Account Executive (AE) Commission Plan

By: JB Daguené

Elevating Sales Excellence

Crafting a comprehensive and strategically aligned commission plan for Account Executives (AEs) can propell revenue generation and fostering a results-driven culture. This article delves into the nuances of an AE Commission Plan, dissecting its components, illustrating its real-world application, and unveiling best practices that organizations can adopt to supercharge their sales force.

Objectives: Fueling Performance and Accountability

At the crux of every successful AE Commission Plan lies a confluence of objectives that directly align with the company's growth aspirations. The AE plan aims to drive results by offering enticing incentives that prompt AEs to secure upfront payments and close yearly contracts. This unique blend of motivating factors not only nurtures individual accountability but also establishes a long-term revenue stream for the company.

Components of the AE Commission Plan

Customer Commitment: The AE Commission Plan revolves around the commitment duration of customer contracts, which inherently reflects the trust built with clients. The plan takes into account the billing frequency of customers, providing AEs with a nuanced view of their performance vis-à-vis the quota target.

Payout Structure: A distinctive feature of the plan is its variable payout structure, intricately tied to the achievement of specific performance thresholds. If the AE's performance falls below 50%, no commission is awarded. If the AE hits between 50%-75% of their target, they receive 50% of their slated commission. However, as the performance surges past the 75% threshold, a 100% commission payout is triggered, propelling AEs to consistently excel.

Bonuses

Beyond the fundamental structure, bonuses serve as potent catalysts for achieving and exceeding targets. The AE Commission Plan incorporates two primary types of bonuses:

  • A cash bonus for reaching 100% of the monthly and quarterly targets.
  • A cash bonus for surpassing the targets by 150%, embodying the commitment to exceptional performance.

Case + Examples

For the following examples, commissions were determined using the following benchmarks:

  • Monthly target: 10,000€
  • Monthly 100% bonus: 250€
  • Monthly 150% bonus: 500€

Commission payouts:

  • Under 50% = No commission
  • 50%-75% = 50% commission
  • Over 75% = 100% commission

*In the chart below 100% of the deals are closed with yearly billing and 12-month duration.


Example 1:

In this example, the AE closed 5,750€.

Example 2:

In this scenario, the AE achieves total deals closed worth 13,000€.

The break down of those deals is the following:

  • 4.500 € | 12 months | Yearly Billing Commission (12%): 540€
  • 2.250 € | 12 months | Quarterly Billing Commission (8%): 180€
  • 6.250 € | 12 months | Half Yearly Billing Commission (9% + 18%): 832€

Because of this AE's impressive 130% of target achieved, they will also receive a 250€ performance bonus.

Total commission payout:

Total deals closed: 13,000€

  • Total commission: 1,552.5€
  • Bonus: 250€
  • Performance: 130%

Total payout ((1,552.5€*100%)+250€): 1,802.5€

Example 3:

In this final example, the AE closes an impressive 16,000€ worth of sales.

The break down of those deals is the following:

  • 4.500 € | 12 months | Yearly Billing Commission (12%): 540€
  • 2.250 € | 12 months | Quarterly Billing Commission (8%): 180€
  • 9.250 € | 12 months | Half Yearly Billing Commission (9% + 18% + 23%): 832€

Over the course of this sales cycle, the AE jumped into the High Over Performance commission percentage (23%) on their half yearly closed contracts.

Total commission payout:

Total deals closed: 16,000€

  • Total commission: 2,135.5€
  • Bonus: 750€
  • Performance: 160%

Total payout ((2,135.5€*100%)+750€): 2,887.5€

Navigating the AE Commission Landscape

Envisioning a high-performing AE team also entails addressing specific challenges and adhering to best practices:

  • Ramp-up Period: Incorporating a ramp-up period for new sales reps ensures a smooth integration into the team and the plan.
  • Performance Improvement Plans: For low performers, a performance plan aids in identifying and addressing areas for enhancement.
  • Dual Sales Rep Hiring: If feasible, hiring two sales reps instead of one fosters redundancy and continuous coverage, preventing gaps in customer engagement.

To simplify the implementation process, an SDR Commission Template is recommended. This template streamlines the commission calculation process and facilitates tracking of individual SDR performances.

Article by

JB Daguené

I eat SaaS for breakfast, B2B Sales for lunch, and Data for dinner. I like my food spicy! Since 2014, I've helped 100+ companies to build and scale specialized sales teams with 6 main playbooks.

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