This glossary explains the key concepts behind sales compensation plans and performance metrics. Use it to design fair, motivating compensation structures and to interpret the numbers behind your sales results.
---
Accelerators: Higher commission rates that kick in once a salesperson exceeds a certain percentage of quota.
ACV (Annual Contract Value): The value of a customer contract normalized over one year.
ARR (Annual Recurring Revenue): The recurring revenue expected from subscriptions or contracts over a year.
Average Deal Size: The average revenue per closed deal over a defined period.
Base Salary: The fixed portion of a salesperson’s compensation, paid regardless of performance.
Bonus: A one-time or periodic payment awarded for achieving specific goals or milestones beyond standard commission.
Churn Rate: The percentage of customers or recurring revenue lost over a period of time.
CLTV (Customer Lifetime Value): The estimated total revenue a customer will generate over the duration of their relationship with the company.
Commission: A performance-based payment, typically a percentage of revenue, margin, or other sales results.
Commission Draw: An advance against future commissions, which may be recoverable (paid back through earnings) or non-recoverable.
Commission Rate: The percentage or amount used to calculate commission payout on closed business.
Conversion Rate: The percentage of leads, meetings, or opportunities that advance to the next stage or become customers.
Decelerators: Lower commission rates applied when deals are discounted too heavily or when performance conditions are not met.
Earnings Cap: A maximum limit on the amount of commission or variable pay a salesperson can earn.
Forecast Accuracy: How closely actual sales results match previously forecasted results over a given period.
Gross Margin: Revenue minus the cost of goods sold, expressed as an amount or percentage.
MRR (Monthly Recurring Revenue): The recurring revenue expected from subscriptions or contracts over a month.
Multi-Year Deal Uplift: The additional value earned by closing contracts with longer terms, often incentivized in compensation plans.
On-Target Earnings (OTE): The total expected annual compensation (base plus variable) if a salesperson meets their quota.
Pay Mix: The ratio of base salary to variable compensation in a salesperson’s total compensation plan.
Pipeline Coverage: The ratio of total pipeline value to quota for a given period (e.g., 3x or 4x coverage).
Profit-Based Commission: A commission structure tied to profit or margin instead of top-line revenue.
Quota: The target level of sales or revenue a salesperson is expected to achieve in a given time period.
Quota Attainment: The percentage of quota a salesperson actually achieves over a defined period.
Quota Relief: A reduction in quota granted under certain conditions, such as territory changes or product issues.
Ramp Quota: A reduced quota assigned to new hires during their initial ramp-up period to account for training and onboarding time.
Revenue per Rep: Total revenue generated divided by the number of sales reps over a given period.
Sales Capacity: The total amount of selling output a team can reasonably produce, given headcount and productivity.
Sales Contest: A time-bound competition that offers rewards for achieving specific sales activities or outcomes.
Sales Cycle Length: The average amount of time it takes to move an opportunity from initial contact to closed-won.
Sales Productivity: A measure of how efficiently a salesperson or team converts time and resources into revenue.
SPIFF: A short-term incentive or bonus used to motivate specific behaviors, such as selling a new product or hitting a contest goal.
Stack Ranking: A ranking of reps from highest to lowest performance, sometimes used for contests or tiered rewards.
Territory: The defined set of accounts, industries, or geographic region for which a salesperson is responsible.
Uncapped Commission: A commission structure with no upper limit on how much a salesperson can earn based on performance.
Upsell: Selling additional or higher-tier products or services to an existing customer.
Variable Compensation: The portion of pay that depends on performance, such as commissions, bonuses, or incentives.
Win Rate: The percentage of qualified opportunities that result in closed-won deals.
Sales Hiring & Recruiting Glossary – https://salesfolks.com/post/sales-hiring-glossary
Sales Process & Performance Glossary – https://salesfolks.com/post/sales-process-performance-glossary
Sales Tech & Tools Glossary – https://salesfolks.com/post/sales-tech-tools-glossary
Glossary of Sales Roles – https://salesfolks.com/post/glossary-of-sales-roles-job-descriptions