The Sales Structure Most MSPs Get Wrong
There are roughly 50,000 MSPs in the United States. The managed services market is projected to hit $71.14 billion in 2026, growing at 11% CAGR through 2031, according to Mordor Intelligence. The opportunity is enormous.
So why do so many MSPs stall out between $1.5 million and $3 million in revenue? Why do owners who were brilliant at building the technical side hit a wall when it comes to growth?
It is almost never a service problem. It is almost never a market problem. It is a sales structure problem.
I have watched MSP owners try to scale by doing more of everything themselves. They are the lead technician, the service delivery manager, the vCIO, and the head of sales. They close every deal. They attend every QBR. And they wonder why the business cannot grow beyond their personal capacity.
Then they hire a salesperson. A good one, they think. Someone with IT sales experience and a Rolodex. Six months later, that salesperson is gone, and the owner is back to closing deals alone, minus the cost of a salary that produced nothing.
This story plays out constantly. And it is almost always the same root cause: the MSP built the sales role before it built the sales structure.
The Three Compensation Models (And Why Most MSPs Pick the Wrong One)
CompTIA’s Quick Start Guide to Managing a Managed Services Sales Organization lays out three primary compensation models for MSP sales teams, as documented on the ConnectWise blog:
1. Up-Front (Front-Loaded). The rep gets a large one-time payment based on contract size and term. This model strongly incentivizes selling managed services over traditional IT projects. It turns reps into hunters. The downside: commission gets paid before the revenue is fully realized, which can encourage short-term thinking and poor client fit.
2. Residual (Month-to-Month). The rep earns ongoing monthly payments over the life of the client agreement. This matches commission expense to actual revenue and encourages long-term retention. The downside: slower payout reduces motivation to pursue new business. Reps become farmers with no reason to hunt.
3. Pure Commission. No base salary. Double the commission rate of other models. This is the least common model among successful, large MSPs, according to ConnectWise. The high risk for reps leads to turnover and aggressive sales tactics that damage client relationships.
Here is what most MSPs get wrong: they pick one model and apply it to everyone. That does not work. The right structure depends on the role, the growth stage, and the behavior you are trying to incentivize.
Barracuda’s sample compensation plans for recurring revenue businesses outline three standard approaches to how you calculate the commission base: Annual Contract Value (ACV), Total Contract Value (TCV), and Monthly Recurring Revenue (MRR). Industry standard rates run 8 to 12 percent of ACV, with 10 percent being most common. TCV plans work similarly but include one-time upfront costs in the calculation. MRR models pay a percentage of monthly fees over the contract term.
The specific percentage matters less than the structural alignment. Are you paying for the behavior that drives sustainable growth, or are you paying for activity that looks good this quarter and falls apart in eighteen months?
Hunters, Farmers, and the Handoff That Never Happens
The most effective MSP sales structures I have seen separate the hunting function from the farming function. Not as a theoretical org chart. As actual roles with different compensation models, different quotas, and different success metrics.
Hunters (Account Executives) focus on net new client acquisition. Their compensation is front-loaded with accelerators for hitting quota. They earn higher rates for multi-year deals and bundled services. Their job is to open doors and close deals. When the deal closes, their involvement with that account drops significantly.
Farmers (Account Managers or vCIOs) focus on retention, expansion, and deepening the relationship. Their compensation is tied to net revenue retention, upsell revenue, renewal rates, and client satisfaction. They earn residual-style commissions that reward them for keeping clients healthy and growing account value over time.
This sounds obvious. Most MSP owners will read that and think, “Yeah, I know that.” But when I look at how they actually compensate their people, the structure tells a different story. They have one salesperson doing both jobs, paid on a single model, trying to hunt and farm simultaneously. That person will always default to hunting because that is where the immediate money is. The existing clients get neglected. Churn creeps up. The owner blames the market.
According to Everstage’s 2026 MSP Sales Compensation Guide, the most effective plans use tiered commissions with accelerators. For example: 5% on the first $10,000 of new MRR, 8% beyond that, but only paid after 90 days of client activity. This single detail, the 90-day clawback, changes the rep’s behavior entirely. They stop selling to anyone who will sign. They start selling to clients who will actually stay.
When to Hire Your First Sales Rep
Most MSPs hire too early or too late. The ones that hire too early bring on a salesperson before they have a repeatable sales process. The rep has no playbook, no qualified leads, and no support. They fail. The owner concludes that “salespeople don’t work for MSPs” and goes back to doing it alone.
The ones that hire too late have been the sole sales engine for so long that the business has hit a ceiling. The owner is the bottleneck. Every deal requires their involvement. Growth is flat. The owner is exhausted.
