Volume 16, Chapter 3
Commissions and Sales Targets
Definition
Picture two salespeople at MANIAC MINDZ, both hitting their numbers. One holds firm on price. The other closes every deal by discounting, sometimes right down to the negotiation floor. Under a commission plan that pays a flat percentage of revenue, both salespeople earn the exact same commission, because the plan never asked how much margin (the profit left after costs) was given away to win the sale.
A commission is pay tied to sales performance, added to Volume 06's payroll calculation. A sales target is a specific, dated, checkable goal a salesperson or team is expected to reach, never a vague hope to "sell more."
Why does the choice between rewarding revenue and rewarding margin matter so much? Because whatever a business pays people to do, it will get more of, whether or not that was the intention. A structure that rewards revenue alone, with no reference to actual margin, will eventually reward exactly the discounting it shouldn't.
What gets rewarded gets repeated, so a commission structure quietly designs behaviour, and a plan built on revenue alone will eventually reward the same over-discounting the business is trying to prevent elsewhere.
Common Commission Structures
| Structure | How It Works | Watch For |
|---|---|---|
| Flat percentage of revenue | A fixed % of every sale | Rewards volume regardless of margin, can encourage the exact over-discounting Chapter 1 warns against |
| Percentage of margin/profit | A % of what the sale actually earned the business, after cost | Aligns the salesperson's interest with the business's actual health |
| Tiered/target-based bonus | A bonus once a specific, dated target is hit | Needs a genuinely achievable, specific target, see Section 3 |
Commission on revenue rewards closing the deal. Commission on margin rewards closing the right deal. The second is nearly always healthier for the business long-term.
Setting a Real Sales Target
A sales target is Volume 08's goal-setting discipline applied to a salesperson or team: specific, dated, and a genuine stepping stone toward the business's actual goals, not an arbitrary round number picked to sound ambitious.
| Weak Target | Strong Target |
|---|---|
| "Sell more this quarter" | "₦500,000 in new orders by the end of the third quarter" |
| "Grow the customer base" | "15 newly registered customers this month (Volume 15, Chapter 1)" |
Example Story: The Target That Rewarded the Wrong Thing
Here's the full version of the two-salespeople story from the start of this chapter.
A revenue-only commission structure at MANIAC MINDZ unintentionally rewarded staff for offering discounts more freely than Chapter 1's negotiation floor intended, every closed deal paid the same commission regardless of how much margin it had given away to close it.
Nobody had told staff to discount more. The commission plan had, without anyone meaning it to. Switching the calculation to margin instead of raw revenue didn't reduce sales activity at all; it simply stopped quietly rewarding the exact behaviour the business was trying to prevent elsewhere.
Across Industries
The same underlying question, reward revenue or reward margin, plays out differently depending on what's actually being sold.
| Business | A Commission or Target Approach |
|---|---|
| Golden Crust Bakery | A bonus for securing new standing/wholesale orders, not single walk-in sales |
| Rapid Auto Works | Commission tied to completed, paid repair value, not just quotes given |
| Precision Print & Press | A quarterly new-client target, tracked alongside keeping repeat clients |
Common Mistakes
Quietly rewards over-discounting, as the example story shows.
Fails the same specific-and-checkable test Volume 08's goals and Volume 06's KPIs require everywhere else in this manual.
A target hit in isolation that doesn't serve Volume 08's actual strategy is busywork with a bonus attached.
Quiz Yourself
Practice Exercise
Review your current commission structure, if one exists. Does it reward revenue or margin? Rewrite one current sales target so it's as specific and dated as the "strong target" examples in Section 3.
Quick Summary
Quick Summary
- Commission structures quietly shape behaviour, reward margin, not just revenue, to avoid rewarding over-discounting.
- Sales targets need the same specific, dated, checkable discipline as any other goal or KPI in this manual.
- Volume 16 complete. Next, Volume 17: Marketing covers how interest reaches the business in the first place.