Salary vs. Commission

Scaling your business means growing sales, and most of the owners I work with expand their sales team at some point during our engagement. 

One of their biggest decisions is deciding how much of a salesperson's compensation should be salary vs. commission. 

This decision affects everything from your sales team’s motivation to the company’s bottom line and future growth. There’s no one-size-fits-all ratio—choosing the right balance depends on your goals, sales cycle, and industry.

Here’s how Salary-Heavy vs. Commission-Heavy models work:

1. Salary-Heavy

A higher salary with a lower commission rate works well in industries with long sales cycles or complex products, where relationship-building and expertise are key. When a salesperson knows their paycheck is stable, they can focus on nurturing leads without feeling pressured to rush a sale. This model also suits situations where client retention and satisfaction drive profitability, like professional services or technology solutions.

2. Commission-Heavy

A higher commission rate with a lower base salary motivates quick, high-volume sales. This structure is effective in fast-paced, transaction-oriented industries, like retail or insurance, where volume is critical to growth. Salespeople in this model tend to be highly motivated by performance and thrive in competitive environments. However, commission-heavy models can lead to burnout or high turnover if not carefully managed.

3. Balanced Model

Most of the businesses we work with opt for a balanced model—a moderate salary with a solid commission component. This approach combines stability with performance incentives, making it ideal for sales environments that require a mix of relationship-building and deal closing. A balanced model is often a fit for industries where sales cycles vary, or where adapting to client needs is a key part of the sales process.

Regardless of the model you choose, don’t forget to track leading indicators so that you can better predict future sales success. Metrics like the number of new leads generated, initial meetings held, or proposals submitted give you insight into the future pipeline.

 These early indicators allow you to identify trends and make adjustments to keep the team on track.

They also let you better make informed decisions on compensation adjustments and ensure alignment with growth goals. 

Compensation is more than just motivating sales—it’s a tool to shape the direction of your sales strategy, improve profitability, and increase the value of your business.