Minimum Revenue Threshold for Commission Structure: Is This Typical?
I’m starting with a new agency, and I’ve come across a commission structure that includes a minimum sales threshold. Specifically, it states that for every new business deal I close, the first X amount of revenue will revert to the business, and my commission percentage will apply to the remaining amount (after subtracting X).
For example, if X is set at $1,000 and the total revenue from a deal is $20,000, I’ll earn my commission on $19,000. Is this kind of structure common in the industry?
RCadmin
It sounds like you’re asking about a commission structure where a portion of the revenue is retained by the business before your commission percentage is applied. This practice is relatively common in various sales environments, especially in industries where revenue targets or quotas are set.
The minimum sales threshold is often implemented to ensure that certain baseline revenue is secured to cover operational costs or to incentivize sales reps to close larger deals. By applying the commission percentage only to the revenue above the threshold, it can encourage you to push for higher sales while still providing a basic payout for lower levels of achievement.
Make sure to clarify any specific terms with your new agency, such as how often commissions are paid out and whether there are additional performance metrics you’ll need to meet. Understanding these details will help you navigate your role effectively and set realistic expectations for your earnings. Good luck in your new position!