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People who work in outside sales go out to meet customers, build friendships, and help make their company grow. They’re the ones who bring in money by talking to people face-to-face and closing deals.
To keep these hardworking people happy, it’s not enough to provide them with a good salary. They need a smart pay plan that says, “The better you do, the more you earn.” This keeps them excited, helps them do their best every day, and ensures everyone’s goals align with the company’s goals.
Paying sales teams the right way isn’t just about money; it’s about helping them feel valued, stay motivated, and keep doing great work for a long time.
What Is Outside Sales Compensation?
Outside sales compensation refers to how companies pay people who go out and meet customers in person, rather than those who work from offices. These salespeople travel, manage areas, and usually take longer to close deals.
Their pay often includes a fixed salary plus extra rewards for doing well, like bonuses or commissions. Some even get a car or travel allowance.
The goal is simple: to thank them for working hard, keep them happy, and help them stay with the company.
Understanding Outside Sales Commission Structures
Before deciding how to pay salespeople, it’s important to know what affects their commission (extra pay for making sales):
- Industry type: Different industries sell different things, so the time and effort needed to make a sale can change how much commission they get.
- Deal size and complexity: Bigger or more complicated deals usually mean more money for the salesperson because they take more time and skill.
- Territory potential: Bigger or more complex deals typically mean more money for the salesperson because they take more time and skill.
- Company objectives: If the company wants more new customers, more upgrades, or growth in a new market, that changes how commissions are set.
Common Outside Sales Compensation Models
1. Salary + Commission
A fixed base salary plus performance-based commissions.
- Pros: Provides stability while rewarding sales success, making it easier to attract talent and maintain morale during slow periods.
- Cons: Higher cost for employers if not carefully managed, and may reduce urgency if the base salary feels too comfortable.
2. Commission-Only
Compensation is entirely based on sales performance with no base salary.
- Pros: Lower fixed costs for the company and maximum motivation for high-performing reps who thrive on earning potential.
- Cons: High turnover risk, difficulty attracting new talent, and potential for burnout or unethical sales tactics under financial pressure.
3. Tiered Commission
Commission rates increase as reps hit higher sales thresholds or quotas.
- Pros: Encourages reps to exceed targets and rewards top performers disproportionately, driving competitive excellence.
- Cons: Can create frustration if tiers feel unattainable or if territory imbalances make goals harder for some reps than others.
4. Territory-Based Pay
Compensation is tied to the performance and potential of a specific geographic or account-based territory.
- Pros: Aligns pay with controllable factors and encourages deep territory development and relationship building.
- Cons: It may feel unfair if territories have unequal opportunities and can disincentivize collaboration across regions.
5. Performance Bonuses
Periodic bonuses are awarded for hitting specific milestones, such as quarterly targets or strategic account wins.
- Pros: Offers flexibility to reward short-term wins and strategic priorities beyond standard commission structures.
- Cons: Can become complex to administer and may feel unpredictable if bonus criteria aren't clearly defined upfront.
Designing an Effective Outside Sales Compensation Plan
- Align pay with company goals: Make sure what salespeople earn fits the company’s big goals, like getting new customers, growing sales, or keeping old ones happy.
- Balance base and variable pay: Give a basic salary for stability and add rewards for great work to keep everyone excited and motivated.
- Set clear quotas and territories: Tell each salesperson what targets to hit and where they should focus, so they know exactly how to succeed.
- Maintain transparency: Explain how pay is decided, when it’s given, and what kind of work earns rewards, and build trust.
- Review regularly: Review your pay plan every year to ensure that it still works well as the market and business change.
Benefits and Drawbacks of Outside Sales Compensation Models
Benefits:
- Drives high performance: Variable pay motivates reps to close more deals and consistently exceed targets, directly impacting revenue growth.
- Attracts competitive talent: People who love challenges and big goals are drawn to jobs where they can earn more for good performance.
- Aligns individual and company success: People who love challenges and big goals are drawn to jobs where they can earn more for good performance.
Drawbacks:
- Can be costly to administer: People who love challenges and big goals are drawn to jobs where they can earn more for good performance.
- Risk of turnover: If the pay plan feels unfair or confusing, good salespeople might quit and join other companies.
- Potential for conflict: If people argue about sales areas or goals, it can create problems unless handled clearly and fairly.
Challenges in Managing Outside Sales Compensation
- Accurate tracking: Monitoring deal progress, territory performance, and commission calculations across a dispersed team requires reliable tools and processes.
- Territory disputes: Representatives may clash over account ownership or perceive an unfair distribution of territories, which can lead to dissatisfaction and disengagement.
- Retention risks: High performers often have multiple offers, so any perceived unfairness in compensation can quickly lead to turnover.
- Legal compliance: Commission structures must comply with labor laws, overtime rules, and contract terms, which vary by region and require careful attention.
Outside Sales vs. Inside Sales Compensation
Inside Sales:
People in sales usually work from an office or at home. They make many calls and handle smaller, quicker deals.
They receive a smaller salary with small bonuses for every call or deal closed. The goal is to work fast and steadily instead of building deep relationships.
Outside Sales:
People in outside sales travel to meet clients face-to-face. They handle bigger deals and build long-term relationships.
They usually earn a higher salary plus bigger bonuses because their sales take longer and require more effort. The focus is on growing trust, selling smartly, and helping the business grow over time.
Best Practices for Outside Sales Compensation
- Keep compensation plans simple and easy to understand: Overly complex structures confuse reps and reduce motivation; clarity drives performance.
- Use technology to automate tracking and payouts: Platforms like Advantageclub.ai can streamline incentive management, ensuring timely and accurate commission distribution while reducing administrative burden.
- Build in recognition beyond monetary rewards: Celebrate wins publicly, offer experiential incentives, and create a culture where achievements are acknowledged to boost morale and loyalty.
- Regularly gather feedback from your sales team: Check in with reps about what's working and what's not in the compensation structure, then adjust based on real-world insights to keep engagement high.
Conclusion
Making a good outside sales pay plan is like mixing art and science.
It’s about finding the right balance, being fair, helping both the company and the salesperson, and keeping everyone excited to do their best work.
When done well, this kind of pay plan isn’t just about giving money; it helps people do better, stay longer, and feel proud of what they do.
As businesses change and grow, using smart tools like Advantageclub.ai can help track rewards and keep teams happy.
The future of sales pay is not just about money; it’s about creating a workplace where people want to stay, grow, and win together.
