Sales Representative Agreement: Commission Structure and Territory Rights (Consulting Services)

Independent sales representatives and commission-based consultants live and die by two deal terms: how you get paid and where you’re allowed to sell. If either is vague—or worse, missing—you can spend months building a pipeline only to discover (1) you’re not owed commission on renewals, (2) you don’t get paid until the client pays, (3) the company can reassign the account, or (4) another rep can sell into “your” region.

This post breaks down the key provisions in a sales representative contract for consulting services—especially commission structure and territory rights—from the perspective of the service provider (the company engaging you). You’ll also see practical drafting tips that help protect both sides and avoid common commission disputes. If you’re searching for an independent sales rep agreement template, consider this a roadmap for what that template should actually include.

Disclaimer: This article is educational and not legal advice. Contract needs vary by jurisdiction and business model.

---

Why a Sales Representative Agreement Matters in Consulting

Unlike product sales, consulting services often involve:

• Custom scopes of work and variable pricing
• Longer sales cycles and multi-stakeholder approvals
• Renewals, expansions, and change orders
• Delivery risk that affects client satisfaction and retention

That complexity makes a generic “commission sales agreement” risky. A well-drafted sales representative contract clarifies:

1. What counts as a sale (and when it’s “earned”)
2. How commission is calculated
3. When commission is payable
4. What happens with renewals, upsells, and churn
5. Where the rep can sell and whether they’re protected

If you’re an independent rep, clarity helps you forecast income and plan your pipeline. If you’re the service provider, clarity helps you control margins, prevent double-paying commissions, and reduce litigation risk.

---

The Core of the Deal: Commission Structure

Commission terms are where most disputes originate. In consulting, commission design should reflect both revenue timing and delivery reality.

1) Define Commission “Base”: What Revenue Counts?

Start by defining the commissionable amount—the “base.” Common options include:

• Gross contract value (GCV): Total fees in the signed agreement
• Net revenue: Fees actually collected, excluding refunds/credits
• Gross margin: Fees minus delivery costs (more complex, but margin-protective)

Best practice for consulting service providers: Use net collected revenue or a hybrid approach (e.g., 50% at signature, 50% as collected) to reduce exposure if the client delays payment or cancels early.

Contract language concept (plain English):

• “Commission is calculated on Net Fees Collected, excluding taxes, pass-through costs, travel reimbursements, refunds, credits, and amounts written off.”

Typical exclusions in consulting:

• Sales tax/VAT
• Payment processing fees (sometimes)
• Client-paid expenses and reimbursements
• Subcontractor pass-through amounts
• Discounts approved by the company (or include them, but define how)

2) Commission Rate: Fixed, Tiered, or Blended

Most consulting sales rep arrangements use one of these:

• Fixed percentage: Simple and predictable
• Tiered accelerator: Higher % after hitting revenue thresholds
• Deal-based rate: Rate varies by service line, margin, or sales cycle length

Example tier structure:

• 8% on the first $250,000 in annual net collected fees
• 10% on the next $250,000
• 12% above $500,000

Tiered structures can motivate performance while protecting margins at lower volumes.

3) Trigger: When Is Commission “Earned” vs. “Payable”?

This is the single most important drafting distinction.

• Earned: The rep has satisfied conditions to be entitled to commission
• Payable: When the company must actually pay it (often after client payment)

A service provider will often define “earned” as requiring:

• A signed agreement and
• Client payment (or at least the first invoice paid) and
• No cancellation within a short rescission window

A rep will want “earned” tied to the signed contract to avoid being penalized for invoicing delays outside their control. A fair compromise is to:

• Earn commission upon signature (if the rep sourced and closed)
• Pay commission as funds are collected (monthly/quarterly)

This is common in a commission sales agreement for services, where cash flow matters.

4) Payment Timing and Reporting

Spell out:

• Commission calculation schedule (monthly, quarterly)
• Payment date (e.g., within 15 days after month-end)
• Statement delivery (commission report showing invoices collected and applied rate)
• Audit rights (limited but meaningful for the rep)

Tip for service providers: Consider adding a short window for disputes (e.g., “Rep must raise questions within 30 days of statement”).

