How to Design a Sales Commission Plan: The 2026 Framework

Designing a sales compensation plan is the highest-leverage activity a RevOps or Finance leader does all year.

Get it right, and the revenue engine hums. Get it wrong, and you either burn cash (high Cost of Sales) or burn talent (high turnover).

In 2026, the era of "growth at all costs" is over. Modern plans must be efficient, predictable, and aligned with unit economics.

This guide outlines the Unified Framework for designing plans across your entire revenue team.

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Step 1: Define the "Job to be Done"

You cannot have one plan for everyone. You must design for the specific motion of the role.

• The Hunter (AE): Paid to Close.
  • Metric: Bookings / Revenue.
  • Risk Profile: High Risk, High Reward (50/50 Pay Mix).
  • Goal: Maximize new logos.
• The Farmer (CSM/AM): Paid to Retain & Grow.
  • Metric: Net Revenue Retention (NRR).
  • Risk Profile: Lower Risk (70/30 or 80/20 Pay Mix).
  • Goal: Protect the base, expand the account.
• The Generator (SDR): Paid to Open Doors.
  • Metric: Qualified Meetings / SQLs.
  • Risk Profile: Moderate Risk (65/35 Pay Mix).
  • Goal: Feed the AEs.

Step 2: Set the OTE (The Price of Talent)

On-Target Earnings (OTE) is your anchor. It includes Base Salary + Variable Commission.

2026 Benchmarks:

• SDR: $75k - $95k
• SMB AE: $110k - $150k
• Mid-Market AE: $160k - $230k
• Enterprise AE: $260k - $360k+

Note: OTE varies by location. Use our Plan Design Wizard to see benchmarks for your specific city.

Step 3: Choose Your Mechanics

Once you have the Role and the OTE, you need the math. This is where most plans fail.

1. The AE Model: "The 5x Rule"

For Account Executives, your "North Star" is the Quota-to-OTE Ratio. The standard is 5x.

• If OTE is $150k, Quota should be ~$750k.
• This ensures your Cost of Sales stays around 10-20%.
• Read our Deep Dive on AE Plans →

2. The SDR Model: "The Hybrid"

For SDRs, never pay solely on meetings booked (quantity) or solely on closed deals (outcome). Use a Hybrid Model.

• 60% of variable on Qualified Meetings (Control).
• 40% of variable on Deals Closed (Alignment).
• Read our Deep Dive on SDR Plans →

3. The CSM Model: "Retention + Expansion"

For Customer Success, you must separate defense (Retention) from offense (Expansion).

• Retention Bonus: Paid on hitting 95%+ Gross Retention.
• Expansion Commission: Paid like an AE on upsells.
• Read our Deep Dive on CSM Plans →

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Step 4: Model It Before You Roll It

The biggest mistake leaders make is rolling out a plan without testing "What If" scenarios.

• What if a rep hits 300%? Do we have a cap?
• What if the whole team misses? Do we have a floor?

You need to visualize the Pay Curve.

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Frequently Asked Questions (FAQ)

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Related Reading

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