Start from what the role is worth to the business, then decide the total package before you split it. Base and commission move against each other, so setting one without the other is where plans go wrong. Work out the number the role has to earn someone, then design the split that gets them there.
Someone asks me what a BDM should be on and I can give a number off the top of my head. Then I ask what the seat has to do, and the number moves. What the role is worth depends on the area, the product margin, the length of the cycle and how much of the revenue the person creates rather than inherits. Two BDM seats in the same business can justify very different plans.
What follows is how I would work through the design, in order. There are no market rates on this page on purpose.
How should you split base and variable?
Decide the total first, then split it, and remember the two move against each other.
If the base goes up, the commission should come down. It sounds obvious written down and it still gets missed. When a company lifts the base to win a candidate and leaves the variable where it was, it has paid more for the same performance and set a number the next person will expect.
When a bonus is in play, I work within 20 to 30 per cent of base as a range. That is the range I use when I am helping design a plan, not a measured Australian average, and I would not present it as one. Where a role sits inside it depends on how much of the outcome the person controls. A pure new-business seat can carry more variable because the person is closer to the result. An account manager holding an inherited ledger has less claim to it, because you would be paying a large variable for revenue that was arriving anyway.
Two things matter more than the split itself. Be clear about exactly what has to happen for the bonus to be paid. If a bonus is withheld under an unclear rule, explain the decision directly.
What should you measure against?
Whatever the business actually needs, which is why this is the part you cannot copy from another company's plan.
Revenue is the simplest measure to administer. Paying on revenue with no margin condition invites discounting, and in building products where a rep has pricing latitude that is a real cost. Gross profit removes that problem and takes more work to run. A mix does both jobs: volume with a margin floor underneath it.
Use the commission builder to design the plan and the commission calculator to test it against your own numbers.
What matters more than the choice is that you write the protections in. There are a few things worth fixing in the plan from the start so the business is covered without anyone having to renegotiate later:
- A minimum gross profit percentage, below which commission does not accrue.
- A volume or revenue floor, so the plan pays out on delivered results.
- A written definition of new business against existing business, because that is the argument you will otherwise be having the first time a contested account lands.
Those protections are what stop you needing to change the plan mid-year, which is the outcome you actually want.
Should commission be capped?
Cap inherited revenue and leave commission uncapped where the rep creates it.
The question I would answer before anything else is what the business is getting in return for what it pays. Nobody sensible signs an open-ended commitment with no ceiling and no conditions attached to it.
Where the revenue is largely inherited, repeat and account-managed, a rep can earn very well without having created much of it, and a cap or a taper is reasonable. Where the person is genuinely creating the revenue, the case for a cap is much weaker, and I would leave it uncapped.
If you are running uncapped, put a few clear fallbacks in so you are covered: the margin floor, the new-versus-existing definition, and a written position on windfalls, house accounts and one-off project volumes. Decide all of that in advance and write it into the plan.
How do you pay someone through a long ramp?
Guarantee commission for the ramp period, paid against activity and KPIs the person controls.
This is the building products problem. A rep on a specification cycle is doing exactly the right work for months before anything can close. A plan that pays only on closed revenue pays nothing during that work. A seat on that cycle has to be paid through the ramp.
So guarantee it. Set the guarantee against things the person controls in that period: specifications lodged, accounts opened, projects tracked, meetings with the right people. Then step it down as the real numbers come through.
How do you pay a specification that someone else closes?
Pay the specification manager on the pipeline they build and the BDM on the close, then carry a small share of the closed value back to the specification manager.
The shape of the problem is specific to this industry. A specification manager gets the product written into a project, working the architects and designers months ahead. The order then lands with the builder, the installer or the contractor, and a BDM converts it. Both people are right that they earned it.
The workable split pays the specification manager on KPIs drawn from the specification pipeline: projects specified, meetings and touch points with the architects and designers who decide. The BDM is paid on the close. That holds up because the leading indicators are measurable now and the close can be a long way out.
The weakness is worth naming. A specification manager paid purely on activity never shares in the outcome they created, and that gap is visible to the person doing the work. A share of the closed value flowing back to the person who wrote the specification, even a modest one, closes that gap.
Two things make this workable whichever way you pay it. Support the contractor and installer end of the channel properly, because a specification that nobody converts is worth nothing to anyone. And write down what counts as a specified project, because that definition is what the whole thing hangs on.
When should commission be paid?
I work to paid invoice, 30 days.
Paying on invoice raised exposes the business to a debtor who never pays. Paying on project completion in a long-cycle product pushes a rep's earnings a long way out. Paid invoice at 30 days is where I land, and it is the trigger I recommend when a client asks me.
Whatever you choose, state the payment trigger in the plan document.
How do you change a plan without losing the rep?
Build the rules at the start, then explain any later change clearly and directly.
Nothing is perfect and every plan needs adjusting eventually. Changing a plan mid-year moves the goalposts on someone who has been working to them. Where I have seen a plan reopened mid-year, it was because something was left uncovered at the start: a margin floor, a definition, a treatment for a windfall account.
So cover those from day one, write the plan in language the rep can read without help, and once it is fixed, leave it alone. If circumstances genuinely change and you have to move something, tell the person directly, explain the reasoning, and do not let them work it out from a payslip.
What about paying a new hire more than the existing team?
It is a hard problem with no clean answer, and the exposure sits with the person already in the seat.
Compare the proposed new-hire package with the existing team's package before approving it. If an existing person is below the number and worth retaining, address that exposure directly.
The same applies to testing a number low. If a candidate tells me they are underpaid, I can tell them roughly where they sit against what I am seeing, and I will tell an employer the same thing. That is the extent of anyone's influence. The market is the market and it dictates the outcome. Where a client holds a number below it, that is the constraint the search has to work inside.
Where should you start?
Work through the design in this order.
- Work out what the role is worth to the business before looking at any market figure.
- Set the total, then split base and variable, and move them against each other.
- Choose the measure your business actually needs, and write the protections in.
- Decide the cap question on whether the revenue is created or inherited.
- Guarantee the ramp against activity.
- Fix the payment trigger and write it down.
- Leave the plan alone.
The candidate's side of the same package, and what they will be checking, is on the paired page. If you want a read on whether a package will attract the person you are describing, talk through the package with me.