A typical B2B SaaS sales commission structure combines a base salary with variable commission, usually split 50-70% base and 30-50% variable compensation. This model rewards both consistent performance and deal closures, reflecting the longer sales cycles and recurring revenue nature of SaaS products. The structure varies significantly based on role, deal size, and company stage, making it important to design compensation that aligns with your specific business model and growth objectives.
What is a typical B2B SaaS sales commission structure?
The standard B2B SaaS sales commission structure follows an on-target earnings (OTE) model where total compensation splits between guaranteed base salary and performance-based variable pay. Most SaaS companies structure this as 60/40 or 50/50, meaning if someone has €100,000 OTE, they might receive €60,000 base salary and €40,000 in commission at quota achievement.
This differs from traditional sales roles in several ways. SaaS sales typically involve longer sales cycles, ranging from 3-9 months for mid-market deals and potentially 12-18 months for enterprise contracts. The recurring revenue model also means commission structures need to account for ongoing customer value rather than one-time transactions.
The base-to-variable ratio shifts based on role seniority and deal complexity. Entry-level positions lean toward higher base percentages (70/30 or 65/35) because they’re still building skills and pipeline. Senior positions handling complex enterprise deals might work with 50/50 or even 40/60 splits, reflecting their ability to close larger contracts and manage longer sales cycles independently.
How do commission rates differ between SaaS sales roles?
Commission rates vary significantly across different SaaS sales positions based on revenue responsibility and sales cycle involvement. Sales Development Representatives (SDRs) and Business Development Representatives (BDRs) typically earn smaller commission amounts tied to qualified meetings or pipeline generation rather than closed revenue. Their OTE might range from €35,000-€55,000 with commissions paid per qualified meeting (€50-€200 each) or for pipeline created.
Account Executives carry the largest commission percentages because they own deal closure. They typically earn 8-15% of Annual Contract Value (ACV) on new business, with rates varying based on deal size and market segment. An AE closing €500,000 in new ACV annually at 10% commission would earn €50,000 in variable compensation.
Account Managers and Customer Success Managers focus on renewals and expansion revenue, earning smaller percentages (3-8% of renewal/expansion ACV) because retention typically requires less effort than new customer acquisition. However, their commission structures often include targets for net revenue retention, upsells, and cross-sells to encourage growth within existing accounts.
These differences exist because each role handles different sales cycle stages with varying complexity levels. SDRs focus on volume and qualification, AEs manage complex negotiations and deal structuring, whilst CSMs nurture long-term relationships requiring different skill sets and time investments.
What factors should influence your SaaS commission structure?
Your commission structure should reflect your deal economics and sales motion complexity. Companies selling €5,000 annual contracts need different structures than those closing €500,000 enterprise deals. Higher-value contracts with longer sales cycles (9-18 months) justify higher commission rates because reps invest more time per deal and close fewer total accounts annually.
Sales cycle length directly impacts how you structure payments. If your average deal takes 6-8 months to close, paying commission only at contract signature creates long periods without variable income. Some companies address this by paying partial commission at key milestones (qualified opportunity, technical validation, contract signature) to maintain motivation throughout extended cycles.
Market maturity and competitive landscape matter significantly. If you’re entering established markets with strong competitors, you might need more aggressive commission structures to attract experienced reps who can navigate competitive deals. Early-stage companies in emerging categories might offer lower rates initially but include equity compensation to balance risk and reward.
Customer acquisition cost (CAC) and lifetime value (LTV) ratios provide important guardrails. If your CAC is €15,000 and first-year contract value is €20,000, commission rates above 25% make customer acquisition unprofitable. Most sustainable SaaS businesses maintain commission costs at 10-15% of ACV whilst targeting CAC ratios that recover within 12-18 months.
Company growth stage influences structure flexibility. Early-stage startups might offer higher commission rates (12-18% of ACV) to compensate for brand recognition gaps and longer sales cycles. As companies mature with established brands and inbound lead flow, rates often normalize to 8-12% because sales cycles shorten and conversion rates improve.
How do you calculate SaaS sales commissions on recurring revenue?
