Sales compensation for scale-ups: beyond commission

I once asked a roomful of founder CEOs what they were paying their first sales reps. The answers ranged from £35,000 base salary with uncapped commission to £120,000 base salary with no commission at all. One founder was paying 100% commission only. Another was offering equity worth more than the salary.

Every single one of them believed they had the right answer.

That’s the problem with sales compensation. There isn’t one right answer. But there are several spectacularly wrong ones. And most founders stumble into them because they’re copying a compensation plan from a company at a completely different stage.

My view (and it’s consistent): commission is usually a bad default for a scale-up. It attracts the wrong sales reps, it drives the wrong behaviour, and it creates a compensation plan the rest of the company resents.

That’s not to say that commission is always a terrible idea. In start-ups, it can help with those early sales hires if it’s viewed as a solution to managing cashflow. By paying some money now (so they can do exciting things like eat and keep warm) and more when the money starts coming in, you’re sharing that risk and not putting it all on the company. If you’re genuinely constrained and the alternative would be to not hire at all, a commission mix can be rational. What’s not rational is thinking that commission is all about motivation. In this instance, it’s simply about cashflow.

Sales compensation is part of your business strategy

Sales compensation isn’t an HR admin job. But it’s not a magic lever either. People love to believe that tweaking a sales compensation plan can suddenly lead to better sales performance. But if that were true, 85% of sales reps wouldn’t keep missing their target (the general research consensus). Instead, it sets the rules of the game. It’s how your company’s strategy turns into what people actually do on a daily basis. And not just when they think you’re watching them.

Every compensation plan creates behaviour. It tells your sales team (and the rest of the business) what you value, what you’ll tolerate, and what you’re willing to pay for. And it shapes how your sales reps behave with customers, with sales engineers, with account managers, and with you.

If your sales compensation plan rewards closed revenue at any cost, you’ll get “wins” that look great on a spreadsheet and turn into churn, discounting, and a delivery team that wants to murder you. I’ve lived that movie. Including a stretch where we lost over £1m in ARR after the sale because the promises didn’t match reality.

And if you’re using a commission-heavy compensation plan to motivate sales teams, you’re just moving the arguments from performance to pay.

The real job of sales compensation is simple: make the right behaviour the easy behaviour.

The three reasons I avoid commission-based sales compensation

1) It creates a fairness problem inside the company

Commission-heavy sales compensation pays one function extra for overall company success. The rest of the business sees it. Support sees it. Product sees it. Delivery sees it.

If you’re trying to build a sales team that collaborates, and you want sales team members pulling in the same direction, a sales compensation plan that makes “every person for themselves” the official policy of your company is a weird place to start.

2) It drives perverse behaviour (because incentives work)

Commission-based incentives encourage reps to focus exclusively on trying to hit their target. And b*ll*cks to what’s best for the business (especially when that involves slowing down, qualifying leads harder, or walking away from deals completely).  

It’s why founders end up with:

• deals pulled forward to hit the sales quota
• discounts to “make the monthly target”
• bad-fit customers that ruin customer retention rates
• a sales process built around pressure instead of trust

3) It attracts the wrong sales professionals

A commission-first sales compensation strategy tends to attract people who are heavily motivated by money and ego.

I’m not saying money doesn’t matter. But the best sales reps in a scale-up usually care about craft, autonomy, learning, and winning as a sales team. When your sales compensation plan screams “money first”, you filter out the builders and hire the mercenaries. They’ll chase short-term wins; top performers build revenue growth.

They can talk. They can sell. They can hit a number. They often don’t build a sales team, they don’t support account management, and they don’t stick around when the job gets hard. When you pay individual commission that doesn’t reward team behaviour, you’re making this problem worse by telling everyone at your organisation that the way forward is to put their own needs in front of the team’s needs.

Most people assume salespeople are motivated by money because it’s such a consistently portrayed stereotype. There are definitely people out there motivated by greed (around 20% of the world’s population according to research). And perhaps they are disproportionately represented in sales. But the fact remains that most high-performing salespeople are not primarily motivated by money.

