Commission is always a percentage of the sales, whether paid as a percent of the total sales dollars, or a percent of the gross margin dollars, or even a percent of the net profit dollars.

Draw is always a regular (monthly, bi-monthly, weekly) payment from the commission pool. When commissions are not high enough in that pay period to fund the draw, a negative balance is carried over to the next pay window, etc, until the commission bank has paid back the debt on draws.

Bonuses are “buckets” of money that can be earned over and above draws and commissions, usually paid for specific behaviors. For instance, one popular approach is to set aside a bucket (say, $10,000) and tie it to a performance matrix where the horizontal scale is sales as a percent of quota and the vertical is gross margin as a percent of quota. The lower left cell would be where quota and gross margin are just met, so the multiplier is 0. The upper right cell– where sales over quota and margins over quota are both as high as the table defines– the multiplier might be 2.5. All other cells would have values between 0 and 2.5. (For instance, 115% of sales and 110% of margin might show 0.45.) The bonus would be the $10,000 bucket multiplied by the multiplier. So for my 115/110 example, the sales person would earn a $4,500 bonus at the end of the year. If he or she really went bonkers and maxed out both scales, they’d get $25,000 as a stocking stuffer at the end of the year. Not bad, eh? (By the way, the company would make a whole lot more than that if you do the math. It always irks me that managers wince at such a bonus plan because they are afraid a sales person will make more than they make. Phooey on that! If the sales person brings in sales 150% over quota and 130% over margin (or whatever the scale maxima on the matrix are), they deserve to make more than the manager!!)

Other bonus plans are less aggressive but more tuned to specific behaviors. For instance, if you manager wanted you to sell duct cleaning, more service agreements, more complete systems, more air treatment products, and more extended warranties, he might set up a 5-bucket program with each bucket holding $2,000. If, at the end of the year, you have met the requirements for one of the buckets, you earn that $2,000 as a bonus. Hit all five, you get a $10,000 bonus check.

In this case, the rules might say, “(1) Sell 10 duct cleaning jobs; (2) sell 50 service agreements; (3) sell 30 complete systems; (4) sell 50 air cleaners, 100 humidifiers, 20 UV lights; (5) sell 25 10-year P/L warranties”. For each bucket you yit, you get a $2,000 bonus at year-end.

I hope this clarifies it for you. Does it?

Richard