Calculating commissions on recurring revenue presents unique challenges because subscription value extends beyond initial sale periods. The most common approach pays commission on Annual Contract Value (ACV) regardless of contract length. For example, a three-year contract worth €150,000 total (€50,000 annually) would generate commission on €50,000 at a 10% rate, paying the rep €5,000.
Some companies use MRR multipliers instead, paying commission on monthly recurring revenue multiplied by 10-12. A deal generating €5,000 MRR with a 10x multiplier would pay commission on €50,000 (€5,000 × 10). This approach works well for month-to-month contracts or when deal lengths vary significantly across your customer base.
Multi-year deals require clear policies about upfront versus annual commission payments. Paying full commission on three-year total contract value (€150,000 in our example) creates €15,000 commission expense before you’ve collected the revenue. Most companies either pay on ACV only or spread commission across contract years to align expense with revenue recognition.
Renewals complicate calculations further. Common approaches include paying reduced commission on renewals (3-5% versus 10% for new business), paying renewal commission only to account managers rather than original AEs, or paying no commission on straight renewals but full rates on expansion revenue. The right approach depends on whether renewals happen automatically or require active selling effort.
Downgrades and churn often trigger clawback provisions where previously paid commission gets deducted if customers reduce spend or cancel within specified periods (typically 90-180 days). For instance, if a rep earned €5,000 commission on a €50,000 ACV deal that churns after two months, you might claw back 75% of the commission (€3,750) since the customer only paid for two months of a twelve-month contract.
What are the pros and cons of different SaaS commission models?
The straight percentage on ACV model offers maximum simplicity and transparency. Reps know exactly what they’ll earn on each deal, making forecasting straightforward for both salespeople and finance teams. However, this approach doesn’t account for deal quality differences or encourage specific behaviours like focusing on ideal customer profiles or longer contract terms. A rep earns the same percentage whether they close a strategically important enterprise account or a small business likely to churn.
Tiered commission structures with accelerators reward top performers by increasing rates after quota achievement. For example, 8% commission up to 100% of quota, 12% from 100-120%, and 15% above 120%. This motivates reps to exceed targets rather than coasting after hitting quota. The downside is complexity in tracking and calculation, plus potential tension if territories have unequal opportunity distribution making accelerators easier to achieve in some regions.
Team-based commissions split revenue credit across multiple contributors (SDR, AE, Solutions Engineer). This approach recognizes that complex SaaS sales require collaboration and prevents territorial behaviour that damages customer experience. However, team structures can demotivate top individual performers who feel they’re subsidizing weaker team members, and they complicate commission tracking significantly when team compositions change mid-quarter.
Hybrid models combining different elements offer flexibility but require careful design. You might pay base commission on all revenue plus bonuses for strategic objectives (contract length, specific product attachments, ideal customer profile matches). These structures can drive precise behaviours aligned with company priorities, but they risk becoming so complex that reps can’t easily calculate their earnings, reducing the motivational impact of variable compensation.
When choosing between models, consider your sales team’s experience level and your company’s operational maturity. Simple structures work better for newer teams still learning your sales process, whilst sophisticated models require experienced reps and robust systems for tracking and reporting. The best commission structure balances motivation, simplicity, and alignment with your specific growth objectives rather than following a universal best practice.
Getting your B2B SaaS sales commission structure right requires balancing competitiveness with profitability whilst aligning incentives with your growth strategy. The most effective structures evolve as your company matures, your product develops, and your market position strengthens. We help technology companies design and implement sales compensation frameworks that attract top talent and drive sustainable revenue growth across European, American, and Asia Pacific markets. If you’re building or refining your sales organisation for international expansion through sales outsourcing or developing effective inbound marketing strategies, we’d be happy to share what we’ve learned from helping hundreds of SaaS companies scale their revenue operations. If you are interested in learning more, contact our team of experts today.
Related Articles
- What is the difference between appointment setting and lead generation?
- Should tech startups expand internationally or focus domestically first?
- How do you qualify leads at industry events?
- How do you choose the right B2B tech events for lead generation?
- What are the pros and cons of outsourcing sales development?