5) New Business vs. Renewals vs. Expansions

Consulting accounts evolve. Your sales representative contract should separate:

• Initial engagement: first SOW/MSA signed
• Renewal: extension of time or repeat SOW for same service
• Expansion/upsell: increased scope, new business unit, added services
• Cross-sell: different service line sold to same client

Common approaches:

• Full commission on new business, reduced commission on renewals (e.g., 30–50% of new business rate)
• Commission on expansions only if the rep materially participated in the upsell
• Commission sunsets after a defined period (e.g., 12–24 months from first contract)

For the service provider, the key is avoiding perpetual commission on an account the rep no longer services.

6) Splits, Referrals, and Team Selling

If multiple people touch a deal—an SDR, a partner, a channel affiliate—define:

• Who gets credit for sourcing vs. closing
• Split rules and who approves them
• What happens if the account was already in the CRM

Ambiguity here creates internal conflict and expensive disputes.

7) Chargebacks, Refunds, and Nonpayment

Consulting projects can be paused, disputed, or partially refunded. Your agreement should specify:

• If commissions are reversed when client payments are refunded
• How partial refunds are treated
• Whether the rep bears any risk of client nonpayment

Service providers typically want the right to claw back on refunds/credits. Reps often accept chargebacks only if the refund occurs within a defined period (e.g., 90–180 days).

8) Discounts and Deal Approval

A common margin leak: reps discounting to close. Add:

• Discount approval thresholds
• Commission calculated on discounted price (usually yes)
• Whether commission is reduced further if margin drops below target

This keeps incentives aligned with profitability.

---

Territory Rights: The Other Half of Your Income Security

A sales rep contract with territory is about focus and fairness. If you’re expected to invest time in relationship-building—especially in consulting—then territory rights prevent the company from reallocating your prospects at the last minute.

1) What Is a “Territory” in Consulting?

Territory can be defined by:

• Geography (state, country, region)
• Industry vertical (healthcare, fintech, manufacturing)
• Account list (named accounts)
• Channel type (enterprise vs. SMB, public sector, partnerships)

In consulting, named accounts or industry-based territories are often more practical than pure geography—especially with remote delivery.

2) Exclusive vs. Non-Exclusive Territory

• Exclusive: Only you can sell to clients in the territory (with carve-outs)
• Non-exclusive: Company can sell directly or use other reps

Exclusive territory usually requires performance commitments (minimum sales targets). Service providers may prefer non-exclusive but can still offer protection via rules of engagement.

Balanced option: “Soft exclusivity”

• Rep has primary rights if they register the lead and actively pursue it
• Company may reassign if the rep is inactive or misses milestones

3) Lead Registration and Account Ownership

To avoid “who found the client?” fights, include a lead registration process:

• How to register (CRM entry + email notice)
• What info is required (client name, contact, opportunity summary)
• When registration expires (e.g., 90–180 days if no meaningful progress)
• What constitutes meaningful progress (meeting held, proposal delivered, etc.)

This is often the real enforcement mechanism behind a sales rep contract with territory.

4) Carve-Outs: Existing Clients, Strategic Accounts, and Inbound Leads

Most service providers will carve out:

• Existing clients already under contract
• Accounts already in active discussions
• House accounts (global enterprises managed by leadership)
• Inbound leads from marketing (sometimes shared or split)

For independent reps, the key is transparency: an attached exhibit listing excluded accounts or a clear definition of “existing client.”

5) Territory Changes and Reassignment

Service providers want flexibility; reps need predictability. Address:

• The company’s right to change territory with notice
• Whether changes apply prospectively only
• How pipeline opportunities are handled after reassignment
• Commission protection for deals already sourced

A fair structure:

• Territory may change with 30 days’ notice
• Rep keeps commission eligibility for registered opportunities originated before the change (for a limited time)

6) Non-Circumvention and Direct Sales by the Company

Even in non-exclusive arrangements, reps often ask for non-circumvention language: if they introduce a client, the company can’t bypass them to avoid commission.

