviors or products. Spiffs aren’t quota dependent. They’re activity dependent. Think of these separately. If you miss the specific criteria required for a spiff then you won’t get it. If you get a big quarter but didn’t met the spiff’s specific criteria, you might be disappointed. One is a measure of your focus. The other is a measure of your growth.

You can see how these structures play out in various roles below in our reference tables on the page. In most cases account executives gets a tiered plan (they’re typically rewarded for hitting quota). Customer success managers tend to have a renewal plan which rewards them for retention. One isn’t “better” than another, they simply measure different things. The key is to align your effort with what you will be paid against. If you’re on a flat rate plan, then you only have one lever, volume. If you’re on a tiered plan, then you have timing as your lever. You want to know when deals accelerate so you can pace them appropriately.

Commission planning has another tough nut to crack: Clawbacks. If you receive payment for a deal that dies, it will be taken back. Months later. And it catches people by surprise. They think it’s some kind of punishment from the past. Always plan with a buffer. Think about how much of your pipeline will go poof! This happens once the close occurs. Ten to fifteen percent? Feed these numbers into the calculator and see what it looks like when they’re used as a drag on your net payout. Ouch. But it is necessary.

In conclusion, working on a commission deal is a game of risk. If you don’t perform, you bear the risk. If the company doesn’t pay you, they bear the risk. Your tools should of give you an ability to measure this risk. Don’t base your expectation of compensation on a vague description of upside or a handshake. Review the math. Understand the inputs. Know exactly what it is you’re getting paid for. Once you clearly see the numbers, the anxiety dissapears. You no longer wonder if you’ll be paid, now you plan on getting paid more.