Sales Commission Programs

Written by Genevieve Hawkins
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As one of the most variable types of compensations available, sales commission programs can be confusing. Salespeople are one of the most important aspects of any business, and they are usually paid for performance. Some programs offer a base salary in addition to compensation for sales, and they vary on a wide variety of other considerations, including the size of the business and the type of product being sold.

Types of Sales Commissions

There are several types of commission programs. They vary based on several considerations, including the cost for the product or service, the overhead, and the total profit. Some will award bonuses for being the leader of a team of employees who sell under you, while others only count profit margins. There are several classifications.

Salespeople are usually compensated based on incentive (revenue or profit margins of sales), the frequency of the calculations, and the types of transactions (many are compensated higher for actual sales as opposed to deals that do not close). The level of the salesperson is a consideration, as well as any upper limit or caps on performance. Certain companies operate in a pyramid type network marketing structure, while others do not.

Salespeople may be compensated between one and 70 percent of total revenue of a given business. These calculations will vary depending on the company's overhead, but the most common commissions are between five and 20 percent. Like many other business opportunities, salespeople are attracted by the chance to make far more than the national average. If they are good at what they do, this is very possible without any traditional skill set.


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