If you are one of the top sales agents in your company, then you’re likely about to be offered a sales commission plan—if you haven’t already. According to the Boston Consulting Group, the employees who are happiest and most likely to stay with the company for a long time are those who feel appreciated. And what better way for a company to show appreciation than by offering its top performers a competitive compensation plan?

This offer helps both you and the company. As an employee, you are rewarded for the outstanding performance and effort you put into your role. For the company, it’s a way to motivate and inspire loyalty in a dedicated agent. And when an agent is happy, they continue to deliver quality results.

If you are currently being offered a sales commission plan, congratulations! You are on top of your game! But that doesn’t mean you should accept it right away. Take some time to do research on the different options, compare offers, and choose the one that gives you the most value. You may be tempted by fancy On-Target Earnings (OTE) but hold your horses! Before you say yes to a sales commission plan, here are 6 factors to consider.

1. How and when are you getting paid?

You want to maintain a consistent cash flow. To do that, you need to know how you will get paid, and how often. Different companies may offer different policies. If your payout is set on a quarterly basis with 50% incentive pay, then your cash flow isn’t going to look great. Target at least 30% to 60% incentive pay every month.

2. Ramp policy

Most companies offer a ramp period of 2-3 months where you get paid the incentive pay in full while you train and learn about the business. Find out the percentage of guaranteed incentive pay you’ll get in the first month, second month, and so on.

3. Revenue vs non-revenue goals

Getting incentives based on closing deals tends to be more secure—after all, closing is your main job as a salesperson. Plus, closures usually get higher commission rates than other non-revenue components. If a firm says you will be paid greater than 20% of your incentive through opportunity generation, that’s a potential red flag!

4. Bookings vs invoices

As much as possible, opt for a commission or compensation plan that is based on bookings rather than invoices. In bookings, you get paid for closing the deal, and then you can securely move on to the next one. With invoices, you get paid only after the customer has paid the company.

5. Advanced commissions

Some sales are seasonal. You may close several deals during holidays but very few to none during the other months. In this case, ask your employer if you can take an advance on your commissions during off-season months, which will be later deducted when you earn your commissions.

6. Sales cycle

Your sales cycle can vary depending on what you will be selling. Some cycles are less than 3-6 months while others can be as high as a year. Clarify this with the HR team so you know what to expect at the onset.

Conclusion

There you have it—the 6 things that you should take into consideration before accepting a sales commission plan! A good plan is a great way to keep your cash flow steady, instead of waiting for a big payday every quarter.

Make sure your expertise and dedication get the comp plan they deserve. Take your time to compare the offers, dig deeper into all the details, and never hesitate to ask for clarifications. We hope this helped!