Calculating Commissionable Value: Tales from the Sales Team

by | Mar 3, 2021

In our Tales from the Sales Team series, we’ll cover actual concerns and questions from real salespeople about their paycheck and sales commission.

“What is my commissionable value”
– Anna, a sales job candidate

Our hero Annie is considering accepting a new position as a sales representative for a national sales organization but she has questions about her compensation. As she seeks to understand the commission plan she’d be eligible for, she wants to know how much she has the potential to earn. To get that insight, she needs to know how to calculate that commissionable value.

Access to a clear map of commissionable value will help attract and retain sales talent.

Terri, the interviewer tasked with handling this question, broke down commission rates for Annie. Per Terri, products sold earned sales reps a 10 percent commission while services raked in 15 percent. This of course would be based on the gross price of the product or service, minus any sales tax that might be included.

Why Communicate Commissionable Value?

In order to attract the best talent for a job, it’s important to provide clear and understandable commission models. By this, we mean that an organization should give employees — new, existing, and potential — access to all the information they need to determine their potential earnings.

This is an important tool for recruiting but also for retaining talent. If candidates and sales reps know how much they’re worth, it can help make them loyal members of the team. Of course, that means that potential earnings should be competitive in the market.

Elements Needed to Calculate Commissionable Value:

  • Gross Value of Products or Services: Especially if a rep will responsible for selling a wide range of products and services, they’ll need to know their worth. Generally, commissions draw from that gross value rather than the overall sales cost. What a customer pays for the product could include additional costs and taxes not taken into account for commissions. If a sales rep has a clear understanding of the actual price of the product they sell, they’ll be more confident about the commissions they’ll earn.
  • Commission Rates for Each Type of Sale: In addition to the gross value of each of those sales, a rep needs to have a solid grasp on the rate they’ll earn for each. In many cases, organizations offer higher rates for products and services it wants to sell more of. If the people responsible for selling don’t understand that, it defeats the purpose of the higher rate. So detail out each commission rate a sales rep has the potential to earn on specific products and when those rates come into play.
  • Other Variables: Any type of commission plan involves a certain number of variables that will impact pay. When sales reps understand those variables thoroughly, they face less uncertainty about their earnings. And uncertainty about earnings can not only scare away top talent but cause turnover among staff.
  • Sales Taxes That May Apply: If a sales rep operates in multiple states or territories, they’ll be subject to differing sales taxes. It would be helpful to list out the taxes that a sales rep may encounter throughout their tenure. It will also help them communicate pricing to customers based on where they are located. This could simply be a resource provided to each person on your team or each person in a particular territory.
  • Communicate Progress: In addition to carving out the details of the commission plan, it helps to allow your team to view their progress on their earnings regularly. Core Commissions offers a sales web portal that allows you to do just that.

We can assist you in automating any commission plan with any commissionable value attached. Contact us for more info or let’s schedule a free demo. We can give you a firsthand look at how Core can help you simplify commissions.

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