Comments on: Percent of Revenue Spent on Sales Incentives? http://leapcomp.com/2009/02/percent-of-revenue-spent-on-sales-incentives.html Thu, 09 Feb 2012 01:48:15 +0000 http://wordpress.org/?v=2.6 By: Donya Rose http://leapcomp.com/2009/02/percent-of-revenue-spent-on-sales-incentives.html#comment-4686 Donya Rose Sat, 21 Feb 2009 15:39:09 +0000 http://leapcomp.com/?p=851#comment-4686 "What should our commission rate be?" is one of the most frequent questions we get from our Ask the Expert section of our web site. And almost every leader of a large company and their CFO want to know what percent of revenue (or margin in distribution companies) should be spent on sales comp (base + variable). I have only seen one thorough study of this by ZS Associates years ago in a book (left it in a hotel room - so can't tell you more). But I do remember that software and publishing were the highest on an industry basis, small companies generally paid a larger percent of revenue in sales comp than larger companies, and it's all over the place. Among my clients I have seen values from 10% of margin (= very small percent of revenue) up to 20%+ of revenue as the total cost of comp. I have never felt a general guideline for this was particularly useful, and have addressed the topic more thoroughly in a post on our company website blog: http://www.cygnalgroup.com/blg_article.php?id_art=56. “What should our commission rate be?” is one of the most frequent questions we get from our Ask the Expert section of our web site. And almost every leader of a large company and their CFO want to know what percent of revenue (or margin in distribution companies) should be spent on sales comp (base + variable).

I have only seen one thorough study of this by ZS Associates years ago in a book (left it in a hotel room - so can’t tell you more). But I do remember that software and publishing were the highest on an industry basis, small companies generally paid a larger percent of revenue in sales comp than larger companies, and it’s all over the place. Among my clients I have seen values from 10% of margin (= very small percent of revenue) up to 20%+ of revenue as the total cost of comp.

I have never felt a general guideline for this was particularly useful, and have addressed the topic more thoroughly in a post on our company website blog: http://www.cygnalgroup.com/blg_article.php?id_art=56.

]]>