Sales Targets and Commission Plans for Salesperson Teams (With Worked Numbers)

Targets and commissions are the steering wheel of a sales team. Set them badly and the team drives in the wrong direction at high speed: pushing stock into dealers at month-end, chasing easy shops, ignoring collections. Set them well and people know exactly what is expected and what they earn if they deliver.

This guide builds a plan from scratch. All numbers are hypothetical, so replace them with your own margins and history.

Principles of a good plan

1. Simple. A salesperson should be able to calculate his own commission on a phone.
2. Fair. Targets reflect territory potential, not office politics.
3. Aligned. Pay for what the business needs: secondary sales, collections, new outlets, active shops.
4. Affordable. The total payout stays inside a share of gross margin.
5. Predictable. Rules are published before the month starts.

Step 1: Choose what to measure

Pick a small number of measures:

• Sales value or volume (NPR, kg or cartons). Volume in kilograms suits masala and food products with varied pack sizes.
• Productive calls: visits that ended in an order.
• Collections: payments received against dues.
• New active outlets (optional).

Too many measures cause confusion. Two or three are enough.

Step 2: Set monthly targets by territory

A simple method: take last year's same-month sales for the territory, add a growth percentage you believe in, then adjust for known changes such as new outlets, a lost shop or a festival falling in a different month.

Hypothetical example for a distributor with three officers:

Officer	Area	Last year same month (kg)	Growth	Target (kg)
Ram	Kalanki-Balaju	4,000	10%	4,400
Sita	Lalitpur	3,000	10%	3,300
Hari	Bhaktapur	2,000	15% (new outlets)	2,300

Discuss each target with the person. A target they helped shape is one they will try to reach.

Step 3: Use a daily pace

A monthly target is hard to feel on day 4. Divide it by working days to get a daily pace. If Ram's target is 4,400 kg and the month has 25 working days, his pace is 176 kg a day. After 10 working days he should be near 1,760 kg. Daily pace shows early whether the month is slipping, when you can still act. Remember to remove holidays and approved leave from the working days.

Step 4: Design the commission

Option A: flat rate

Pay a flat percentage of secondary sales. Example: 1.0% of NPR value. Ram sells NPR 1,800,000: commission NPR 18,000. Simple, but it pays the same for hitting 50 percent or 120 percent of target.

Option B: flat rate with a minimum achievement

Add a threshold. For example, no commission below 70 percent of target. If Ram reaches only 65 percent, he earns nothing, which protects the company and signals the seriousness of targets. Use it with care and explain it clearly.

Option C: slabs

Achievement	Commission rate
Below 70%	0%
70% to 89%	0.8%
90% to 109%	1.0%
110% and above	1.3%

Worked example for Ram with NPR 1,800,000 in secondary sales and a target of NPR 1,600,000. Achievement is 112.5 percent, so the 1.3 percent slab applies:

• 1,800,000 x 1.3% = NPR 23,400.

Decide whether the higher rate applies to all sales (as above) or only to the amount above the threshold. State which in your policy, because the difference in payout is significant.

Personal rates and universal rates

You may have a universal rate for everyone plus a personal rate for a senior officer or a special product. Keep exceptions rare and documented.

Step 5: Combine salary and commission

A typical structure is a fixed monthly salary plus variable commission. Higher variable pay motivates more but makes income volatile; lower variable pay is stable but less motivating. Consider the nature of the territory: a salesperson in a hilly district with long travel needs a stronger base than one in a dense bazaar.

Total monthly cost for Ram in the example: salary NPR 30,000 plus commission NPR 23,400 equals NPR 53,400. Compare that with the gross margin on his NPR 1,800,000 of sales. If your gross margin is 20 percent (NPR 360,000), the pay for the month is about 15 percent of that margin. Do this check for every plan before launching it.

Step 6: Guard against gaming

People respond to incentives, including in ways you did not intend. Common problems and fixes:

• Month-end stuffing: pay on secondary sales and verify dealer stock. See dealer stock reports.
• Selling to shops that cannot pay: link part of the pay to collections or deduct for old overdue invoices. See collecting payments on time.
• Splitting or inventing orders: reconcile with deliveries and returns.
• Fake visits: use proof of visit; see stopping fake visits.
• Cherry-picking easy products: include a mix or lines-per-order measure.

Step 7: Finalise, pay and explain

Calculate drafts during the month so people can see progress, but finalise only after month-end, when returns and cancellations are known. Pay on a fixed date. Provide a simple statement showing target, achievement, rate and amount. Disputes are rare when the arithmetic is visible. See month-end closing.

Confirm payroll and tax treatment of commissions with your accountant.

Reviewing the plan

After three months, look at the outcomes: did most people hit 70 percent? If nobody does, the targets are too high. If everybody exceeds 110 percent, they are too low. Adjust once a year, not every month; constant change breeds mistrust.

A second worked example: collections-linked pay

Suppose you want some of the pay to depend on collections. A hypothetical officer, Hari, has a monthly target of NPR 1,200,000 in secondary sales and sells NPR 1,100,000, which is 91.7 percent. The 90 to 109 percent slab gives 1.0 percent, so commission is NPR 11,000.

Now add a collection rule: 80 percent of invoices raised to Hari's shops in the month must be collected within the payment term, otherwise commission on the uncollected invoices is held until they are paid. Hari's shops owe NPR 150,000 beyond term, so commission on that portion (1.0 percent, NPR 1,500) is held. Hari is paid NPR 9,500 now and NPR 1,500 when the shops pay. Hari now has a personal reason to chase overdue accounts. Check that such a rule is allowed under your employment terms and communicate it before it applies.

Communicating the plan

A plan only motivates if people understand it. Prepare a one-page summary in Nepali and English, with:

• The measures and the targets.
• A simple table of slabs.
• One worked example.
• The date of payment.
• Who to ask when a figure looks wrong.

Hold a short meeting at the start of each month to confirm targets, and give each person a mid-month progress check so there are no surprises.

When to change a plan

Change a plan when the business changes: a new product, a new region, a change in margins. Avoid changing it mid-month. If you must, apply the change from the next month and explain why. Stability matters more than perfection.

How gamitrack handles it

In gamitrack you set monthly officer targets with daily pace, and annual dealer targets split by Nepali fiscal quarter. Commissions can use a universal rate with personal overrides, applied on secondary orders only, with a minimum achievement rule and monthly salaries. Month-end drafts are created automatically on the 1st; you finalise only ended months, the system recomputes, and posts once to the earnings ledger. Officers see their earnings in the mobile app, and there is a performers ranking and a printable monthly agent report.

Test a plan with your own numbers: start a free trial. For the review side, read monthly sales reports per agent.

Key takeaways

• Choose two or three measures and publish the rules before the month.
• Base targets on territory potential and use a daily pace.
• Check total payout as a share of gross margin before launching.
• Finalise commissions only after the month ends.