Software Sales Commission Structure

chorba

For the past year my company has been developing an enterprise software product for Arts and Entertainment Industry. We are at the point where I would like to bring on a sales rep (or two) to focus on software sales.My question is: what are typical sales commission structures in the software industry? And what are the common percentages that commissions are paid on?
-Thanks in advance for your help!

pepperlegal

I`ve spent many years as an in-house attorney for large software companies, and now represent many of them as part of my private practice.  I can tell you that the commission structures vary widely (anywhere between 3% to 250%).Some of the criteria that are used to formulate the structure include:type of account (major or smaller customer)whether support services will also be sold, and if so, whether they are charged on a recurring, annual basisthe date of the sale during the company`s fiscal year (during certain slower fiscal quarters, there are "kickers" for selling during those timesthe amount of discount taken from the "list" pricehow much will be fixed salary versus commissionquota size

chorba

Thanks pepperlegal! Those are great criteria to consider.

GeminiMediaGroup

To PL`s advice, I`d also add that oftentimes it`s best to offer a tiered commission structure. We typically offer a realtively low base salary, then offer a different percentage for each tier.
For example, a $25 k base, then 5% of the first dollar after $5k/mo in sales. The next tier may be10% of the first dollar over $30k/mo in sales, and so on. It`s a great incentive to reach those high numbers!