Subscription Businesses

Commission in Subscription Businesses

Subscription-based business models have revolutionized many industries, from software to media and consumer goods. The subscription economy is growing significantly, and commission models in these companies differ substantially from traditional sales models.

The unique aspect of subscription businesses is the focus on Customer Lifetime Value (CLV) rather than individual transactions. This affects how commission is structured and paid out.

Typical Commission Models

OTE for Subscription Sales

On-Target Earnings in subscription businesses varies by segment and customer types:

• Enterprise Account Executive: $125,000-200,000 annually
• Mid-Market AE: $95,000-140,000 annually
• SMB Account Executive: $70,000-100,000 annually
• Customer Success Manager: $72,000-110,000 annually
• SDR/BDR: $55,000-75,000 annually

Special Elements

Subscription businesses have several unique commission aspects:

• Churn impact: Many models reduce or clawback commission on early churn
• Renewal commission: Typically 25-50% of new sales commission for renewals
• Net Revenue Retention: Bonuses tied to NRR performance
• Customer Success commission: CSMs can earn commission on expansion and renewals

It is critical to understand clawback rules in subscription sales. Typically a 3-12 month period applies where commission can be recalled upon customer departure.

Accelerator Structures

Subscription companies often use aggressive accelerator models:

• 0-80% of quota: Base commission (e.g., 8%)
• 80-100% of quota: 1.25x multiplier
• 100-150% of quota: 1.5x multiplier
• Over 150%: 2x multiplier or higher

FAQ About Subscription Commission

How is commission calculated on annual vs. monthly subscriptions?

For annual subscriptions, you typically receive commission on the entire ACV immediately. For monthly subscriptions, you either receive commission on the first month or distributed over time.

Do salespeople earn commission on renewals?

It varies. In some companies, the customer transfers to Customer Success, who then receives renewal commission. In others, the original salesperson receives reduced commission.

What happens to commission on a downgrade?

With tiered commission models, a downgrade can affect your overall attainment and thus accelerator level for the quarter.