Your Commission Structure Is Sabotaging Your Agency (And How to Fix It)
Most agency founders approach sales commission structure by researching generic sales compensation guides and picking percentages that "seem reasonable." The problem with this approach is that it treats all sales as equal, a $10K website project gets the same commission treatment as a $10K monthly retainer, even though one provides ongoing revenue and the other is a one-time transaction. This leads to salespeople optimizing for quick wins rather than long-term client relationships.
But there's a deeper issue at play. Even agencies that get their commission percentages right often miss the bigger picture: commission structures should align with your positioning strategy, not undermine it.
Here's what most agencies get wrong, and how to build a "Relevance-Based Commission Framework" that actually supports your growth goals.
Why Most Agency Commission Structures Backfire
When you structure commissions around pure deal value, you're essentially paying salespeople to ignore everything that makes your agency unique. They'll chase any client who can pay, regardless of fit. They'll compete on price because closing fast matters more than closing right. They'll overpromise during sales because their commission doesn't depend on successful delivery.
This creates what I call the "commission-positioning conflict." Your marketing efforts work to position the agency as the specialist choice for specific types of clients, while your commission structure incentivizes salespeople to treat you like a generalist that takes any work.
The result? You end up with a pipeline full of poor-fit clients who demand constant attention, squeeze margins, and rarely refer similar high-value prospects. Meanwhile, your best salespeople get frustrated and leave because they're competing against cheaper alternatives instead of selling premium services to ideal clients.
The Relevance-Based Commission Framework
Instead of structuring commissions around deal size alone, successful agencies structure them around client relevance, how well each new client fits the agency's positioning and long-term growth strategy.
This framework operates on three core principles:
Principle 1: Reward Client Lifetime Value, Not Deal Size
Different types of clients provide dramatically different value to your agency. A $120K annual retainer client provides predictable cash flow, opportunities for additional services, and referrals to similar clients. A $120K website project provides one-time revenue and disappears.
Your commission structure should reflect this reality. Most agencies that implement relevance-based commissions pay 3-5% on monthly retainers (calculated annually) versus 8-12% on one-time projects. This incentivizes salespeople to prioritize the revenue that actually builds sustainable agencies.
Principle 2: Higher Commissions for Higher-Fit Clients
Not all clients within your target market are created equal. Some fit perfectly within your positioning and provide case studies that attract more ideal clients. Others are technically within your target market but don't move your agency forward strategically.
Create commission tiers based on client fit:
Premium tier (15-20% commission): Clients who perfectly match your ideal client profile and provide strategic value
Standard tier (8-12% commission): Clients who fit your positioning but aren't strategic wins
Acceptable tier (3-5% commission): Clients who meet basic criteria but don't advance your positioning
Principle 3: Include Positioning Metrics in Commission Calculations
Traditional commission structures only measure revenue. Relevance-based structures include metrics that matter for long-term positioning success:
Retention bonuses: Additional commission paid quarterly for clients who stay beyond 12 months
Referral multipliers: Extra commission when commissioned clients refer new prospects who become clients
Portfolio bonuses: Higher commission rates when deals contribute to specific case study gaps or market expansion goals
Implementation: Moving Beyond Generic Sales Compensation
The challenge with implementing relevance-based commissions isn't the math, it's having clear enough positioning to define what "high-fit" actually means. This is why most agencies default to generic commission structures. They don't have the positioning clarity needed to implement anything more sophisticated.
Before you can structure commissions around client relevance, you need to answer:
Who are your ideal clients, specifically?
What makes a client "strategic" versus just "acceptable"?
How do you measure whether new clients advance your positioning goals?
Without this foundation, any commission structure becomes a guessing game.
Start with Client Fit Definitions
Most agencies can't implement relevance-based commissions because they've never clearly defined their ideal client profile beyond industry and budget. You need specificity around company stage, technical requirements, decision-making process, and growth trajectory.
The agencies that successfully implement this framework can describe their ideal client in enough detail that salespeople can immediately categorize prospects into fit levels. This isn't about being picky, it's about being strategic.
Account for Service Model Realities
Your commission structure must align with how your agency actually delivers value. Agencies focused on ongoing optimization work need structures that reward retention and relationship-building. Agencies that do transformational project work need structures that reward deal quality and smooth handoffs to delivery teams.
The worst commission structures ignore service delivery entirely. They pay salespeople for closing deals without considering whether those deals can be delivered profitably or successfully.
Build in Evolution Mechanisms
Your commission structure should evolve as your positioning becomes more refined and your market understanding deepens. What counts as an "ideal client" for a 5-person agency may not be the same for a 15-person agency.
Build in quarterly reviews that assess both individual performance and overall commission effectiveness. Are commissioned deals leading to the client outcomes you want? Are salespeople bringing in clients that advance your positioning? Is your commission spend generating sustainable growth or just short-term revenue?
Why This Approach Actually Works
Agencies that implement relevance-based commission frameworks report several key improvements over traditional structures:
Better client fit leads to smoother delivery, higher satisfaction, and more referrals. When salespeople are incentivized to prioritize fit over speed, they become more selective and strategic in their pursuit.
Clearer sales conversations happen when commission structures align with positioning. Salespeople stop competing on price and start selling the specific value your agency provides to your ideal clients.
Higher team retention occurs because salespeople enjoy selling premium services to engaged clients more than competing for commodity work against cheaper alternatives.
Predictable pipeline development becomes possible when commission structures reward the activities that actually build sustainable agencies: retention, referrals, and strategic client acquisition.
The Strategic Foundation Comes First
Here's the reality most agency founders don't want to hear: commission structure is a tactical implementation of strategic positioning decisions. If you don't have clarity on your positioning, ideal client profile, and growth strategy, even the most sophisticated commission framework becomes another form of expensive guessing.
The agencies that successfully implement relevance-based commissions aren't just good at sales compensation, they're clear on their market position and can articulate why specific clients matter more than others for their long-term success.
Commission structures only work when built on top of clear agency positioning and ideal client profiles. Without positioning clarity, even the best commission structure will incentivize salespeople to chase any deal rather than right-fit clients.
This is exactly why we start every engagement with positioning and ideal client definition before touching sales compensation or any other growth tactics. The commission structure becomes obvious once you're clear on who you serve and how you want to grow. Before that clarity exists, you're just creating expensive incentives for the wrong behaviors.
Commission structure is just one piece of building a scalable growth system. If you're ready to align your sales compensation with your positioning strategy, start with the foundation: clarifying who you serve and why they should choose you.
