Sales Compensation
From guesswork to structure — Building a compensation system that is fair, predictable, and capable of scaling with the business.
Context
When I first started the diamond business, I had no experience in sales — not in the product, not in the customer, and not in how salespeople actually behave.
Because of that, I relied heavily on hiring experienced salespeople and a sales manager to drive growth. Compensation and incentives became one of the few levers I could use to influence performance.
At the beginning, the system was simple. Sales were small, and the commissions felt “reasonable.” There was no structured thinking behind it — just an assumption that the numbers were neither too high nor too low.
At that stage, it worked.
But it wasn’t a system.
The Problem
The real issue appeared when I started thinking forward.
What happens when the business scales?
If a small commission works at low revenue, what happens when revenue grows 10x, 100x, or more?
At higher volumes, the same structure could result in extremely high payouts — numbers that are difficult to evaluate:
- Is it fair?
- Is it too much?
- Is it too little?
- Who decides?
Without a structure, compensation becomes unpredictable.
And unpredictability creates tension:
- When incentives are high → the company feels pressure
- When incentives are low → the sales team loses trust
Over time, this leads to:
- inconsistency in behavior
- reduced morale
- unreliable performance
- operational friction between management and sales
The system started affecting not just compensation — but the entire rhythm of the business.
What Was Broken
Looking back, the problem was not the amount.
It was the absence of structure.
The incentives were:
- not formula-based
- not predictable
- not aligned with long-term growth
- not designed to scale
Because of that:
- salespeople couldn’t predict their income
- management couldn’t predict cost
- behavior was not guided — only reacted
There was no shared understanding of what “fair” meant.
The Objective
The goal was not to create a perfect system.
The goal was to create a structured and scalable one.
A system that could:
- support short-term performance
- sustain long-term growth
- attract and retain strong salespeople
- create predictable outcomes for both the business and the team
Most importantly:
A system where incentives are not guessed — but calculated.
The Shift
The direction became clear:
Move from:
“We’ll decide commissions as we go”
To:
“We design a system that defines them in advance.”
This meant:
- introducing formulas
- defining thresholds
- structuring tiers
- linking performance to outcomes
Not just for fairness — but for control.
What the System Is Becoming
The system is built around a structured compensation model:
- base salary
- performance-based incentives
- total compensation logic
It introduces:
- performance thresholds
- weighted incentives
- tiered structures
And it is designed to connect with:
- KPIs
- sales targets
- reporting systems (MBO)
- bonus structures
This transforms compensation into something more than pay:
It becomes a tool to shape behavior, guide performance, and influence business outcomes.
Why It Matters
Compensation is not just about paying people.
It is one of the strongest signals in a business:
- what matters
- what is rewarded
- what is expected
If designed correctly:
- salespeople can predict their income
- management can predict revenue
- behavior aligns naturally with business goals
If designed poorly:
- everything becomes reactive
Direction
The long-term intention is not just to fix internal problems.
It is to build a system that:
- is clear
- is scalable
- reflects how this business operates
And eventually:
something that could resemble a standard for how sales compensation should work in this space.
Closing Thought
At the start, I had to ask others:
“How do you calculate commissions?”
Now, the goal is different.
To build a system where the answer is already defined.