Breaking Boundaries – The Case for Unlimited Sales Commissions

Sales reps thrive on commission-driven motivation. However, is there a point where too much commission is, well… too much? In this post, we’ll explore the concept of unlimited earning potential. We’ll discover how unlimited commissions can supercharge your sales organization and elevate company profitability.

What Are Uncapped Commissions?

Are you ready to unleash your reps’ earning potential and take your commissions to the next level? Uncapped commissions means breaking free from limits. As long as sales happen, reps get paid. It’s the opportunity for your reps to dream big and earn without boundaries. Whether your team is made of sales pros or just aspiring reps, they will embrace the thrill of unlimited earning potential. They will watch their efforts translate into rewards – without artificial throttling of earnings.

Comparing Capped vs. Uncapped Earnings

The main reason for capped commissions is to ensure that your division doesn’t go above budget. Often, caps are also used to prevent reps from receiving “abnormal” commissions when certain large deals are closed (for example because you feel their contribution wasn’t sufficient or proportional). 

With capped commissions, reps stop getting paid on deals once they reach a specific sales threshold or quota. In some cases, they may still earn some commissions, but their commission rate is reduced once a certain sales threshold has been reached (example below).

Instead applying earning limits based on overall attainment / tiers / rates, some organizations apply earning limits (caps) on a per-deal basis – examples:

  • Commissions cannot exceed $5,000 per deal
  • Commissions are calculated per-deal based on the following
    • 10% commission over first $10,000 of each deal’s amount
    • 5% commission over the deal amount in excess of $10,000

However, capping commissions presents a fundamental challenge. It reduces the incentive for salespeople to actively pursue more or larger deals. This explains why commission caps are uncommon. Uncapped earnings is the “gold standard” across modern sales organizations. The prospect of unlimited earnings serves as a key motivating factor for sales pros.

Why Uncapped Earnings?

In the world of sales, limiting a team’s earning potential might seem like a cost-saving or cost-control move in the short term. However, it comes with some serious issues. Embracing uncapped earnings can ignite sales performance and ultimate boost long-term revenue. Equipped with ambitious quotas and accelerators (aligned with reasonable business targets), unlimited earning potential empowers teams to strive for consistent sales success. This drives greater ROI for your business. Let’s make a case for uncapped commissions.

1. Generate Strong Sales Motivation

The potential to earn more with each sale enables your reps to remain focus on selling. Otherwise, they will reach a point of diminishing returns and lose motivation. Plus, it’s only fair to pay reps for better results. Also, uncapped earnings make it much more exciting for reps to work on large deals!

2. Avoid Silly Deal Timing Games

Some reps may artificially delay deals so that they appear in the next period (ex: next quarter), when their cap has been reset / replenished. Or they may split deals into 2 so they can get more commissions. This is obviously not good for business and it’s also distracting. Your reps should not have to “pace” or “throttle” the influx of deals to get paid more.

3. Promote “Pay For Results”

Your commission structure directly expresses how you value rep contributions. Imposing an artificial limit on payouts can convey the wrong message to sales representatives. It implies that their efforts is only be valued up to a certain extent. On the other hand, offering unlimited earning potential makes it clear that efforts are highly valued, and that they will be fully rewarded for results.

4. Extra Spend May Be Low

Your reps are subject to many real-world constraints. Switching from a capped to an uncapped earning model will typically only affect a few top performers. Those reps are the ones who will leave if frustrated because their commissions were capped. Hiring new reps is expensive, so you may find that uncapped commissions are actually less expensive overall than capped ones.

Handling Uncapped Earning Potential

You probably capped commissions because you did not want to exceed a budget. For uncapped commissions to work effectively, you need an effective commission structure and tools.

  • You need to be able to understand and track commission spend
  • You need the ability to evaluate different commission structures / plans
  • You need to make sure the right reps are credited on the right deals (ex: splits for large deals)
  • You need forecasting tools to estimate what payouts might be under different scenarios
  • You need to set quotas which are ambitious but also attainable
  • You need to make sure earnings are aligned with business goals

Sales Cookie provides you with the ability to accomplish all of the following. Here are a few examples.

Using Revenue Analytics, you can forecast revenue and analyze churn. This helps you predict how much business you may close and what your commission spend may look like.

Sales Cookie offers advanced commission capabilities, such as weighted commission splits, the ability to run spend simulations, generate detailed quota attainment reports, manage changes to quotas, etc. In the example below, we’re running a simulation to see what our spend may be at the end of the month.

Sales Cookie makes it easy to clone plans and manage multiple plan versions. For example, you could run one plan version with capped earnings, and another plan version without caps, to understand what the difference would have been for different past periods.

Whether you choose capped or uncapped earnings, we support all scenarios and can help you automate every aspect of your commission program. Visit us online to learn more.