Written by: Shaun Ricci | Ideal Candidate
OTE, base, spiff—While these terms seem straightforward to a seasoned salesperson, they can be pretty cryptic (I know) to someone new to the industry. After my years in software sales, I will attempt to answer the question in plain English: How do salespeople get paid?
Often salespeople new to the industry are afraid to admit they don’t understand how sales salaries work. Unfortunately, in my experience, this is most common during an interview process, when understanding the pay structure matters the most. If you are wondering how typical salesperson compensation works, this post should help give you a basic understanding of how paychecks are calculated.
Basic Sales Salary Terms
Before we talk about how you might get paid, let’s cover a few basic terms that you should know before you start interviewing:
The Most Common Pay Structures for Salespeople
Where you’ll see it: real estate, selling knives door to door (think Cutco)
100% commission means you do not make a penny unless you sell something. For the most part this model is typically not regarded as advantageous for experienced salespeople. It could take months to make your first sale and you could go through slow periods, which may not always be your fault. 100% commission can be highly financially rewarding in some situations but it comes with a lot of risk.
Where you’ll see it: almost everywhere (think inside-sales reps, BDRs )
This is a very common model where you make a base salary no matter what you sell and then receive commission on top of that base salary. Having a base salary shares some of the risk with the employer but still allows a salesperson to make a good chunk of their salary based on their performance. This is one of my personal favourite models because as an employer, you get quality salespeople and as an employee, you still have a lot of control over your earning potential.
Where you’ll see it: sales engineers, account management positions
Organizations can offer a base salary plus a bonus based on a salesperson’s performance. This model works well when a salesperson is responsible for more “account management” vs. constantly winning new business. Typically these bonuses are not paid out based on a specific deal you close, but rather a bonus paid quarterly or annually based on an overall goal you are set to hit.
Hope these explanations help you on your job hunt!
Remember—understanding your compensation will help ensure three things:
Good luck out there and let me know if there’s another definition you’re looking for!