The right time to hire your first dedicated sales role is when you can answer three questions clearly: What does the sales process look like from first contact to closed deal? What does a qualified lead look like for your specific MSP? And what will this person do in their first 90 days that you cannot do yourself?
If you cannot answer those questions, you do not need a salesperson. You need a sales process. Build that first. Document it. Run it yourself until it is repeatable. Then hand it to someone else.
The ConnectWise 2026 Annual IT Solution Provider Compensation Report, covered by Channel Insider, found that hybrid work has become the dominant operating model across the IT services industry, and demand for high-skill consulting roles continues to rise. The labor market for sales talent in the MSP space is competitive. If you are going to hire, you need to offer a structure that attracts people who want to build something, not just collect a paycheck.
The Owner’s Role After the Sales Hire
Hiring a sales rep does not mean you stop selling. It means you sell differently.
In the early stages, the owner should remain involved in the largest deals and the strategic relationships. The sales rep handles the pipeline, the follow-up, and the closing process for standard opportunities. The owner steps in for complex deals, key accounts, and relationship-level conversations that require the authority of the person who built the company.
Over time, as the sales function matures and the team grows, the owner’s role shifts from deal-doer to deal-reviewer. You are checking pipeline health, coaching the team, removing obstacles, and making sure the sales motion aligns with the service delivery capacity. You are not closing every deal. You are making sure the system works.
This is the transition that most MSP owners struggle with. Letting go of sales feels like letting go of control. But holding onto sales is what keeps the business stuck.
What a Mature MSP Sales Structure Looks Like
I want to be clear: there is no single correct org chart. The right structure depends on your size, your growth rate, your service mix, and your market. But a mature MSP sales operation, one doing $5 million or more, typically includes some version of these roles:
Sales Development Representative (SDR). Handles outbound prospecting, lead qualification, and meeting scheduling. Compensated with a base salary plus a fixed bonus per qualified meeting. Their job is to fill the pipeline. That is it.
Account Executive (AE). Runs the sales process from discovery to close. Compensated with a base/variable split, typically 50/50 or 40/60, with tiered commissions on new MRR and accelerators for overachievement. Their job is to convert pipeline into signed clients.
Account Manager or vCIO. Manages the post-sale relationship, drives retention, identifies expansion opportunities, and runs QBRs. Compensated with a base salary plus variable pay tied to net revenue retention, renewal rates, and upsell revenue. Their job is to grow the value of existing accounts.
Sales Engineer (as needed). Supports complex deals with technical expertise, RFP responses, and solution design. Compensated with a base salary plus milestone bonuses tied to supported wins.
The compensation mix shifts as the MSP matures. Early-stage MSPs need hunters. The comp plan should be aggressive on new business. Mid-stage MSPs need to balance hunting with farming. The comp plan should reward both. Mature MSPs need to optimize for retention and margin. The comp plan should penalize bad deals and reward profitable growth.
As Everstage puts it, a great MSP compensation plan does not just pay for sales. It pays for sustainable, profitable growth.
The Mistake I See Most Often
MSP owners treat sales compensation as an HR problem. They look at what other MSPs are paying, pick a number that feels reasonable, and slap together a plan that is part base salary, part commission, and part hope.
Then they act surprised when the rep closes deals with thin margins, sells to clients who churn in six months, or spends all day on activities that do not move the pipeline forward.
Sales compensation is a strategy problem. It is the single most powerful lever you have for shaping how your team behaves. Every dollar of commission is a signal. It tells your people what you value. If you pay the same rate for a one-year deal as a three-year deal, you are telling your reps that contract length does not matter. If you pay the same rate for a high-margin security stack as a low-margin break-fix conversion, you are telling them that profitability does not matter.
Design the comp plan to reward the outcomes you want. Then hold people accountable to the metrics that drive those outcomes.
Start With the Structure, Not the Person
If your MSP is stuck and you think the answer is hiring a salesperson, stop. Start by defining the role. Define the process. Define the compensation model that aligns with your growth stage. Define what success looks like at 90 days, 6 months, and 12 months.
Then hire.
The MSPs that scale successfully do not just add people. They build systems. Sales is a system. Compensation is a system. Onboarding a new rep into a system that does not exist is not a hiring problem. It is a leadership problem.
Get the structure right first. The right person in the right structure will produce results. The wrong structure will eat good people alive.
About Brent Lacy: Brent Lacy has been in the IT industry since 1997. He moved into the managed services world around 2015 and was doing vCIO work before the title even existed. He writes about the operational discipline, trust-based relationships, and strategic thinking that separate MSPs built to last from those built to bill. He is the author of Rewired MSP: Mastery, Scalability and Performance, vCIO Rewired: Virtually Conquering IT Obstacles, and Near Miss: Preventable IT Failures Threatening Your Business Security.
