
Non-Recoverable Draw
A non-recoverable draw, often called a non-recoverable draw against commission, is a common element of sales commission plans.Continue Reading
What is a recoverable draw?
There are two different types of sales commission draws– recoverable and non-recoverable. A recoverable draw against commission is money paid to a sales rep paid from the future commission they earn.
A recoverable draw offers financial support to new or first-time sales reps while they build out their pipeline and get up to speed in their role. By providing advancements on commission, the company helps to ensure that reps are able to cover their basic living expenses while still focusing on growing their business.
As previously mentioned, in some commission-based compensation plans, the sales team can borrow against future earnings to maintain a more stable income. This is called a draw against commission. There are two types of draws—recoverable and non-recoverable.
Both types of draws are intended to help sales reps earn a livable wage during ramp periods, seasonal lows, long sales cycles, and any other time when it becomes difficult for reps to earn commissions to cover their living expenses.
For recoverable draws, the salesperson pays the balance they owe from previous draws as soon as they start earning commission. The amount they owe is taken from the commission they earn. Once their draw balance has been paid off entirely, they will receive the full amount of their commission.
A non-recoverable draw is a loan that can be taken out to help you make a living. Unlike a recoverable draw, a non-recoverable draw does not need to be paid back in the next pay period and does not carry over as debt. You can think of a non-recoverable draw as a guaranteed minimum commission payment.
In this example of a recoverable draw, let’s pretend this is the pay for an established AE. The company has instituted a draw amount of $2,000.00 to offer some stability for reps during seasonal low periods. Here’s what that would look like in practice:
We’ve seen a lot of different sales compensation plans during the implementation of Spiff at our clients. Sometimes they want a quick and easy translation from spreadsheets to our object-oriented system or they’re desperate to motivate their reps and ask our advice on how exactly we would do that. While every company has unique needs that fit their situation, our friends at SaaStr have put together a template for SaaS companies to follow.
Spreadsheets are amazing. They have made handling complex mathematical scenario modeling available for everyday people. Through spreadsheets, anybody can handle huge amounts of data from multiple sources, easily manipulate the data, do calculations, summarize, and visualize the results. The learning curve to get started is extremely low, and the possibilities of what you can do are nearly limitless.
As an entrepreneur, I have brainstormed for startup ideas so many times, I’ve lost count. If you’re like me, you’ve probably done a lot of this too. Over the years, I started noticing that what I really wanted to find was an “aha” experience. The exercise became a bit like solving a puzzle.
In the 1970s and 1980s, management consultants used a puzzle to foster creative thinking with clients.