Key Takeaway
A workable B2B outside sales agreement settles four things before it sets a single rate: how long base pay is guaranteed, whether a draw is recoverable, what the commission is calculated on and when it gets paid. Lock those clauses first. The percentage is the easy part.
Why the Pay Clauses Decide the Role
A route rep in distribution can carry 80 to 200 accounts, while new business cycles run three to nine months. Money lands long after the first visit.
That gap between work and income is where a B2B outside sales agreement gets tested. Base pay covers it while commission pays for the close. If the contract leaves the timing undefined, the rep is funding the company’s prospecting with unpaid time.
FAQ: Structuring Commission and Base Pay
What exactly is base pay and why does it need a floor period?
Base pay is the fixed salary paid regardless of sales. The floor period is the window where that salary is protected while pipeline builds.
For outside sales, six to twelve months is normal. Without a floor, the rep absorbs all early risk while the company absorbs none.
What is a draw and when is it recoverable?
A draw is an advance against future commission. A recoverable draw creates a balance that shrinks as commissions are earned until it hits zero.
Say the base is $40,000 a year and the rep draws $2,000 a month. In month three they earn $1,500 in commission. The $500 shortfall rolls into the draw balance, which is money the company expects back.
A non-recoverable draw is different. It is a guaranteed minimum that gets forgiven, so the rep keeps it even if commissions never cover it.
Ask which one you are signing. The words “draw” and “guarantee” get used as if they mean the same thing. They do not.
Should commission be calculated on revenue or gross profit?
Revenue-based commission is simpler: Commission = Revenue x Rate. A 5% rate on a $20,000 order pays $1,000.
Gross profit commission protects the company from discounting: GP = Revenue – Cost of Goods Sold, then Commission = GP x Rate. A 15% rate on $6,000 of GP pays $900.
Revenue-based plans push volume, so pick the base that matches the behavior you want. Put the formula in the contract with a worked example.
What is a quota threshold and how should it be set?
The threshold is the point where commission starts, below which the rep earns base only. Attainment is simple to calculate:
Quota attainment = Closed GP / Assigned Quota
Set the threshold from trailing territory data, not from a round number pulled out of the air. If the territory did $900,000 in GP last year, a $1.2 million quota assumes 33% growth. That may be fair. It may also be wishful.
How do accelerators work above quota?
An accelerator raises the rate once the rep passes quota. An 8% rate up to quota and a 12% rate above it is a common shape.
A 50% acceler bounce on $100,000 of over-quota GP adds $2,000 to the check. Small rate changes move real money at the top end.
When is commission earned and when is it paid?
“Earned” and “paid” are separate events. The agreement should name both.
Booking-based payout pays when the order is written. Collection-based payout pays when the customer’s invoice clears.
For a route with net-30 or net-60 terms, collection-based payout can delay a check by two months. That delay is fine if it is written down. It is a problem if the rep discovers it on payday.
How do splits and house accounts get treated?
A split assigns commission across two or more reps on one deal. A 50/50 split is common when a hunter closes and a service rep maintains the account.
House accounts are customers the company keeps off-limits or pays at a reduced rate. The agreement should name them in an attached list. A vague house-account clause can erase commission after the deal closes.
What happens to commission after the rep leaves?
This is the tail clause. Some agreements pay commission on invoices collected for 30 or 60 days after termination. Others pay nothing past the last day.
A tail protects a rep who closed a deal the week before leaving and gives the company a reason to collect the receivable. Get the number in writing, because “We usually pay that out” is not a clause.
How long should the ramp guarantee run?
Match the ramp to the sales cycle. If new accounts take three to nine months to sign, a three-month ramp sets the rep up to fail.
Look for a declining guarantee: full base in months one through six, then a step-down as the book matures. That shape protects the rep early and protects the company later.
Should the agreement cap commission?
Caps punish the exact behavior the plan is built to reward. A rep who hits 180% of quota and gets clipped has a reason to slow down next year.
If uncapped upside worries finance, use a decelerator or reset the quota instead.
Which non-pay clauses protect the structure?
Four clauses do most of the work. Define the territory by name and attach the account list. Set the quota period so both sides know when the slate resets. Name the commission calculation base with a formula. Add a dispute process for commission errors.
Without a defined territory, a rep can be moved into dead ground mid-year. Without an account list, a house-account claim can be invented after the close.
What to Fix Before You Sign
Read the contract and mark every clause that touches money. If any of them is vague, ask for the number in writing. Get the draw type, the calculation base, the payout trigger and the tail spelled out.
Then run one test. Take last year’s territory sales and estimate year-one pay at the stated commission rate. If the company will not share trailing sales, treat that as a signal. Real territories keep records.
The one thing to do: ask three current or former reps what the plan actually paid in year one. A contract explains the intent. Those reps explain the result.
Read the full guide: B2B Outside Sales: 6 Questions to Ask Before You Sign