Sets a minimum threshold of sales before unlocking commissions.
Commission with Accelerators & Cliff
Adding a cliff component, or a minimum sales threshold before a rep is eligible to receive commissions, can lead to sandbagging and unhappy reps. We don’t recommend it, as cliffs are more commonly used in leadership structures. However, a cliff sets a clear bar of acceptable performance.
When to use this plan?
Why use a Commission with Accelerators & Cliff plan?
Protects business from paying reps who aren’t performing up to standard.
Customize the Commission with Accelerators & Cliff Plan Template
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Forecast earnings & plan performance
See potential earnings based on your inputs and goal attainment progress.
Check the health of your Quota:OTE ratio
Use the calculator to quickly measure how realistic, attainable, and healthy your OTE to quota ratio is.
Streamline plan management
Assign the plan to your team and automate sales commission calculations. Be confident your team is being paid fairly and accurately.
How to adjust this compensation plan template
To customize this plan, you will input these 7 variables.
On-Target Earnings (OTE)
OTE combines base salary with variable pay and represents the total amount of money your reps can expect to earn if they hit 100% of quota.
Pay Mix
Refers to the percentage of a salesperson’s total compensation, made up of base salary, commission, and other incentives. The most common pay mix in SaaS is 50/50.
Company Revenue
Revenue is the total amount of income that a company generates from its primary operations. In SaaS, annual recurring revenue is one of the most important metrics.
Quota:OTE Ratio
This ratio quantifies how much larger a quota is to a sales rep’s OTE. The most common multiplier in SaaS is a quota 5x that of the OTE, but this will vary based on size and stage of the company.
Annualized Quota
An annualized quota is a sales goal that is set for a year
Average Contract Value
Often abbreviated to ACV, this number represents the average deal size that your company sells.
Quota Period
Your quota period sets the frequency at which your team’s quota resets. In SaaS, the most common quota period is quarterly. However, this number will vary based on your sales cycle.
Frequently Asked Questions
What is a cliff in sales?
In sales compensation, a cliff (also sometimes called a commission threshold or commission floor) is a rule that prohibits the rep from earning any commissions until achieving a set percentage of their total quota. For instance, in this plan, the cliff dissolves once the rep hits 60 percent of their quota. Upon doing so, the rep then earns their base commission rate on all deals sold during their quota period.
Should I include a commission cliff?
Probably not! There are two reasons why we discourage commission thresholds like this. First, it can be incredibly demotivating for a salesperson to sell all quarter only to miss their floor and not get paid anything on those deals. Secondly, if a sales rep knows they aren’t going to hit the minimum quota attainment to be paid, they might sandbag deals until the following month/quarter. This is dangerous behavior because you want to close deals as quickly as possible!
When does it make sense to include a commission cliff?
There are, of course, situations where a cliff makes sense. If your reps are more “order takers” and less value sellers, it might make sense to include a cliff in order to ensure that reps are doing the bare minimum. Cliffs are also fairly common in account management/customer success plans that use retention as their compensation mechanic.
What can I do instead of a cliff?
Instead of a cliff, you might want to use a decelerator. While technically a cliff is a decelerator – one that reduces the commission rate to 0% – here’s a plan that might work better for you: Account Executive: Commission with Accelerators & Decelerators plan.
What should my accelerator multiplier be?
This plan features a 1.5x multiplier rate. That means that the commission rate above quota is 1.5 times the base rate below quota. Set your multiplier based on how much you want to incentivize your reps overachievement. An overly generous multiplier (ex. 3x) can create lumpiness in attainment. For example, a rep may hit 200% quota one quarter, then hit 50% of their goal the next quarter. For more consistency across quota periods, consider a lower multiplier, such as 1.25x the base rate.
How many accelerator tiers should I have?
This plan features 3 tiers: a 0% rate until 60 percent of quota is achieved, the base rate for deals that fall within 60% to 100% of quota, and the accelerated rate for all deals over 100% quota. Most plans that have accelerators feature 2 to 4 tiers. Any more than 4 tiers can become difficult for reps to remember which detracts from the purpose of the accelerator.
What is an accelerator in sales?
An accelerator rewards reps with a higher commission rate once they’ve passed a percentage toward quota attainment, deal size, or total amount of sales in a month or quarter. We also refer to accelerators as multiple rate commissions.
Is this plan too complex?
This commission plan is definitely more complex than the Single Rate Commission plan, as well as the Commissions with Accelerators. It’s also one we recommend avoiding as cliffs act more of a punishment than a motivator. If you are going to include a cliff in your commission plan, make sure to give your reps full visibility into their earnings, forecasted earnings, attainment, and projected attainment. You can use QuotaPath’s sales commission software to automate commissions calculations and provide that real-time transparency and forecasting toward attainment for your team.
Explore similar compensation plans
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Multiple Rate Bonus (Revenue)
Good for high seasonality businesses.
Capped Commission
Please don’t cap commissions. But if you have to, use this plan to derisk the financial costs of variable pay.
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