89% of salespeople leave their jobs due to inadequate compensation. For sales managers, the number is even higher. And when a sales manager quits, it's not just recruitment and training you lose. You lose momentum, team culture, and months of pipeline.
Yet most companies design their sales manager compensation as an afterthought. They copy the rep commission model, add a bit more base salary, and hope for the best.
That doesn't work.
This guide gives you the concrete numbers, models, and structures you need to design a compensation plan that actually motivates your sales managers to drive the behavior you want.
Let's start with the numbers. According to the latest salary data from 2025-2026, sales manager compensation varies significantly depending on direct reports, industry, and geography.
| Type | Average/year | Lower quartile | Upper quartile |
|---|---|---|---|
| Sales Manager with direct reports | $145,000 | $105,000 | $195,000 |
| Sales Manager without direct reports | $95,000 | $75,000 | $115,000 |
| General average | $98,000 | $78,000 | $118,000 |
Source: Bureau of Labor Statistics, Glassdoor, Payscale (2025)
For a sales manager with direct reports, typical annual compensation ranges between $120,000 and $180,000 including benefits and bonus. At the top of the market—particularly in tech, pharma, and finance—we see sales managers hitting over $200,000 annually.
The wide spread is primarily due to:
| Role | Typical base salary/year | Typical OTE/year |
|---|---|---|
| SDR/BDR | $50,000 - $65,000 | $70,000 - $90,000 |
| Account Executive | $70,000 - $100,000 | $120,000 - $180,000 |
| Sales Manager | $90,000 - $130,000 | $140,000 - $200,000 |
| VP of Sales | $150,000 - $220,000 | $250,000 - $400,000 |
A sales manager typically earns 20-40% more than the Account Executives they lead. This matters—if the pay gap is too small, there's no incentive to take on leadership responsibility.
This is where most companies start to fail. They treat sales managers as glorified reps and give them a nearly identical compensation structure.
That's a mistake.
A sales manager's job isn't to close deals. It's to build a team that closes deals. Compensation must reflect that difference.
| Role | Typical pay mix (Base:Variable) | Comment |
|---|---|---|
| SDR/BDR | 70:30 or 80:20 | Higher base due to less control over revenue |
| Account Executive | 50:50 or 60:40 | Direct link to closed deals |
| Sales Manager | 60:40 or 70:30 | Balance between stability and performance incentive |
| VP of Sales | 70:30 or 80:20 | More strategic role, longer time horizons |
According to international research, the average pay mix in the US is 44:56 (base:variable), but for leaders, 60:40 or 70:30 is typically recommended. The reason is simple: a sales manager has less direct control over individual deals, but more influence over the team's overall performance.
A 60:40 split provides:
According to Harvard Business Review research, different structures motivate different types of performers. Top performers are motivated by accelerators above quota. Underperformers are motivated by more frequent bonuses. Your sales manager needs to work with both types.
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Book a demo →The variable portion of a sales manager's compensation can be structured in many ways. Here are the five most effective models—and when to use each.
How it works: The sales manager gets a bonus based solely on the team's combined quota attainment.
Pros:
Cons:
Best for: Experienced teams with consistent performance
How it works: The manager is held accountable for 80-90% of the team's total quota, not 100%.
Pros:
Cons:
Best for: Teams with high turnover or many new reps
How it works: Bonus is split between team performance and individual management goals.
Pros:
Cons:
Best for: Companies that want to drive specific behavioral changes
How it works: The manager receives a percentage of each rep's earned commission.
Pros:
Cons:
Best for: Companies with large, infrequent deals (enterprise sales)
How it works: Bonus is tied to achievement of specific, predefined goals.
Pros:
Cons:
Best for: Companies in transformation or with complex strategic priorities
| Situation | Recommended model |
|---|---|
| Stable, experienced team | Model 1: Pure team quota |
| High turnover or many new reps | Model 2: Team quota with buffer |
| Want to drive culture change | Model 3: Split metrics |
| Enterprise sales with big deals | Model 4: Override |
| Strategic transformation | Model 5: MBO |
One of the most effective ways to motivate sales managers is through accelerators—increased bonus percentage when they exceed their goals.
According to Harvard Business Review research, accelerators are particularly effective for top performers. Studies show that eliminating commission caps and ratcheting quotas can increase sales by 8-9%.
| Quota attainment | Multiplier | Example (base bonus $12,000) |
|---|---|---|
| 0-80% | 0.8x (or threshold) | $0 - $7,680 |
| 80-100% | 1.0x (linear) | $7,680 - $12,000 |
| 100-110% | 1.2x | $12,000 - $13,440 |
| 110-120% | 1.5x | $13,440 - $15,240 |
| 120%+ | 2.0x | $15,240+ |
Some companies also use decelerators—reduced bonus percentage below a certain threshold. For example, no bonus below 60% quota attainment, or only 0.5x between 60-80%.
Decelerators can be effective, but use them with caution:
When decelerators make sense:
When to avoid decelerators:
Less than 10% of companies believe their sales incentive plans "consistently drive desired sales behavior" according to Forrester research. Here are the most common mistakes.
Your sales manager's job isn't to close deals. It's to build a team that closes deals. Compensation must reflect that.
Solution: Design a separate compensation plan that rewards leadership activities and team results.
Annual bonuses can get the manager to focus on long-term results. But quarterly can create short-term decisions.
Solution: Combine quarterly and annual elements. For example, 60% quarterly team quota, 40% annual MBO.
Harvard Business Review research shows that underperformers need more frequent bonuses to stay motivated—their revenue drops 10% when they only have annual bonuses. Your sales managers need to be able to motivate both types.
Average turnover in sales is 35%—three times higher than the average across industries. Losing a sales manager costs 90-200% of their annual salary according to SHRM.
