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Tiered Commission Plan for AEs | Series A Startups

Tiered Commission Plan for AEs | Series A Startups

Account Executive
Get the template widely used by Series-A high-growth companies to set up tiered commission plans for Account Executives.
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For high-growth companies, implementing a tiered commission structure can align sales behaviors with key revenue goals. This motivational framework offers increasing rewards for incremental performance levels.

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With a tiered plan, account executives receive higher commission rates as they progress through predefined revenue tiers. This inspires AEs to push into higher performance tiers to earn bigger payouts.

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Who is this for?

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This tiered commission template is perfect for high-growth companies who:

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  • Are transitioning from basic commission to advanced structures
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  • Want to compensate reps based on revenue quality
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  • Seek to promote collaboration between sales roles
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  • Need to structure sales teams with specialized positions
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  • Have between $2M to $10M in revenue

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More specifically, this template works best for companies that:

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  • Are in the Series A funding stage
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  • Have a total sales team size of 20-25 reps
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  • Find that excel sheets no longer serve complex sales comp plans
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  • Want to incentivize the right behaviors and outcomes
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  • Need to smooth collaboration between AEs and SDRs
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  • Require specialized sales roles for scaling

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This framework is flexible enough to optimize new customer acquisition and expansion of existing accounts.

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Implementing This Tiered Commission Plan for AEs

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A tiered compensation structure offers increasing payouts as account executives progress through predefined performance tiers.

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Here are some best practices for implementing a tiered commission plan:

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  • Set clear incremental revenue ranges for each tier based on goals
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  • Attach accelerating commission multipliers to higher tiers to increase motivation
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  • Establish 3-5 tiers to allow flexibility in goal-setting
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  • Use SPIFFs and contests to incentivize key behaviors
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  • Implement a transparent process for reviewing tier advancement
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  • Celebrate public recognition when reps reach new tiers
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  • Ensure quota assignments support rep progression through multiple tiers
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  • Continually refine tier targets and multipliers based on data and feedback

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This template provides sample tiers, quota calculations, and payout formulas to demonstrate how the framework can be customized.

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Aligning sales behaviors with company goals requires an iterative approach based onUsage data, win/loss analysis, and rep feedback are key to optimizing the plan.

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Metrics to Have Ready For Maximum Impact

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To fully leverage this tiered commission template, there are key metrics you should have on hand:

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  • Number of sales reps by role (AEs, SDRs, Account Managers)
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  • Historical quota attainment percentages for your sales team
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  • Average deal size and sales cycle length for your AEs
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  • Revenue projections and growth targets for the next 1-2 years
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  • Customer profile data - industry, size, geo, persona
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  • Expansion revenue and upsell/cross-sell metrics
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  • Sales activity metrics - calls, emails, demos, opportunities
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  • Rep ramp times and trajectory to full quota
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  • Performance distribution of top, average, and underperforming reps

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How the Tiered Commission Template Works

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A tiered compensation structure can drive sales performance by aligning rep incentives to key revenue goals. This template provides a blueprint for building an integrated tiered plan.

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Template Tabs

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  • Comp Plan: Defines 4 tiers with ascending payout multipliers
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  • Earning Calculations: Shows payout calculations for a sample rep
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  • Financial Model: Estimates total comp costs for a team

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Commission Tiers

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The foundation is creating incremental performance tiers with attached commission rates.

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The template has 4 predefined tiers:

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  • Tier 1: 0-60% quota achievement, 0.5x payout rate
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  • Tier 2: 60-100% achievement, 1x rate
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  • Tier 3: 100-150% achievement, 1.25x rate
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  • Tier 4: 150-250% achievement, 1.5x rate

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Higher tiers reward overachievement with accelerated payout rates.

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With defined tiers and rates in place, payouts are calculated based on:

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  • Individual rep quota assignment
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  • Attainment % determining the tier threshold achieved
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  • Corresponding payout multiplier for that tier

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Reps are motivated to progress through tiers to earn higher commissions.

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Sample Quota and Commission Calculations

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  • Example rep has $900k quota and achieves $792k = 88% attainment
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  • This puts them in Tier 1 with a 0.5x payout rate
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  • With 88% attainment, their commission is 0.5 x $52,800 = $26,400

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This shows how tier, attainment %, and multiplier determine commission payout.

