MSP Sales Compensation Plans: How to Design, Structure & Scale Them in 2025

Introduction

Two MSP founders walk into a boardroom, one’s celebrating record-breaking renewals, while the other’s scrambling to replace three reps who just quit. The difference wasn’t their services or clients, it was how they compensated their sales teams.

That story is more common than you'd think. I've seen MSPs with brilliant offerings struggle to scale simply because their sales reps weren't incentivized to care about what happens after the deal is signed. Some reps chase quick wins. Others push loss-leading bundles just to meet quota. The fallout? Higher churn, thinner margins, and frustrated founders left asking, "What went wrong?"

If you’ve ever questioned whether your current sales comp plan is doing more harm than good, you’re not alone. The way you pay your sales reps directly shapes how they sell, who they target, and whether those deals stick.

In this blog, I’ll break down what makes an MSP sales compensation plan effective, from aligning incentives with recurring revenue to customizing models by role. We’ll explore industry-backed structures, examples, and practical steps you can take to scale sustainably.

Let’s get into it.

What Is an MSP Sales Compensation Plan?

MSP sales compensation plans are structured pay models that align sales incentives with recurring revenue, client retention, and upsell performance. These plans define how managed service providers reward sales roles based on quotas, MRR targets, profit margins, and partner contributions. 

Tiered commissions, SLA-linked bonuses, and role-specific metrics help MSPs scale revenue while reducing churn. A strong plan motivates reps, protects margins, and supports long-term growth.

Unlike typical SaaS compensation plans that often emphasize upfront deal value, MSP comp models must address recurring revenue, gross profit, and client longevity. This means taking into account bundled service deals, tiered commission rates, partner-sourced revenue, and SLA compliance.

For instance, some MSPs implement escalating commission tiers, 5% on the first $10,000 MRR, 8% beyond that, but only release the full payout once a client stays active for at least 90 days. This structure encourages reps to prioritize deal quality over quick wins.

In short, a great MSP compensation plan doesn’t just pay for sales, it pays for sustainable, profitable growth.

Why MSP Sales Compensation Plans Are So Important

In the MSP world, churn is expensive. Signing new clients only to lose them within months drains resources and hurts your reputation. That’s why sales comp needs to do more than incentivize deal closure.

It’s not enough to reward the act of closing a deal. You need to reward deals that are actually worth keeping. A poorly designed plan will push reps to chase volume, regardless of long-term fit. The result? Unsustainable growth, frustrated onboarding teams, and a revolving door of clients.

According to Grand View Research, the U.S. managed services market brought in approximately $79.2 billion in 2023 and is projected to grow at around 12.8% annually through 2030. With roughly 40,000 U.S. MSPs in operation, having a scalable and sustainable sales compensation plan is crucial, not just for hitting quotas but for retaining top talent and growing client value over time.

By contrast, the right compensation plan helps build discipline. It motivates reps to:

• Sell sticky, recurring services over one-time projects.
• Prioritize client fit and contract terms.
• Collaborate with onboarding and customer success.

This alignment builds healthier pipelines and stronger customer relationships. Your sales reps stop selling just to sell, they start selling for impact. And over time, that shift in mindset drives more stable growth, better retention, and a stronger business overall.

Key Components of a High-Performing MSP Sales Compensation Plan

Designing an effective sales compensation plan isn’t just about making your reps happy; it’s about ensuring every dollar you spend on sales incentives brings long-term value to your MSP. 

That means aligning short-term effort with long-term outcomes like retention, margin, and recurring revenue. Here are the foundational elements to build a plan that does just that.

1. Quota and Goal Setting

Start with clear, measurable goals. Instead of focusing solely on deal volume, set targets tied to Monthly Recurring Revenue (MRR), multi-year contract adoption, or customer retention milestones. These goals reflect the real drivers of MSP success and push your team to close deals that actually stick.

2. Commission Structures

Flat commissions might be simple, but they don’t drive smart selling. Instead, tiered commission structures work better. For example, you might offer 4% commission on initial MRR and increase it to 6% after hitting a certain threshold. This not only encourages reps to overperform but also ensures they’re thinking about deal quality. Some MSPs also base commissions on Gross Profit (GP) to prioritize margin protection over top-line revenue.

3. Pay Mix: Base vs. Variable

Your comp mix should reflect the role, market maturity, and complexity of the sale. Junior SDRs in appointment-setting roles often start with a 70/30 base-to-variable mix, while experienced account executives might operate on a 50/50 or even 40/60 split. Adjust these ratios based on risk appetite, territory coverage, and expected ramp time.

4. Accelerators and Bonuses

Accelerators light a fire under high performers. Increase commission rates for reps who exceed quota, say, 1.5x payouts for hitting 120% of target. Bonuses can also reward deal quality or strategic outcomes. For instance, you might offer a one-time bonus for closing a two-year bundled contract that includes both managed IT and security services.

