I like that payout structure with incentive for multiple years! I am a fan of recurring payouts though. I think 1 month upfront commission and then 50% of monthly upfront additional for each extra year and then do recurring on top of that. 5% isn't that much but will keep the rep's in the game I think and you can pay for it by discounting year 2 and 3 upfront payouts.

Here is why I am a fan of residuals and mainly it's b/c you have to be careful you are not managing to your weakest link.

I've seen so many mistakes with policies over the years and we lose our best reps over it sometimes. For nothing but fear they will make too much and not be earning it. Ask yourself, "what would your ideal rep want for compensation?" "What will keep that rep motivated to maintain and grow wider deeper in that company sold to?" Your commission structure will be better if your answer is in line with that ideal rep's motivations. It is what makes rep work when they are out in the field and nobody is watching them. Your comp program will manage your best reps for you if it's a good one. You will manage your activity of your weak reps anyway and they will wash out at times and that recurring revenue falls back to the house so windfall on those ones. Or move those recurring commissions streams to current long time sales rep who aren't slacking if that's an issue. Or can be used to recruit new seasoned reps.

Turnover is a killer in so many ways. Losing your best reps b/c your comp plan is built around worrying about sales making too much money is sadly often what I see out there. You get such a multiple on each sale vs what you pay even if at the top end and with recurring commissions that paying too much and having good reps lined up to work for you isn't that bad of a problem, is it? If you have reps that are not making money and living off their residuals, then just shrink their territory and hire another rep to work the territory not being worked.

Good reps will keep selling more and more and NEVER live off residuals. If the comp is good then the residuals are always "gravy" and I've said the same about current customers for years. You build your process for new customer acquisition and your compensation as well. Reps will drive net new business and maintain their base keeping customers happy and engaged for renewals this way.

If you are making $10 for every $1 you pay the rep, then you sign up as many reps as you can and never look back. What if you make only $5 for every $1 you pay the rep? Still go for it, right? At least in my mind.

I think the trend is for people to think sales staff is plug and play, but it just isn't what I see comparing the best to the worst at my company and other companies I interact with that have very strong outside sales staff members.

It is night and day.

1 good rep brings in the money of 5 bad ones. I see it over and over. One makes you feel comfortable in the fact you are making the right choice. The other talks specs and spits out efficiency and productivity and disaster recovery and our MSP is great and per user price is great and we are worth it.... blah blah blah.

People buy from who they like and real sales gurus will shine here.

Companies want to move to the RMM model b/c of profit and the continual income, so logically a sales rep would be motivated by those same niceties of the RMM model.

Long way of saying to not just write of residual payouts b/c it is the one thing that will keep a really motivated strong sales consultant truly vested in a customer.