This tension defines the first sales hire for most founders. Offer too little, and experienced reps will not join. Offer too much, and a few closed deals could drain your operating budget before revenue stabilises. The average annual turnover rate for sales positions is approximately 35%, nearly three times the rate across all industries. Getting your commission structure wrong accelerates that churn.
The guidance here draws from advisory work with early-stage B2B startups across the UK and US. The focus: practical frameworks you can implement within weeks, not theoretical models that require a compensation analyst to deploy.
Commission structures that work for cash-strapped startups
The instinct is to offer high commission rates. More money attracts better talent, the logic goes. Reality differs. In my work with early-stage founders, structure flexibility consistently outweighs rate generosity when attracting first sales hires. A 12% commission means nothing if your sales cycle runs six months and the rep cannot pay rent month two.
Five commission models dominate startup compensation. Each carries distinct implications for cash flow, complexity, and your ability to scale. The choice depends less on industry norms and more on your specific runway and product maturity. When optimizing sales processes, the commission structure must align with your broader sales strategy.
| Structure Type | Cash Flow Impact | Complexity | Scalability | Best For |
|---|---|---|---|---|
| Commission-only | Low upfront, unpredictable | Simple | Poor | Pre-revenue testing |
| Base + Commission | Predictable monthly | Moderate | Strong | First full-time hire |
| Tiered | Variable, back-loaded | High | Moderate | Proven sales cycle |
| Draw Against | Front-loaded risk | High | Moderate | Long sales cycles |
| Straight-line | Directly proportional | Simple | Strong | Transaction-based sales |
Case study: London fintech startup, 2023
Two co-founders, 18 months post-launch, £800,000 seed funding. They implemented a commission-only structure with a 15% rate to attract experienced reps without fixed salary overhead. The plan backfired. Three large deals closed in month two. Commission payouts exceeded the monthly operating budget. Cash crisis. They restructured to a 60/40 base-commission split with quarterly true-up. Two of three reps stayed. The lesson: commission-only sounds founder-friendly until deals actually close.
My firm opinion: before your first paying customer, you should not hire a commissioned salesperson at all. Founder-led sales proves product-market fit. Skipping this step means paying someone to learn lessons you need to learn yourself.
Setting rates and quotas without historical data
The mistake that costs startups most? Setting quotas based on funding targets rather than market-validated sales cycles. You need £500,000 in revenue this year to hit your next milestone, so you divide by twelve and call it a monthly quota. That number reflects your needs. Not reality.
Common quota-setting mistake: Setting quotas based on funding targets rather than market-validated sales cycles leads to rep burnout and turnover. Without historical data, quotas become aspirational rather than achievable.
In my advisory work with early-stage B2B startups across the UK and US (approximately 60 founders between 2021-2025), setting commission rates based solely on competitor benchmarks—without adjusting for longer sales cycles in unproven markets—frequently leads to rep turnover. The median turnover rate observed was 40% within the first six months. This pattern is limited to early-stage B2B companies and may vary significantly by industry vertical and average deal size.
Market benchmarks provide a starting point, not a prescription. According to Sprintlaw UK’s analysis of commission structures, staff typically receive a base wage of £25,000 per year plus commission as a percentage of sales. That baseline shifts dramatically by role and funding stage. Ravio’s 2026 startup salary benchmarks show Sales Executive mid-level roles at late-stage startups earning £56,400, with an 18% premium between seed and Series C.
Without historical data, work backwards from unit economics. Calculate your customer acquisition cost ceiling. Determine what percentage can go to sales compensation. Build your on-target earnings around sustainable margins, not competitive matching. A sales commission plan template can accelerate this modelling, letting you test multiple scenarios before committing to a structure.
Pre-launch commission plan checklist
- Break-even analysis completed for three payout scenarios
- Industry OTE benchmarks researched for your specific vertical
- Cash flow model tested for best-case deal velocity
- Ramp period defined with reduced quota for months one through three
- Legal review of employment contract implications completed
One pattern I see repeatedly: founders set quotas assuming their sales cycle matches industry averages. It rarely does. Unproven products require more touchpoints, more demos, more objection handling. Build in a 50% buffer on expected sales cycle length until you have six months of closed-deal data.
Building in flexibility as your business scales
Seventy percent of startups revise their commission plans within the first twelve months. The problem: poorly managed transitions destroy trust. Reps who joined under one set of rules feel betrayed when those rules change. The average turnover for UK workers stands at 34%, and abrupt compensation changes accelerate departures.
The solution is not avoiding revision. It is building revision into your plan from day one.
Implementation typically spans six to eight weeks: revenue target definition in week one, benchmark research in week two, structure drafting with finance in week three, legal review in week four, pilot testing in weeks five and six, and final documentation in week eight. This timeline, based on 25 startup implementations tracked between 2022-2024 in US and UK early-stage companies, assumes you have clarity on your go-to-market motion.
Steps to build revision flexibility into your plan
- Label initial plan as Version 1.0
Make this explicit in all documentation and verbal communication during hiring.
- Include 90-day review clause
Employment contracts should reference planned evaluation points with mutual adjustment rights.
- Define trigger metrics
Specify revenue milestones or team size thresholds that initiate plan revision discussions.
- Create grandfather clause template
Protect existing reps from disadvantageous changes for a defined transition period.
- Establish communication protocol
Establish minimum notice periods and the format for announcing commission structure changes.
The question you need to answer before your first sales hire is not what percentage to offer. It is whether you have enough information to set any meaningful quota at all. If the answer is no, consider a pure ramp period with guaranteed earnings while you gather data. Three months of learning costs less than three hires who leave frustrated.