Sales Commissions - Based On Revenue Or Profits?

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?

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**** - ** **** ******** ********* *********** ** *************?

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** ******* ***** ***** *** ***** ****** ** ****, **** it ******* ** **-*** **** *********** ** ******* - ****** lost?

** ************* ****** ** ********* ********** *****, *** ***** *****?

******* -** ****** *** ****** ****** ** ******* ***** ***** However, *** **** ** ******** **** **** ***** *** **** multiple ****** **** ** **** *** *** * ****** ***. This ****** ********** **** ** *** ******* **** **** ** see. *** *** ****, **** ********* **** ** ** *********** plans ***** ********* *** ********** % ** ****** ****** **** the ****** **** ** ***. * ***'* **** ** ****'* still **** *****

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*** ****** ******* **** ****. * **** ** **** ****** for ** **********. ********** *** ********.

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**** ** *** ****: ******* * **** ** * *** that ** */* ** **** ****** ******'* ****** ***** *** an ****, **** ******* **** ** ** * ******* **** on * *********** ***** ** *** * **** ****.

** *** ******** *****, * ******* ***** ******* ****** ** paid ** ********** *******, *** **** *** ************ ********** **** should **** *** ******* ** **** * ******** ** **** before ********* **. **** *** *** ** "******," ** *** be * ********* *****, ********* ** **** ********* *** *******, but ****** *** ***** ****** ***** ***** *** ** *** time ** ******, *** ***** ****** ** **********. *** ** should ***** ** *** *************, ** ****** *** ***** ****** and ***** ******** (** **** *****), *** *** ** ** Director ** ** (** ******* ********) ****** ****** *** **** off ** *** *************.

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***** ********** ****** ** ***** ** ******** ******* ***** ** reasonable **********, *** ****** *******. ** *** **** * ******* manager, ** *** *******, * "******** *** ****" **** *** unexpected ******, **** ** ***** ***********, *** *********** *******'* ** punished ** *** ******* ** ****** *******.

******* ****: *'** **** * ***********, ***** ********, *** ******* manager. **** ** ***** ********** ****** ** ******** **** ******* category *****'* ** ***** ***.

****, ***** ********.

** ********* *** ******* ** **** *******:

"* *** **** ** "******** ******." *** *** **** *********** * *** ******** * ******* *******, ***** ******** *** parts *** ******, *** ***** ******* ****, *** ** **. I ***** ** ***** ** ******* ********* *** ***** ****** after ****, *** *** ****** *** ***** *** ******, ******* up ********, *** ***'** "********" ** **** ** ** **** point *** ** **** ***** ******. ***** ** **** *******, the ******* ******* ***** *** ****** **** **** ***** **** the ******* ***** ***** ** *********."

**** ************* *** ** *******, *** *********** *** ** ** some *** ** ********* *** ********** ********. ******* **** *** a % ** ** ** ***** ** * ******* ***** where *** % ** ******* **** ** ********* ** *** GM.

** *******, * ********* **** ************* **** **** **** ****** their ***** ****** ** ****** - **** ** ****** *** set *** ******* *** *********** ** ********* *** ***** *******.

**** ***********, ** ******* ** ***** ***** **** (* - 3 ****) *****. * ****** ***** * ***** ************ ******* by ************* ***** ***** **** ***** - *** **** *******, recurring *******, ***** ******, ***? **'** *** *** ************ **** back ** *** ******* *****.

**********, **** ** ****** *** ***'* **** ****** *** ** pay ** * ********* **** *** ** *** **** *** the "***** ****** ****'* ** ******** *** **". ***'** **** that ***** ****** (***** ***** ** **), *** ***'** **** lose *** ***** ******** ***** ****** - *** ****** *********** is *** ** *** ***** *********** ** **** ** ********** talent.

...**'* **** ******* ** ***** *** ********* *** ** ***** times *** ********** **** *** *** **** ***** **** ****.

** ***** ** **** *********** ** ********* *** * **/** split ***** *** **** ***** ** **. **** **** ** the ********* ** ******* *** **** ** ******.