Solution: Include retention elements such as:
If your sales manager doesn't understand how their bonus is calculated, you have a problem. Lack of transparency creates distrust and demotivation.
Solution:
The manager must have influence over the factors that determine their bonus. If they're penalized for things they can't control, they lose motivation.
Solution: Review each metric and ask: "Can the manager directly impact this?" If no, consider removing it or reducing the weight.
Research from a Fortune 500 company showed that eliminating commission caps increased sales by 8-9%. Caps demotivate your best performers.
Solution: Remove caps or set them so high they never activate. If you're worried about costs, use accelerators that flatten at very high attainment instead.
Stop monthly commission errors
60-90% of companies have errors in their commission calculations. With Prowi, you eliminate errors and give your managers confidence in their bonus.
See how it works →Here's a step-by-step process to design or redesign your sales manager's compensation.
Start with behavior, not numbers. What should your sales manager do for the company to succeed?
Examples:
More than 4 metrics creates confusion. Focus on the most important ones.
| Desired behavior | Possible metric |
|---|---|
| Drive revenue | Team quota attainment |
| Retain talent | Rep retention rate |
| Build pipeline | Pipeline coverage ratio |
| Improve efficiency | Win rate or sales cycle |
| Develop the team | Number of reps hitting quota |
Based on market data and your risk profile:
Choose the bonus model that fits your situation (see the 5 models above). Remember:
Thresholds: When does bonus start? (e.g., 80% quota attainment)
Accelerators: How is overperformance rewarded? (e.g., 1.5x above 110%)
Cap: Do you have a ceiling? (Recommendation: Avoid it, or set it very high)
Before rolling out the plan:
The best compensation plan is worthless if the manager doesn't understand it.
One of the most debated topics in sales manager compensation is the split between team-based and individual metrics.
How it works: Bonus is 100% based on the team's combined results.
Pros:
Cons:
How it works: Bonus is based on the manager's personal results (e.g., pipeline quality, coaching activities, own deals).
Pros:
Cons:
For most sales managers, the answer is: both.
A typical split:
How often should you measure and reward your sales manager's performance? It depends on several factors.
Best for:
Pros:
Cons:
Best for:
Pros:
Cons:
Best for:
Pros:
Cons:
Many companies combine:
This provides both short-term motivation and long-term focus.
42% of turnover is preventable according to Gallup. For sales managers, compensation is a critical factor—but not the only one.
Cliff-vesting bonus: A bonus that only pays out if the manager stays for a certain period.
Deferred bonus: A portion of bonus is paid out over time, encouraging retention.
Equity-based compensation: Stock options or RSUs that vest over time.
Long-term incentive plan (LTIP): Multi-year bonus tied to company performance.
According to Salesforce, 42% of salespeople prioritize career development over base salary. For managers, the number is likely even higher.
Career path: Clear progression to senior manager, director, VP.
Autonomy: Freedom to run the team their way.
Recognition: Public acknowledgment of success.
Development: Training, coaching, mentorship opportunities.
Let's put it all together in a concrete example.
Basic assumptions:
Compensation structure:
| Element | Amount | Details |
|---|---|---|
| Base salary | $96,000/year | $8,000/month |
| Variable compensation | $64,000/year | At 100% quota attainment |
| Total OTE | $160,000/year | $13,333/month |
Variable compensation breakdown:
| Component | Weight | Amount at 100% | Frequency |
|---|---|---|---|
| Team quota attainment | 60% | $38,400 | Quarterly ($9,600/Q) |
| Rep retention | 20% | $12,800 | Annual |
| Number of reps on quota | 20% | $12,800 | Quarterly ($3,200/Q) |
Scenario analysis:
| Scenario | Team quota | Retention | Reps on quota | Total annual comp |
|---|---|---|---|---|
| Underperformance (80%) | $23,040 | $9,600 | $7,680 | $136,320 |
| On-target (100%) | $38,400 | $12,800 | $12,800 | $160,000 |
| Overperformance (120%) | $49,536 | $12,800 | $15,360 | $173,696 |
| Exceptional (140%) | $65,000+ | $12,800 | $17,920 | $191,720+ |
It depends on direct reports, industry, and geography. With direct reports, the average is around $145,000/year (including benefits and bonus). Without direct reports, the average is $95,000/year. Total compensation ranges from $120,000-$180,000 for most sales managers.
For sales managers, 60:40 or 70:30 (base:variable) is typically recommended. This provides stability while still creating performance incentive. A 50:50 split can be too aggressive for leaders who don't have direct control over individual deals.
Yes, primarily. 60-70% of bonus should be team-based to ensure alignment. The remaining 30-40% can be individual goals such as rep retention, pipeline quality, or strategic initiatives.
Combine competitive compensation with retention elements like cliff-vesting bonuses and career development. 42% of salespeople prioritize career development over base salary. Make sure there's a clear career path.
No. Research shows that removing commission caps increases sales by 8-9%. Caps demotivate your best performers at the worst time—when they're performing best.
For most B2B sales managers, quarterly works best. It provides enough time to smooth out variation while still giving regular feedback. Consider a hybrid with 70% quarterly and 30% annual.
Your sales manager isn't just a glorified rep. They're a leader, a coach, a culture carrier, and a strategic partner.
Compensation must reflect that.
The key takeaways:
The average company spends over $900 billion annually on sales compensation globally. But less than 10% believe their plans "consistently drive desired behavior."
Don't be average.
Design a plan that motivates your sales managers to build the teams that drive your growth.
Ready to automate your sales manager bonus?
With Prowi, your sales managers see their bonus in real-time—based on actual team performance. No surprises, no disputes, no spreadsheet errors.
Book a demo →Sources: