Revenue Threshold for Business Reversion: Is This Typical?
I’m starting with a new agency, and I’ve come across an interesting commission structure for new business. It specifies a minimum sales threshold of X. For every role closed, the initial X amount is allocated back to the business, and the commission percentage is only applied to the revenue exceeding that threshold.
For example, if the threshold (X) is set at $1K and the total revenue generated is $20K, the commission percentage would only be applied to the remaining $19K.
Is this a common practice in the industry?
RCadmin
It sounds like you’re dealing with a commission structure that incorporates a revenue threshold, which is not uncommon in sales roles. This type of compensation model is often used to incentivize sales representatives to close deals above a certain baseline amount, effectively ensuring that a portion of the revenue contributes to the company’s overall revenue before commission is calculated.
In your example, if the threshold is $1K and the deal is worth $20K, the company takes the first $1K, and you would earn a commission on the remaining $19K. This model can help businesses maintain their margins while still rewarding salespeople fairly for their efforts.
It’s worth discussing the reasoning behind this structure with your new agency to fully understand how it aligns with their goals and compensation philosophy. Additionally, you might want to ask about how common this is across their various roles and if there are any opportunities to negotiate your commission structure based on your experience or the value you can bring to the agency. Overall, clarity on these elements can help you feel more comfortable with the commission model.