You're Paying Full Commission on Revenue That Leaves in Six Months
Comp plans that pay on signature rather than on retained, collected revenue manufacture precisely the churn-and-burn behaviour owners complain about in management meetings.
Fabien DarollesOperations ExpertThe size of the leak
Forty-five deals a month at €500 average monthly revenue is €22.5k signed. If €8k of that churns within six months, the durable addition is €14.5k — but you paid commission on €22.5k. That is roughly a 55% overpayment per durable euro.
Across a year, on a sales team of any size, this is one of the largest uncontrolled costs in the business, and it never appears as a line item.
A structure that fixes it
Pay 60% of commission on cash collected in month one and vest the remaining 40% across twelve months of the client staying. Claw back in full if the client cancels inside six months.
Make discounting personally expensive: a rep who gives 10% away should lose 25% of the commission on that deal. Today the discount costs the company and costs the rep almost nothing, which is exactly why it gets given. Pay renewals at a lower rate, because unpaid renewals means nobody owns them. Tie 10–20% of variable pay to CRM and data hygiene, since that data is a balance-sheet asset at exit. And use accelerators above quota with decelerators below — a flat percentage pays mediocrity the same rate as excellence.
Comp beats management
Owners treat compensation as a fairness exercise for HR and then try to manage behaviour with meetings and speeches. Compensation wins that contest every time.
Every behaviour you complain about weekly is a behaviour you are paying for monthly.
Recalculate last year's commissions on a durable basis — collected and retained twelve months. The gap between that and what you actually paid is the annual size of the leak.
Has run organisations above €100 million in revenue with teams exceeding 10,000 people.
Meet the team →Questions we get asked
How should sales commission be structured?
Pay roughly 60% on cash collected in month one and vest 40% across twelve months of the client staying, with full clawback if they cancel inside six months.
How do I stop reps discounting?
Make it personally expensive. A rep giving 10% away should lose around 25% of the commission on that deal. Today the discount costs the company and costs the rep almost nothing.
Why don't management meetings change sales behaviour?
Because compensation beats management every time. Every behaviour you complain about weekly is one you are paying for monthly.
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