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Modeling Total Compensation Costs

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The Financial Model estimates costs for 8 reps:

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  • Sets team quota at $7.2M based on $900k individual quotas
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  • Calculates 88% team attainment based on example rep
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  • Payout is 0.5 x $422,400 = $211,200 in tiered commissions

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Optimizing the Plan with SPIFFs

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SPIFFs incentivize behaviors like larger deal sizes or faster sales cycles:

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  • Attach SPIFFs to specific activities or outcomes
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  • SPIFFs combined with tiered commissions enhance motivation
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  • The template shows SPIFFs for multi-year deals and payment terms
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  • Multi-Year SPIFF: 0.5% payout on multi-year deals (ex: $990 on $198k)
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  • Payment Terms SPIFF: 0.5% payout on upfront annual contracts (ex: $990 on $198k)

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The SPIFFs in this template motivate larger, longer contracts paid upfront.

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How does this benefit you?

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This structure helps sales leaders:

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  • Motivate reps to progress through tiers with accelerating payouts
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  • Segment and reward top performers
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  • Incentivize key sales behaviors through SPIFFs
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  • Model variable compensation costs based on performance
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  • Optimize compensation plans to drive growth

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The Critical Role of Account Executives

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Account executives are core drivers of revenue growth, tasked with acquiring new customers and expanding existing accounts.

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This tiered commission plan aims to optimize AE performance by:

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  • Motivating AEs to push into higher tiers with increasing payouts
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  • Allowing granular tracking of sales activities and pipeline trends
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  • Incentivizing behaviors that lead to bigger deal sizes
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  • Promoting customer loyalty and retention efforts
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  • Enabling flexible SPIFFs to encourage key outcomes

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Essential Skills for Successful Account Executives

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  1. Building Relationships: Excel in creating lasting connections with customers, acting as a trusted advisor throughout their journey.
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  2. Customer Focus: Prioritize customer satisfaction, actively listen to feedback, and proactively address challenges.
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  3. Consultative Selling: Master asking insightful questions, active listening, and tailoring solutions to meet unique customer needs.
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  4. Growth Mindset: Identify and act on expansion opportunities within existing accounts, cross-selling and upselling strategically.
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  5. Collaboration and Communication: Effectively collaborate with cross-functional teams for a seamless customer experience.
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  6. Results-Driven: Be motivated by results, taking ownership of sales targets while prioritizing long-term customer success.

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‍Key Metrics for Tracking Account Executive Performance

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  1. Sales Quota Attainment: Measure the percentage of achieved revenue targets, showcasing overall performance.
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  2. Pipeline Growth: Reflects effectiveness in prospecting, qualifying leads, and building a strong customer base.
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  3. Deal Velocity: Measures efficiency in closing deals, indicating productivity in expanding customer relationships.
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  4. Average Deal Size: Assess the ability to secure deals of varying sizes and contribute to overall revenue potential.
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  5. Expansion Revenue: Measures success in identifying and capitalizing on expansion opportunities within existing accounts.
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  6. Expansion Rate: Calculates the percentage of customers expanding their usage, showcasing effectiveness in driving expansion.
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  7. Pipeline Velocity: Measures how quickly opportunities move through the sales pipeline.
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  8. Customer Retention: Reflects the percentage of customers renewing contracts, indicating success in fostering loyalty.
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  9. Customer Lifetime Value (CLTV): Measures the total value a customer brings over their lifetime, showcasing contribution to company growth.
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  10. Renewal Rate: Measures the proportion of customers renewing subscriptions or contracts at a specified period.

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This template will empower your AEs to drive sales growth by aligning their activities and priorities to your revenue goals.

Talk to our Mid-Market Compensation Specialist
Take a free tour to learn how we can set you up for success.
Master ASC 606 compliance for SaaS

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We know it’s not easy to design comp plans that keep everyone happy. That’s why we partnered with the best SaaS companies to design a template with a 99% success rate. Join hundreds of high-growth SaaS companies that leverage ths template to simplify sales commission and grow revenue.

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