Base salary: the anchor of the compensation plan

A scale-up should pay a serious base salary for sales reps and for the sales team that supports them. A higher base salary forces discipline in the hiring process. It also makes it obvious what the job is: you’re paying for professional judgement, not just activity.

In UK startup sales compensation, you’ll still hear the language of target earnings OTE, and you can still use it if it helps candidates compare roles. But don’t lump everyone into one pay mix. New business and account management are different roles and they should be paid differently.

If you were going to force me to use commission for new business sellers, I’d go for a 50/50 split between base salary and commission, but for account managers, that should look more like 60/40 with managers on a mix nearer 80/20. The point isn’t the exact split. It’s that the pay mix should match the role, and reflect what you’re actually asking that person to do. 

A safer pay mix for scale-ups is “base salary plus a bonus”. Your pay mix might still include variable compensation, but the variable pay should be modest and tied to outcomes the company actually values.

The bonus: what to tie it to (and what not to)

If you’re not paying commission, you still need a clear incentive plan. Think of the bonus as a target incentive for doing the right work, not a commission bribe.

This is where founders get muddled and build a compensation plan that rewards the wrong thing. Keep the bonus formula tied to outcomes that align with business goals, company goals, and company objectives.

In practice, that usually means some mix of:

• revenue targets (with quality controls)
• quota performance over time, not one lucky month
• team performance across the sales team, not lone-wolf heroics
• retention and customer lifetime value

That’s it. Not a dozen metrics. Not a “comp plan” with a calculator.

If you want a single headline: reward the deals you’d be happy to repeat.

Notice what’s missing: the classic tiered commission structure, and all the clever contests. Those are exactly the things that make comp plans explode into arguments and exceptions.

Sales contests, sales accelerators, and SPIFs

I’m not a fan of sales contests or sales accelerators, and I’m wary of a sales performance incentive fund being used as a sticking plaster.

Can they spike activity? Yes.

Do they usually improve the sales strategy or your sales strategy? Not really. More often they cover up a messy sales compensation plan, weak targeting, or poor management.

If you insist on using sales incentives, keep them small, time-boxed, and tied to a specific business objective (for example: improve qualification, reduce discounting, or increase customer lifetime). Don’t let them become the sales compensation plan.

(That’s also why sales operations exists: to make the system usable, not to babysit comp plans.)

Where commission can make sense (and why I still avoid it)

There are types of sales where commission is a workable tool, and there are types of sales where it’s poison: high-volume transactional selling with short cycles, where the product is genuinely commoditised.

But most scale-ups aren’t doing that. They’re running longer B2B cycles. They’re involving sales engineers. They’re relying on relationships, trust, and a clean handover into account management.

In that world, commission-heavy sales compensation tends to damage the thing you’re trying to build.

It’s also hard to design fair commission when your company’s strategy involves multiple people influencing the win: marketing, product, delivery, and customer success. That’s why I prefer a strong compensation plan with high base salary and modest variable pay.

The “no commission” model isn’t fringe

Plenty of serious sales organisations don’t pay commission at all. Including examples I’ve written about before (Apple, Pluralsight, Makers Academy and some UK drug companies).

The point isn’t to copy them. The point is that a sales compensation plan can work without commission if you hire properly and manage properly.

The roles question: stop trying to pay one person to do five jobs

A lot of startup sales compensation problems come from founders hiring one role and expecting five.

Sales representatives are there to open, qualify, and progress opportunities. Account managers are there to protect and grow existing customers. Sales engineers are there to win the technical conversation. Sales operations is there to make the system usable, not to babysit comp plans.

If you muddle that, no sales compensation plan will save you.

Be clear in the job. Then build the sales compensation plan to match the job.

That includes leadership roles. Don’t hire a sales manager too early. A sales manager in a messy system mostly manages confusion. Sales leaders add value when there’s something to lead: multiple sales reps, consistent activity, and a compensation plan that already makes sense.

How to manage a no-commission sales compensation plan

Commission doesn’t remove the need for management. It just hides the lack of it.

