Commission Splits Explained

In recent weeks, I’ve had a surge of inquiries about structuring commission and OTE (On-Target Earnings) for Sales Executives and BDMs. It’s a crucial topic—get it right, and you’ll attract and retain top talent. Get it wrong, and you risk demotivated sales teams and missed targets. So, how should you approach it? 1. Start with the Total Earning Potential (OTE) OTE is a combination of base salary and commission. A competitive OTE should align with industry standards and reward high performers. The typical ratio varies: ✅ 50/50 Split – Common in enterprise/B2B sales. ✅ 60/40 or 70/30 – More common for transactional sales, where a higher base ensures stability. 2. Define Clear, Attainable Targets A common mistake is setting unrealistic sales targets, leading to disengagement. The best practice? 🎯 Set a realistic baseline target that at least 60-70% of your team can hit. 🎯 Provide accelerators for over-performance (e.g., higher commission rates after 120% of quota). 3. Choose the Right Commission Model Different structures work for different sales cycles: 💰 Fixed % on Revenue – Simple and effective for high-margin products. 📈 Tiered Commission – Motivates overachievement (e.g., 5% up to target, 10% beyond). 🏆 Profit-Based – Ideal when margins vary widely. 4. Avoid These Common Pitfalls ❌ Capping Commission – Nothing kills motivation faster! ❌ Complex Structures – If your team can’t calculate their earnings easily, it’s too complicated. ❌ Changing the Plan Mid-Year – This damages trust and retention. 5. Regularly Review and Benchmark Against the Market The sales landscape is constantly evolving. Reviewing your commission plan against market trends and competitor packages ensures you remain competitive. 💡 Looking to structure an effective commission plan for your sales team? Let’s talk—I’ve helped many companies find the right balance to drive performance while attracting top talent. What’s working for your team? Drop a comment below! 👇

A too common blunder when crafting a commission plan: Starting with the payout % you want to pay—and building backwards from there. Your payout % is an output—not a starting point. It’s determined by the variable portion of the OTE and the quota. Not the other way around. Here’s how to get in the right ballpark: -Benchmark OTE using market comps that reflect the role’s scope and sales motion -Define the base/variable split (50/50, 60/40) -Set quotas. A "finger in the air" starting point is a 2x OTE annual quota, ramping up to 5x+ as you scale. (Adjust based on ACV, average sales cycle, inbound demand etc.) (Variable Comp ÷ Annual Quota) x 100 = Payout % Don’t reverse-engineer your plan from the payout % you think “feels right.” Let the math and market lead you there.

Commission Splits: The Hidden Risk Mortgage brokers. Real estate agents. Most disputes I see don’t start when you leave. They start the day you agree to your split. 60/40. 70/30. 50/50. Sounds simple. It’s not. Here’s what actually matters. What is the split applied to? Commission only? Or commission + ongoing income? (Trail. Rent roll. Repeat business.) When is it calculated? Before or after: • Aggregator / franchise fees • Marketing and admin costs • Clawbacks and adjustments This is where income quietly disappears. What happens when you leave? Do you keep your clients? Do you retain your trail or rent roll? Are you still subject to the split? Most people assume they “own” their book. Legally — you own what the contract says you own. And the big one. If you’re giving up 30–50% of your revenue… what are you actually getting in return? Leads? Support? Brand? Systems? Or just a desk? The reality. Commission splits aren’t just commercial. They are legal structures that determine: • Your income • Your control of clients • Your exit value If it’s not clearly documented in your agreement — you don’t have certainty. You have risk. Simple rule. Your income model is your engine. If you don’t understand it legally, you don’t control it. Protect it. If you’re not sure what your agreement actually says, get it reviewed. A 15-minute conversation now can save you years of lost income later. Lawyer for Estate Agents & Mortgage Brokers #commissions #estateagents #mortgagebrokers #lawyer #heretohelp

How to set up the right commission structure for your team: I’ve seen and tested out many commission structures. They usually share a common attribute: Lack of incentives. The challenge is to match the structure with your goals. In my business, I like to offer higher splits to keep my team motivated. These are the 5 most common structures: 1. Straight Commission. This structure pays based on sales made only. No base salary. It makes sense if you’re a scrappy startup needing to sell without a lot of cash on hand to pay employees upfront. 2. Tiered Commission. Paying out bigger commissions as contract values increase. This is good for rewarding your top performers. But you need to keep good track of who is doing well. 3. Single-Rate Commission. It pays out a fixed commission for each sale, no matter how big the deal is. This is easy to keep track of and helps save money. But the problem is that it treats all sales the same way. 4. Gross Margin Commission. It pays commissions based on the company's gross revenue. Rather than the contract's value. As a CFO, I like this because it helps with the problem of giving too many discounts. 5. Residual Commission. It rewards reps for securing long-term clients and upselling them. But be careful with this one, especially if another team is doing most of the work to keep clients. Each commission structure has its benefits and drawbacks. What works best for your business will depend on the behavior you’re trying to drive among other factors. — I’ve helped 75+ SMBs with their finances. If you want to chat about your business numbers, shoot me a DM.