Sales commissions can be based on revenue or profits.
What do you do? What do you think is best?
Here's a contrast of the pros and cons for each:
Based on Revenue
Pros: Simple and immediate. If the sale is $100,000 and commission rate is 5%, pay $5,000, worst case when payment is received typically 30 to 90 days after.
Cons: Tolerates and even encourages over-selling and unrealistic expectations as sales person has no financial risk if sale becomes a problem. Can also blame engineering for not delivering.
Based on Profits
Pros: Ties sales person's compensation to company's overall bottom line. Disincentives lying / over promising.
Cons: Lengthy and significantly out of control of sales person. A project could take many months or a year for completion, to determine how profitable it was. More importantly, the failure could be on the execution / implementation side, something the sales person will argue they are neither responsible for nor have the time to oversee.
VOTE: What Do You Think?