5. Client Retention Metrics

What good is a deal if it doesn’t stick? Retention-based metrics help shift focus from deal speed to deal durability. Many MSPs now delay full commission payments until the client stays active for 90 days or longer. Others make bonus eligibility contingent on renewal rates, rewarding reps who bring in clients that actually stay.

When you bring all these levers together, you create a plan that doesn’t just reward hustle, it rewards high-quality, sustainable growth. That’s the kind of sales comp strategy that sets great MSPs apart.

Types of MSP Sales Compensation Models

When it comes to sales compensation, what you choose to reward is what your team will prioritize. That’s why selecting the right model is more than a financial decision, it’s a strategic one. Whether your goal is fast MRR growth, protecting profit margins, or striking a balance between the two, the compensation model you pick will shape sales behavior.

Below are three common models that MSPs typically adopt, each suited to a different growth stage and business focus:

1. New MRR-Focused Plans

This model is ideal for MSPs in expansion mode, especially those aiming to grow their base of recurring clients. Reps are paid a commission on each new dollar of Monthly Recurring Revenue (MRR) they bring in. The simplicity of this approach helps reps stay laser-focused on landing new deals and building a pipeline.

Many MSPs add layered incentives for selling longer-term contracts or complete service bundles. For example, a rep may earn a higher commission percentage for closing a 24-month contract or bundling helpdesk and cybersecurity services together. These tweaks help shift behavior from chasing small, short-term wins to selling higher-value, longer-lasting deals.

Best For: Early-stage MSPs or those launching new service lines that need a rapid revenue ramp-up.

2. Gross Profit-Based Commissions

In mature MSPs, simply growing top-line MRR isn't enough. The focus often shifts to improving deal quality and protecting margins. That’s where gross profit (GP)-based compensation comes in. Instead of commissions tied to revenue alone, reps earn more for deals that generate higher profit after service delivery costs.

Let’s say two deals each bring in $2,000 MRR. One includes extensive custom onboarding and low-margin pricing, while the other is standardized and profitable. A GP-based model rewards the second deal more, encouraging reps to sell smarter and avoid resource-heavy contracts.

This model also discourages discounting and pushes reps to negotiate better terms. It aligns sales with service delivery and ensures every new customer adds net value.

Best For: Established MSPs focused on operational efficiency and maintaining healthy profit margins.

3. Hybrid Compensation Models

Not every business fits neatly into a single category. That’s why many MSPs adopt hybrid compensation plans that blend multiple incentives. Typically, these plans combine:

• A fixed commission for new MRR
• Bonuses for hitting gross margin thresholds
• Extras for strategic behaviors like landing multi-year deals or cross-selling security packages

For example, a rep could earn 5% on new MRR, a 10% bonus if the deal hits a minimum profit margin, and an additional spiff for bundling three services together. You can also vary incentives by role, paying higher commissions for reps who focus on complex compliance sales versus basic IT services.

The hybrid model gives you flexibility to adapt to different sales motions, service offerings, and revenue priorities.

Best For: MSPs looking to balance growth with profitability and strategic expansion.

Role-Based MSP Sales Compensation Strategies

In an MSP sales team, not all roles drive revenue the same way and your compensation strategy should reflect that. From generating leads to closing high-value contracts and supporting long-term retention, each role contributes a unique piece to the growth puzzle. 

When compensation is tailored to the core responsibilities of each role, motivation and accountability increase, along with results.

1. SDR / Lead Gen Roles

SDRs play a foundational role by generating interest and qualifying leads. For MSPs, where deal cycles are often consultative and multi-touch, a well-incentivized SDR team can significantly impact pipeline health. A typical comp model includes a stable base salary paired with a fixed bonus for each qualified meeting. To balance quantity with quality, you can tier the bonus structure, with higher payouts for meetings that convert into qualified pipeline or booked revenue.

2. Account Executives

AEs are your closers. In MSPs, this means selling not just one-off projects but recurring service packages. Their compensation should drive them to maximize Monthly Recurring Revenue (MRR), contract duration, and margin. A tiered commission system works well here, for example, increasing percentages once they cross 80% or 100% of quota. You can also add accelerators for closing multi-year deals or selling bundled services that include IT management, cybersecurity, or compliance support.

3. Account Managers & CS Teams

Once the deal is closed, it’s the AMs and CS teams who turn new sales into lasting revenue. Their compensation should reflect client outcomes. Tie variable pay to metrics like Net Revenue Retention (NRR), upsell revenue, renewal rates, and client satisfaction scores. 

