MSP Sales Compensation: Rules of Thumb for Building Simple, Motivating Plans

MSP Sales Compensation: Rules of Thumb for Building Simple, Motivating Plans

Co-branded with Bowman Williams & Feel-Good MSP

The Four Levers of Sales Pay

Every sales compensation plan, no matter how complicated it looks, comes down to four levers:

1. Base Salary – the guaranteed paycheck.
2. Commission – paid for results (meetings booked, deals closed).
3. Quotas & On-Target Earnings (OTE) – the relationship between base, commission, and realistic sales goals.
4. Multipliers – higher rewards for performance beyond quota.

Keep the plan simple, competitive, and motivating. The easier it is to calculate on the back of a napkin, the better.

Setting Base Salary

• Competitive, but motivating: Pay a living wage, but keep it just under the point where a rep feels “comfortable” without selling.
• Avoid 100% commission: It’s exploitative, won’t attract good talent, and churn is guaranteed.
• Think long-term: A solid base salary attracts and retains sales reps who want to grow with your MSP.

Commission: Two Reasons to Pay

1. For Openers (SDRs):
   • Paid when a meeting is set and held, not just scheduled.
   • Bonus: a small cut (10–20% of one month’s MRR) when that deal closes, so quality matters.
   • Example: $200–$500 per meeting + $250 per closed deal.
2. For Closers (Account Executives):
   • Commission based on new MRR added.
   • Rule of thumb: ~1 month’s MRR per deal closed.
   • Example: A $3,000/month deal earns a $3,000 commission.

On-Target Earnings (OTE)

Start with the annual MRR you realistically expect a closer to generate. Example:

• Goal: $30,000 new MRR in a year.
• At 1 month’s MRR per close → $30,000 in commissions.
• Add base salary of $75,000 → OTE = $105,000.
• Adjust base/commission ratio to fit your economics (50/50 or 60/40 is typical).

Multipliers: Incentivize Growth

• Once quota is hit, increase payouts (e.g., 1.25x or 1.5x MRR per deal).
• This prevents “sandbagging” and rewards overperformance.
• Example: After quota, that $3,000/month deal might pay $4,500 instead of $3,000.

Important Principles for MSP Sales Compensation

1. Always Base Commission on Total Revenue, Not Gross Margin
   Sales reps drive revenue, not your margin. To keep it simple and fair, tie their commissions directly to the total revenue they bring in. You can protect profitability with guardrails (e.g., minimum price per user/device), not by overcomplicating comp.
2. Keep Pay Consistent and Predictable
   Never move the goalposts mid-year. Changing quotas or commission structures on the fly kills trust. Set transparent plans, stick to them, and pay out commissions fairly and on time.
3. Align Incentives with Business Goals
   The best comp plans encourage the exact behaviors you want more of. If you want more recurring revenue, pay on MRR. If you want larger deal sizes, reward that. Align pay with the outcomes that matter most to your MSP.

Pro Tip

Whatever you monetize, you incentivize.
If you want recurring revenue, commission heavily on MRR. If you want one-time revenue, pay on hardware margin and onboarding fees. Your comp plan is your loudest signal to your team.

Closing Thought

The best comp plan isn’t the flashiest — it’s the simplest one that aligns with your goals, motivates your reps, and is easy to calculate on the back of a napkin.

About Feel-Good MSP

Feel-Good MSP is the sales execution platform designed to help MSPs book new MRR every month. We combine Strategy, Training, and Accountability to help you scale your sales and marketing departments with confidence.

👉 Learn more at feelgoodmsp.com/UTM