Donna Genie shares five commission-structure rules that protect profits while motivating sales teams: collect funds before paying commissions, stress-test rates at 3-5x revenue growth, build in flexibility with baseline and supplemental mechanisms, integrate refund policies, and design residual commissions for ongoing customer relationships.
Commission structures that protect your business and motivate your sales team. First, always collect money before paying any commissions. So many businesses get burned by paying out commissions on sales that never actually convert to revenue. Implement a strict policy where commissions are paid only after the funds are fully collected and cleared. Second, stress test your commission rates by projecting revenues at three to five times higher than the current levels. Ask yourself, if our sales grew dramatically, will this commission structure still make financial sense? Third, build flexibility in your commission rules. Don't create rigid structures that you can't adjust. Start with baseline rates and create supplemental mechanisms for slower initial periods. Fourth, develop a clear refund policy that integrates with your commission structure. You want to incentivize long term customer relationships? Consider how refunds impact commission payouts and build that into your initial framework. Fifth, think residuals. Design commission plans that reward ongoing customer relationships.
