Sales hit target. Gross margin fell four points.

When a commission plan pays on revenue, the seller and the business are not arguing about the same number, and the gap is wider than most owners assume.

By Steve 5 min read
Abstract bridge artwork for Sales hit target. Gross margin fell four points.

A sales team that hits its number while gross margin slides is not misbehaving. It is doing exactly what it has been paid to do. The question worth sitting with is not whether the reps discounted too freely, but why the arithmetic of a discount looks so different from where they sit than from where the owner sits. The commission gradient Take an illustrative deal at a list price of £100, with £60 of direct cost. Gross profit is £40. A rep on 5% of revenue earns £5. Now discount…

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