RSUs, Commissions, and Cash Flow: How Sales Comp Really Works

The Mixed Compensation Problem

Software sales compensation is complex. It's not just base salary and commission. It's base salary, commission, accelerators, RSUs, options, bonuses, and more.

Most salespeople don't understand how their compensation really works. They don't understand RSUs vs cash timing. They don't understand tax implications. They don't understand how to plan with mixed compensation.

Here's how sales compensation really works — and how to plan for it.

Understanding Base, Commission, and Accelerators

Sales compensation has three main components:

Base salary: Fixed income you receive regardless of performance. This is your foundation.

Commission: Variable income based on quota achievement. This is your upside.

Accelerators: Increased commission rates when you exceed quota. Common accelerators are 1.5x or 2x commission rate at 150% of quota.

How it works: You earn base salary plus commission. If you exceed quota, accelerators kick in and you earn more commission.

The math: If your OTE is $150,000 (50% base, 50% commission) and you hit 150% of quota with 2x accelerators, you might earn $225,000+.

Why it matters: Understanding base, commission, and accelerators helps you plan your finances and negotiate better.

RSUs vs Cash: The Timing Problem

RSUs (Restricted Stock Units) are different from cash compensation. They create timing problems.

RSUs: Company stock that vests over time. You receive shares, not cash. You can't spend them until they vest and you sell them.

Cash: Commission and base salary paid in cash. You can spend it immediately.

The timing problem: RSUs vest over 4 years typically. You might receive $50,000 in RSUs, but you can't spend them for 4 years. This creates a cash flow problem.

The solution: Plan with cash, not RSUs. Don't count RSUs as income until they vest and you sell them.

Why it matters: RSUs are paper wealth until they vest. You can't spend paper wealth. Plan with cash.

Tax Implications Salespeople Often Miss

Sales compensation has unique tax implications:

Commission taxes: Commission is taxed as supplemental income at 22% federal (or 37% if over $1 million). This might not be enough if you're in a higher tax bracket.

RSU taxes: RSUs are taxed when they vest. You'll owe taxes on the value of the shares when they vest, even if you don't sell them.

Capital gains: If you sell RSUs after they vest, you'll owe capital gains tax on any appreciation.

State taxes: State taxes vary by state. High-tax states can add 5-13% to your tax burden.

The solution: Set aside 30-40% of commission for taxes. Plan for RSU tax obligations when they vest.

Why it matters: Tax surprises are expensive. Understanding tax implications helps you plan better.

Planning With What's Liquid, Not What's "Earned"

Plan with what's liquid, not what's "earned."

Liquid: Cash you can spend immediately. Base salary, commission checks, cash bonuses.

Earned but not liquid: RSUs that haven't vested, options that haven't been exercised, future commission.

The problem: Many salespeople plan with "earned" income, including RSUs and future commission. But you can't spend what isn't liquid.

The solution: Plan with liquid income only. Base your lifestyle on cash you can spend today, not paper wealth.

Why it matters: You can't spend RSUs until they vest. You can't spend future commission until you earn it. Plan with cash.

Avoiding Golden Handcuffs Without Planning

RSUs can create "golden handcuffs" — you stay at a company because of unvested RSUs, even if you want to leave.

The problem: If you leave before RSUs vest, you lose them. This creates pressure to stay, even if you're unhappy.

The solution: Plan for RSU vesting. Understand what you'll lose if you leave. Build financial runway so you can leave if needed.

Why it matters: Golden handcuffs limit your career options. Financial planning helps you avoid them.

The Practical Framework

Here's a practical framework for planning with mixed compensation:

1. Understand your compensation structure:

Base salary (fixed)
Commission (variable)
Accelerators (upside)
RSUs (paper wealth)
Options (paper wealth)

2. Plan with liquid income:

Base salary
Commission checks
Cash bonuses
Don't count RSUs until they vest and you sell

3. Set aside taxes:

30-40% of commission for taxes
Plan for RSU tax obligations when they vest
Set aside in separate savings account

4. Base lifestyle on base salary:

Don't finance lifestyle on commission or RSUs
Base your lifestyle on cash you can count on

5. Treat RSUs as bonus, not income:

Don't count RSUs as income until they vest
When they vest, treat them as bonus income
Use for savings, investments, or rewards — not lifestyle

What to Do With RSUs

Here's what to do with RSUs:

When they vest:

Sell immediately to diversify (don't hold company stock)
Set aside taxes (you'll owe taxes on the value when they vest)
Use proceeds for savings, investments, or rewards

Why sell immediately: Holding company stock creates concentration risk. You already have income risk tied to the company. Don't add investment risk.

The exception: If you believe the stock will appreciate significantly and you can afford the risk, you might hold some. But be conservative.

The Bottom Line

Sales compensation is complex:

Base, commission, accelerators: Understand how each component works
RSUs vs cash: Plan with cash, not RSUs. RSUs are paper wealth until they vest
Tax implications: Set aside 30-40% for taxes. Plan for RSU tax obligations
Liquid vs earned: Plan with liquid income, not "earned" income
Golden handcuffs: Plan for RSU vesting. Build financial runway to avoid handcuffs

Why it matters: Understanding compensation helps you plan better, negotiate better, and avoid financial mistakes.

The framework: Understand your compensation structure, plan with liquid income, set aside taxes, base lifestyle on base salary, and treat RSUs as bonus income.

The sales professionals who build lasting wealth aren't the ones who count RSUs as income. They're the ones who plan with cash, understand tax implications, and avoid golden handcuffs.

That's how you turn mixed compensation into lasting financial security.

Disclaimer: This content is for informational purposes only and does not constitute financial, tax, or legal advice. Compensation structures, RSUs, and tax implications vary by company, location, and individual circumstances. You should consult with qualified compensation professionals, tax advisors, or financial advisors before making any compensation-related decisions. Individual circumstances vary, and this information may not be suitable for your specific situation.