Why Top Salespeople Should Make More Than Their Managers — And How Smart Companies Profit From It

By Vincent Palomarez

After more than 20 years leading sales teams in Energy, Technology, and Medical Services, I've come to a very clear conviction: your top salespeople should consistently make more than their managers. Not occasionally — as a rule. And far from being bad for the company, this is actually one of the smartest financial decisions leadership can make.

Early in my leadership career, I made a point to be transparent with my reps. I'd tell them directly: "My success is directly tied to yours. If you don't make money, I don't make money. I'm highly incentivized to make sure you crush it."

This simple truth immediately disarms the "me versus the company" mindset that so many salespeople carry.

The Broken Current Model

Most companies are still running a broken incentive system. Ever-increasing quotas regardless of performance, one-year contracts, and compensation plans that fail to reward sustained excellence. The message it sends is clear: Perform better, but we're not going to pay you better.

This isn't just unfair — it's financially shortsighted. It leads to constant turnover, lost institutional knowledge, and inconsistent revenue.

The data backs this up:

• Sales reps stay in role an average of just 18 months.
• SDRs / BDRs often burn out faster — 12–15 months.
• Sales managers average 24–28 months.
• Annual sales turnover sits at approximately 35% — nearly 3× the cross-industry average of 13%.

Companies are constantly training new people, losing institutional knowledge, and resetting customer relationships, only to watch the cycle repeat. The cost to replace a single sales rep often lands between $100,000 and $200,000 when factoring in ramp time, lost pipeline, and recruitment.

Despite these obvious problems, most companies continue using the same broken playbook.

What If There Was a Better Way?

What if I told you there is a compensation structure that allows both the company and the salesperson to win?

A company can apply a hypothetical 25% annual increase in sales targets year on year while maintaining a relatively flat cost of sales percentage. At the same time, the salesperson realizes an equal or greater increase in their earnings year on year — as long as they hit the targets.

This model does exist and can be utilized today.

I have personally refined this model and run it through numerous scenarios across different margin profiles and growth rates to prove its feasibility.

The structure rewards new business strongly in Year 1, then applies a diminishing carryover rate on that same business in future years. The carryover acts as a built-in retention payout, typically spread over a 2- or 3-year span — similar to how many sports contracts are structured.

The company is essentially paying the same dollars, but allocating percentages to future years. Meanwhile, the base contract stays flat year on year. The rep has developed a base revenue to supplement this structure and is incentivized to sell more for future years, knowing the fixed rate any carryover will support a "base growth" in future years while the targets increase.

This removes the "selling more and getting paid less" challenge many companies face today.

Margin Determines the Payout Curve

The exact payout percentages and structure depend heavily on your company's gross margin profile:

• Product-driven companies (35%+ margins) — can support stronger Year 1 payouts to the rep.
• Service-driven companies (20–35% margins) — require a more conservative approach.
• Hybrid service/product models — fall somewhere in between.

The key is letting the margin percentage determine the appropriate cost of sales allocation to the salesperson.

This structure is truly performance-driven. When reps perform, they make significantly more money year-over-year. When they don't, their compensation reflects that reality. The company benefits from better retention of top talent and more predictable revenue growth.

The Bottom Line

Sales is still a relationship and trust business. The best way to build trust with your highest performers is to show them — with both your words and your compensation plan — that their success is genuinely your success.

Companies that understand this and build incentive structures that reward sustained performance will win the war for talent. The ones that continue with the old "increase the quota, flatten the commission" model will keep burning through good people and wondering why their forecasts are inconsistent.

Your top salespeople should make more than you.

That's not being generous. That's being smart.