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Recoverable Draw
A guaranteed monthly minimum that must be earned back from future commissions.
Draws & Guarantees
Intermediate
How it works
A floor payment paid each month that is recoverable from future commissions - effectively a loan. If the rep earns more than the draw in a future month, the draw is recovered out of the excess. Common in insurance and channel sales; rare in modern SaaS.
Formula
If commission >= draw: payout = commission - draw_balance. If commission < draw: payout = draw, draw_balance grows.
Worked example
Example. $5K/mo recoverable draw. Month 1: rep earns $2K → payout $5K, draw debt $3K. Month 2: rep earns $9K → payout $9K - $3K = $6K, draw debt cleared.
Pros & cons
Pros
- Provides income stability
- Cheaper to employer than non-recoverable draws
- Maintains long-run pay-for-performance
Cons
- Reps may stay in 'draw debt' for months
- Hard to communicate
- Departure with unrecovered draw creates exposure
Best for
- Insurance and channel sales
- Independent rep models
- Roles with long sales cycles