For MSPs offering strategic services like vCIO support (Virtual Chief Information Officer), you can also introduce performance bonuses (commonly referred to as “spiffs”), short-term incentives awarded for achieving specific goals. For example, you might offer spiffs for increasing Quarterly Business Review (QBR) participation rates or expanding the scope of existing accounts. This ensures CS teams are rewarded for deepening client relationships, not just maintaining them.

4. Sales Engineers / Sales Support

Sales Engineers help AEs win complex or technical deals. Though they don't close deals directly, their influence is undeniable, especially in high-stakes MSP environments with layered compliance or security needs. Reward them with milestone bonuses or team-based spiffs for supporting large wins, enabling faster deal cycles, or contributing to technical RFPs.

Well-designed, role-specific comp plans ensure that every member of your sales team, from prospecting to post-sale, has skin in the game. When each role is incentivized around what they do best, your entire sales engine runs smoother, faster, and more profitably.

How to Design an MSP Sales Compensation Plan

Below is a step-by-step framework to help you design a plan that not only attracts top talent but also drives sustainable success.

Step 1: Define Sales Goals Aligned to MRR and Profitability

Start by asking: what behaviors and outcomes do we want to incentivize? Is it a net-new business acquisition? MRR growth? Higher average contract values? Upsells from existing clients or accounts?

Your goals should reflect the current stage of your MSP. For example:

• A newer MSP might prioritize net-new MRR and logo acquisition.
• A mid-stage firm could focus more on deal profitability and contract length.
• A mature MSP might optimize for retention, expansion, and high-margin services.

Clarity at this stage prevents misalignment down the road.

Step 2: Benchmark Compensation with Industry Standards

You don’t want to lose reps to competitors or overpay to retain underperformers. Use compensation platforms like RepVue or Bravado data to benchmark:

• OTE (on-target earnings)
• Base salary vs. variable pay split
• Commission percentage by role and seniority

It’s also worth comparing by geography, as comp norms differ between urban hubs and regional markets. Aim to stay competitive while preserving your target margins.

But benchmarking is only half the battle, operationalizing your comp plan is where many MSPs stumble. That’s where a tool like Everstage comes in. It not only helps you roll out tailored compensation plans across SDRs, AEs, and CS teams, but also gives each sales representatives visibility into earnings, quotas, and payout timelines, all in real-time. No more shadow spreadsheets or end-of-quarter surprises.

Step 3: Tailor Plan by Sales Role & Territory

Not every sales rep operates the same way. Inside sales reps working inbound leads in saturated markets may need different incentives than field reps hunting outbound in new territories.

Customize your comp plans based on:

• Sales motion (inbound vs. outbound)
• Ramp time and quota attainability
• Deal complexity and buying cycle
• Territory maturity

When reps feel their plan reflects the reality of their work, they’re more likely to stay motivated and engaged.

Step 4: Include Retention and Profit Quality Measures

Closing a deal is just the beginning. You want reps focused on deals that actually stick and make money.

Incorporate safeguards like:

• Delayed commission payouts until a client hits 90 days of active service
• Clawback clauses for early churn
• Bonus eligibility only if the minimum gross margin thresholds are met

These quality checks ensure reps don’t game the system or bring in low-value clients just to hit quota.

Step 5: Test, Track, and Adjust Quarterly

Even the best-designed plans need iteration. Set clear KPIs like quota attainment rates, churn, time-to-ramp, and profit contribution by rep.

Gartner reports that 48% of sales leaders discovered weaknesses in their compensation plans during the pandemic, highlighting the need for regular reviews and agile adjustments to prevent talent churn and revenue gaps.

Schedule quarterly reviews with sales managers to gather field feedback. What’s working? Where are reps getting stuck? Are top performers being properly rewarded?

Use this data to make small but meaningful adjustments. Over time, your plan will evolve into a living, growth-aligned system, not just a spreadsheet.

Bottom line? Your comp plan is one of your biggest levers for growth. Design it with intention, build in feedback loops, and keep optimizing.

Conclusion & Next Steps

A good MSP sales compensation plan does more than just pay your team, it helps you grow your business the right way.

The best plans are simple, clear, and aligned with what really matters: recurring revenue, client retention, and long-term margin. When your sales reps know exactly what they’re working toward and how they’re rewarded, performance improves across the board.

Here’s what to keep in mind:

• Focus on deals that bring steady, recurring income.
  
  
• Adjust compensation based on the role - SDRs, AEs, and AMs need different plans.
  
  
• Encourage retention and upsell by linking commissions to client longevity and profitability.

Sales isn’t just about closing deals, it’s about closing the right ones. The right compensation plan ensures your team stays motivated and your growth stays healthy.

Want help designing a plan that drives results and keeps your sales team on track? Book a demo with Everstage to see how we can help you build smarter sales incentives for your MSP.