Don't Be Greedy

If you’re bringing a new salesperson on board, few decisions will have a bigger impact on your business than how you structure their compensation.

Get it right, and you’ll attract top talent, drive the right behaviors, and scale revenue with less micromanagement.

Get it wrong, and you’ll be stuck in the weeds—constantly managing, struggling to see results, and dealing with high turnover.

James Clear said it best in Atomic Habits: “We don’t rise to the level of our goals. We fall to the level of our systems.”

And your salesperson’s compensation plan is the ultimate system. It determines who applies, how they perform, and whether they stay.

Here are six principles to guide your sales compensation strategy—regardless of whether you’re hiring your first SDR or your next closer:

1. Be Realistic About Earnings Potential

Many businesses promise “huge earning potential” in their job listings—but when you break down the math, it’s based on unrealistic goals.

For example, if you’re hiring an inside salesperson to book appointments and your business currently gets zero, don’t set a target of 25 per month unless you have hard data proving it’s possible.

Before finalizing your comp plan, reverse-engineer the numbers. Has this been done before—in your business? If not, have you mapped out activity levels and conversion rates that show how it could be done?

A misleading comp plan doesn’t just frustrate salespeople—it wastes your time and money on hiring, training, and replacing talent that will inevitably leave.

2. Pay at the Top of the Market (If You Want the Best Talent)

Before setting compensation, research the going rate for similar roles.

A quick Google search will give you plenty of data points, from job postings to salary reports. You can also talk to recruiters, analyze competitor listings, or use AI tools with ‘deep research’ options for insights on your market.

Personally, I prefer to pay at the top of the market when objectives are met. Why? Because great salespeople generate a high ROI. If your compensation structure only attracts low-level talent, you’ll get what you pay for.

Do the math: If a salesperson helps you close just one new deal, what’s the lifetime value of that customer? So, what’s the ROI on paying them well?

A strong performer often produces 2-5x more than a mediocre one—so don’t step over dollars to pick up dimes.

3. Never Cap Commissions

Capping commissions is one of the biggest mistakes you can make. Why? Because no top performer wants a ceiling on their earnings.

If your comp plan requires a cap to be profitable, it’s designed poorly. There should never be a scenario where your salesperson can earn so much that you aren’t making money.

If your rep is closing deals, you’re winning. The more they sell, the better off everyone should be.

4. Keep It Stupidly Simple

Compensation plans are designed to change behavior. If your salesperson doesn’t understand how they get paid, they can’t optimize their performance.

If you need a spreadsheet with 4 tabs and 211 formulas to explain commissions, it’s too complex. A good rule of thumb: If your rep can’t calculate their paycheck on their own in a few minutes, simplify the plan.

Make it crystal clear what activities lead to more money. When your team knows exactly how to hit their goals, they’ll stay motivated and focused on the right behaviors.

5. Be Transparent—No Surprises on Payday

Your salesperson should always know what to expect on payday. Hidden bonuses, arbitrary targets, or opaque calculations breed distrust and frustration.

If commissions rely on factors outside of their control (e.g., discretionary bonuses, backend metrics they can’t track), your comp plan is broken. Top performers will leave if they feel like their earnings are at the whim of unpredictable variables.

Make everything measurable, clear, and accessible. When salespeople can see their numbers in real time, they stay engaged and accountable.

6. Incentivize What They Can Control

Incentives only work if the person earning them can influence or control them. If commissions are paid on activities outside the control of that particular person, the compensation plan isn’t doing its job.

For example, if you hire an inside sales rep to book appointments, don’t compensate them based on closed deals. They don’t control whether the closer nails the pitch. If the account executive drops the ball, why should the SDR’s paycheck take the hit? Similarly, why should they benefit from the account executive’s efforts if they’re missing their own targets?

Incentivize reps based on their actions, not the outcomes of the broader system.

When your salespeople know their effort directly impacts their paycheck, they’ll stay focused and productive.

Final Thoughts

A great sales comp plan does more than just pay people—it creates the system that changes behavior and drives revenue growth.

Follow these six principles, and you’ll build a structure that attracts top performers, aligns incentives with business growth, and reduces the need for constant micromanagement.

Get it right, and your salesperson will be an investment—not an expense.

Got questions about structuring your sales comp plan? Reply to this email—I’d love to help you refine it.