Sales commissions are financial incentives or compensation that is paid to salespeople or representatives based on their sales performance. They are a form of variable compensation designed to motivate and reward individuals or teams for achieving or exceeding sales targets.
Sales commissions typically consist of a percentage or a fixed amount of the total sales value generated by the salesperson. The specific commission structure can vary depending on the industry, company, and individual sales roles.
Common options are;
- TOTAL COMPANY REVENUE: Commission paid is based on the total sale revenue the company has generated
- TOTAL COMPANY PROFIT MARGIN: Commission paid is based on the profit margin (net or gross) achieved by the company
- SALES REP ALLOCATED TO CUSTOMER/PROSPECT: This method is where an individual salesperson is allocated to a customer/prospect and commission is paid only on the revenue raised against the customer/prospect
- SALES REP ALLOCATED TO GROUP OF CUSTOMERS: This method is based on a salesperson being allocated to a group of customers. This could be by regions (eg. all customers in the north) or industry or customer type (large accounts. small medium enterprises)
- SALES POSITION: Set % based on the role. For example, Sales Director would have a higher percentage than the Sales Manager.
- MULTIPLE VARIATIONS: This indicates a variety of options from the list above