With a sales compensation plan, you still set sales goals and sales targets (and you still revisit sales goals when the market shifts). You still track sales performance. You still define performance expectations and performance metrics. You still have real conversations about progress.

What changes is the tone. You’re not chasing a number for the sake of a cheque. You’re building a repeatable system.

Two good ways to do that are:

• Use a simple pay plan with clear on target earnings, then manage the job properly.
• Build plan management into your rhythm: regularly review the sales compensation plan when pricing changes, roles change, or your business objectives shift.

That’s how you avoid waking up a year later with a compensation plan that rewards the wrong thing. It’s also why effective sales compensation plans are reviewed like any other system.

Cash flow and deal shape: make the compensation plan care about reality

Sales compensation should reflect the way your business actually makes money.

If cash flow matters, don’t reward bookings that don’t get paid. If your best outcomes come from larger contract value and sensible average deal size, don’t reward discounting to hit a sales quota. If your company goals include sustainable growth, don’t reward short-term spikes that create long-term churn.

This is where market data and “industry standards” can mislead you. They’ll tell you what’s common. They won’t tell you what fits your company objectives.

Yes, there are other ways to pay salespeople

Before someone emails me a screenshot of their very clever comp plan: yes, there are other approaches, and some of them work.

One is the “100% quarter”. For a rep’s first quarter, they keep 100% of the revenue they close. Sounds unhinged until you do the maths: if they close £20k, that’s roughly what you’d have paid in base anyway, but psychologically it’s night and day. They get points on the board fast, feel like they’re winning, and that confidence carries into the next quarter. I’ve seen this drive ramp times down from 12 months to 6, which stops you having to pay a 12-month guarantee to someone yet to hit their stride.

And then there’s equity, especially for your first one or two reps. If someone is genuinely helping you prove the revenue model, they’re taking real risk and doing founder-level work. Equity can be a fair way to recognise that without turning the whole culture into a monthly bunfight over who gets credit.

None of this is “the answer”. It’s just a reminder: comp isn’t a religion. It’s a tool. Use the one that fits the stage you’re in and the behaviour you’re trying to create.

The bottom line

A strong sales compensation plan isn’t about clever commission maths. It’s about alignment.

Build a sales compensation plan that:

• pays a fair base salary
• uses modest variable pay and performance-based bonuses tied to business goals
• rewards the outcomes you actually want (retention, customer lifetime value, clean handovers)
• supports the sales team and keeps it aligned, rather than rewarding a ‘me first’ culture.

If you want a simple way to do this without turning it into an office-based version of The Hunger Games, I often refer to the annual bonus mechanism from The Great Game of Business. Set a single annual bonus pool. Then pay it out across the year: 10% in Q1, 20% in Q2, 30% in Q3, 40% in Q4. Make it cumulative, so if the team misses an early target but catches up later, they can still earn the full 100%. 

I like it because it lets you reward the people doing the selling (which is rarely just the salesperson) without creating the resentment that only comes with people asking ‘why do they get paid more than everyone else’. 

Both authors of The Great Game of Business have been podcast guests in the past. The brilliant minds of Jack Stack and Bo Burlingham are well worth a listen.

One last thing: even with the best sales compensation plan in the world, founder-led selling doesn’t vanish. You’ll still need to sell. Your job is to make the sales team better at it. Not to hide from it.

Book a free discovery call with Dominic.

What should you do next?

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If this post has annoyed you slightly, good. The issue is probably not effort. It is design. The business is asking you to carry decisions, standards and exceptions that should now belong inside the team.

The goal is not to disappear. The goal is to build a company where your best work is not dragged back into every operational tangle.

That is the point. Scaling is not adding more people around the same bottleneck. It is rebuilding the business so the bottleneck is removed.

Four ways to take this further

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About Dominic Monkhouse

Dominic Monkhouse scaled Rackspace UK and Peer 1 Hosting as Managing Director, taking both to a £30m annual run rate. He is the founder of Monkhouse & Company.