What Got You Here Won’t Get You There: When Growth Prompts A Rethinking of Financial Strategy

By: Jeff Heybruck

You’ve probably heard the saying “What got you here won’t get you there.” My CFO role recently gave me the chance to live out this saying in real life.

A salesperson for a long-time fractional CFO client came to their in-house Controller and me to express an issue with his commissions for the 4th quarter. This simple conversation sparked a larger discussion that resulted in a big change to the sales team compensation model.

First, some background.

When I first began working with this client, they were generating $3-5M in revenue and had one salesman. Almost immediately, I spotted a flaw in their commission model: a flat percentage tied solely to revenue. The problem? It rewarded winning any job, not profitable ones, which meant a salesman could boost his win rate simply by underbidding. No one suspected the current salesman of doing this, but as the company grew, we knew a less principled hire might. After some discussion, we redesigned the commission plan.

Some key components of the commission plan we implemented at that time:

• Sales are calculated on cash basis
• Each salesperson is given a sales target
• The commission rate increases from 15% to 20% once the sales target is reached
• Sales are multiplied by the company-wide gross profit to promote a team environment and prevent cherry-picking of the best jobs
• All commissions are paid the following quarter (3Q sales result in 4Q payouts)
• Commissions are calculated cumulatively for the year and then reset each January

Fast forward about 10 years to the first quarter of 2026. By now the company had grown to a sales team of 4 people, grossing between $20-25M.

A salesman came to us saying he felt that he was not being rewarded for his increase in sales.

This was due to sales under the accrual basis for the year being greater than cash basis for the same period. For small business owners without the accounting background, the issue came down to timing. Under the accrual method, sales are recorded when the job is completed, even if the customer hasn’t paid yet. So while his numbers looked strong on paper, the cash hadn’t fully come in. His commission was being calculated on collected cash, which lagged behind.

During the “what-if” analysis the Controller and I went through, we realized that the difficulty in reconciling cash basis commissions to accrual basis financials was resulting in more uncertainty each quarter. Our monthly accruals of the estimated commissions were becoming more and more inaccurate. The monthly accruals had also started resulting in frustrating swings in profitability which were only “discovered” when the financials were issued.

Combine this uncertainty with the concerns over fairly compensating the sales team for their efforts, and it was clear we needed to re-evaluate our decade old commission structure.

Combine this uncertainty with the concerns over fairly compensating the sales team for their efforts, and it was clear we needed to re-evaluate our decade old commission structure.

After a fairly detailed conversation with the sole Shareholder, we decided it was time to change the commission plan to better align with the financials and address the sales team’s concerns. We needed to accomplish both of these things while protecting the company and minimizing the risk of paying commissions for uncollectible invoices or hurt cash flow.

While the overall structure remained the same, making a few key changes resulted in an updated commission plan that seemed to address all of the stakeholders’ concerns.

Key plan changes were:

• Sales are now calculated on the accrual basis
• Include a one-time adjustment to address the “gap” between commissions paid on cash sales for 4Q 2025 and accrual on 1Q 2026
• Implemented a “vesting” plan where 10% of any commissions earned are paid the following quarter to minimize paying for invoices not yet collected
• Any bad debt chargebacks are “deducted” from commissions at the 20% rate regardless of whether they were paid at the 15% (note: this client had exactly one uncollectible invoice last year, so this is likely not going to be a problem)

The result was a complete re-casting of the financials for March of 2026. If April 2026 results are any indication, our new plan will be a good thing for everyone involved.

During our meeting to present the new plan, the owner of the company pointed out to the sales team how it has already benefited them. It has resulted in them collectively making more in 2025 under the cash basis and more in Q1 2026 on the accrual basis, so he couldn’t see how they would object.

Naturally my first instinct when we started this process was to defend the plan I had designed 10 years ago and was proud of. But with a little more wisdom and grey hair, I took the time to listen to their concerns and actually considered its faults.

My internal epiphany was realizing that I didn’t have to start from scratch

My internal epiphany was realizing that I didn’t have to start from scratch, and nor did I have to track individual invoices or collections by customer to accomplish something the sales team, the accounting department, and the owner could all agree on.

In the end, the Controller, owner, and I all settled on the sage advice: “what worked for us at $3M, maybe just isn’t working at $20M+…”

If your systems, plans, or processes haven’t kept pace with your company’s growth, it may be time for a closer look. Lucrum can help you re-evaluate what’s working, what isn’t, and build the Confidence in the Numbers you need to make the next decision.