A sales commission structure for B2B that holds up

The arguments that follow a commission plan are almost never about the percentage. They are about dates and definitions that nobody wrote down while everyone was still optimistic.

A commission plan is a contract with your own sales team, and most are written the way a napkin sketch gets written: a percentage, a target, and an assumption that the rest is obvious. The rest is not obvious. In our experience the arguments that follow a commission plan are almost never about the percentage. They are about dates, definitions and edge cases nobody wrote down while everyone was still optimistic.

What follows is the set of decisions a B2B commission structure has to make out loud. None of them are exotic. All of them are the ones we routinely find undefined, and each has a specific failure attached.

What counts as a sale is the decision everything rests on

Before a rate means anything, the plan has to name the event that triggers it. Signature, first invoice, first payment and full payment are four different dates, and in B2B they can sit months apart. A deal signed in March on ninety day terms, invoiced in April, paid in July, has four defensible commission dates and the plan has to pick one.

Picking signature is the most motivating and the most dangerous, because it pays out on revenue the company has not collected. Picking full payment is the safest and the least motivating, because a seller who closed well in March waits until July to see it. Most workable plans land on first payment, which proves the customer is real without making the seller carry the whole collection cycle.

The second half of this definition is what happens when the deal unwinds. If a customer cancels in month two of a twelve month contract, is commission clawed back, and over what window? A plan without a clawback clause does not avoid the question, it just answers it badly under pressure later.

Earned, accrued and paid are three different things

These get used interchangeably and they are not the same. Commission is earned when the trigger event happens. It is accrued when the business recognises it as a liability. It is paid when it reaches the seller. A plan that only specifies the last one leaves the first two to be argued about, usually at the worst moment, which is when somebody resigns with deals in flight.

The resignation case deserves its own sentence in the plan. A seller who leaves in June, having closed a deal in May that pays in August, either is or is not owed that commission. Both answers are defensible. Neither is defensible if it is decided after the fact.

The accounting treatment is not an afterthought

This is the part that surprises founders, and it is worth knowing before the plan is signed rather than after the auditor asks. Under IFRS 15, a sales commission is generally an incremental cost of obtaining a contract, which the standard defines as a cost the entity "would not have incurred if the contract had not been obtained". That is not an accounting curiosity. It means the commission is not automatically an expense in the month you pay it.

The default treatment is to capitalise that cost and amortise it over the period the contract is expected to run. There is a practical expedient: the cost may be expensed when incurred if the amortisation period of the asset that would otherwise be recognised is one year or less. The joint IASB and FASB transition group set this out in its staff paper on incremental costs of obtaining a contract, which is worth twenty minutes if you sell multi year agreements.

The practical consequence is a design constraint. If you sell one year contracts, the expedient probably applies and commission behaves the way everyone assumes it does. If you sell three year contracts, or one year contracts that renew predictably, the treatment can differ and the plan interacts with the accounts in ways a napkin sketch will not survive. This is a conversation to have with whoever signs off your financials, not a conclusion to take from us.

Rate, base and the argument about caps

The rate is the least interesting number in the plan, which is why it gets all the attention. What matters more is the base it applies to. Commission on gross revenue rewards discounting, because the seller keeps a percentage of a smaller number and still gets paid. Commission on gross margin removes that incentive but requires you to know margin per deal, which many small firms genuinely do not.

If you cannot calculate margin per deal reliably, do not pretend you can. Use revenue and control discounting with an approval threshold instead. A plan built on a number the business cannot produce is worse than a simpler plan built on a number it can.

Caps are the other recurring fight. An uncapped plan is a stronger incentive and occasionally produces a payout that makes the founder regret the whole scheme. A capped plan removes that risk and tells your best seller exactly where to stop trying. Our own position is that caps on a small team are usually a mistake, because the outcome they protect against is a good problem, but it is a real trade rather than an obvious one.

What a small team should write down

Decision	Common default	Failure if left undefined
Trigger event	First payment received	Disputes over deals signed but unpaid
Clawback window	Cancellation within 90 days	Commission paid on churned revenue
Leaver treatment	Paid if earned before notice	Argument at the worst possible moment
Base	Revenue, with discount approval	Sellers discount to close faster
Split deals	Named split agreed at qualification	Two people claim the same deal

Five rows is not a sophisticated plan. It is the minimum that stops the predictable arguments, and most teams we meet have written down one or two of them.

Where this connects to the rest of the system

A commission structure is downstream of pricing. If your prices are set by negotiation rather than by method, the commission plan inherits that instability, which is why we would settle how to price a B2B service without guessing at the number before designing incentives on top of it. The same applies to contract shape: retainers and projects create different cash timing, and we covered that trade in B2B retainer versus project pricing.

It is also downstream of whether you should be hiring at all. A plan is a tool for a salesperson you have decided to employ, and that decision has its own tests, which we set out in when to hire your first salesperson. Once someone is in the seat, the numbers you review with them matter more than the plan itself, and we narrowed those to six in a B2B sales KPI dashboard.

One practical note on tooling. Commission calculated by hand in a spreadsheet at month end is where most disputes actually originate, because the seller cannot see the working until after it is done. If you get to the point where that is a recurring cost, the engineering side of the problem is well understood and our colleagues at Rivl wrote it up in a real time dashboard for a sales team, which is mostly an argument about what real time needs to mean before it is worth paying for.

Honest limits

We have given you no benchmark rates here, and that is deliberate. Published commission percentages vary enormously by sector, deal size, contract length and whether the figure quoted includes base salary, and almost none of the sources state which. A percentage borrowed from a software company selling annual licences will not transfer to a services firm selling projects, and using it because it was the number you could find is how plans end up needing renegotiation in year one.

The second limit is that everything above is design, not law. Commission is part of the employment relationship and the rules that govern it differ by jurisdiction, including in the Gulf markets many of our readers operate in. Treat the structure as the commercial decision and take the enforceability question to a local employment lawyer, because that is the part where being approximately right is not good enough.