Service providers can agree but with guardrails:

• Rep must be the “procuring cause” (or meet defined activity requirements)
• The deal must close within a set period
• Rep must comply with processes (registration, documentation)

---

Key Clauses That Support Commission + Territory Terms

A strong sales representative contract doesn’t treat commission and territory as isolated sections. Several other clauses determine whether those rights are real.

Scope of Services and Sales Activities

Define expectations: prospecting, meetings, proposal support, trade shows, CRM updates, weekly pipeline calls.

Independent Contractor Status

Clarify:

• No employment relationship
• No benefits
• Tax responsibility
• No authority to bind the company

This matters for compliance and misclassification risk.

Non-Disclosure and IP

Consulting proposals often include methods and pricing strategy. Protect confidentiality and clarify ownership of materials.

Non-Solicitation / Non-Compete (Where Enforceable)

Be careful—restrictions vary widely by jurisdiction. Service providers in consulting often use narrower:

• Non-solicit of clients and employees
• Confidentiality and non-use
• Limited non-compete if legally permitted (and tailored)

Term, Termination, and Post-Term Commissions

Termination is where commission disputes spike. Specify:

• Term length and renewal
• Termination for cause vs. convenience
• Whether rep is paid on deals “in progress”
• Post-termination commission window (e.g., 60–180 days for deals sourced pre-termination)

Service providers often use a “tail” only for registered opportunities.

Dispute Resolution and Governing Law

Choose the venue and method (court vs. arbitration). Independent reps may prefer arbitration for speed; service providers may prefer courts for injunctive relief on confidentiality.

---

Common Pitfalls (and How to Avoid Them)

Pitfall 1: “Commission on Revenue” Without Defining Revenue

Fix: define net collected fees and list exclusions.

Pitfall 2: Territory Defined as “North America” With No Process

Fix: use named accounts/lead registration and carve-outs.

Pitfall 3: No Rule for Renewals and Expansions

Fix: create separate rates and a commission sunset.

Pitfall 4: No Clarity on Who Owns Inbound Leads

Fix: specify whether inbound is house, shared, or assigned by rotation.

Pitfall 5: Termination Clause That Silently Eliminates Earned Commissions

Fix: distinguish earned vs payable; clarify payment schedule after termination for earned commissions.

---

Practical Checklist: What to Confirm Before You Sign

Whether you’re using an independent sales rep agreement template or reviewing a custom draft, confirm these items in writing:

1. Commission base (net collected? gross? margin?)
2. Commission rate and any tiers/accelerators
3. When commission is earned and when it’s paid
4. Treatment of renewals, expansions, and change orders
5. Refunds/chargebacks policy
6. Deal registration process and expiration
7. Territory exclusivity (or lack thereof) and carve-outs
8. Rules for inbound leads and existing accounts
9. Post-termination commission “tail”
10. Reporting cadence and dispute window

If any of these are “we’ll figure it out later,” you’re signing up for risk.

---

Example Structures (Consulting Services)

Example A: Net Collected + Monthly Payout

• 10% commission on net fees collected
• Paid monthly within 15 days after month-end
• 50% rate on renewals for 12 months
• Chargebacks apply to refunds within 120 days

Example B: Split Trigger to Balance Cash Flow and Certainty

• Earn 50% of commission at signature
• Earn 50% upon first invoice paid
• Pay within 30 days of each earning event
• No commission on pass-through subcontractor costs

Example C: Territory via Named Accounts + Lead Registration

• Non-exclusive territory by industry vertical
• Lead registration grants 120-day protection
• If proposal delivered, protection extends to 180 days
• Reassignment allowed after inactivity, with written notice

These can all be implemented in a well-drafted commission sales agreement tailored to consulting.

---

Conclusion: Put Commission and Territory in Writing (Precisely)

For independent reps and commission-based consultants, your contract is your compensation system. For service providers, it’s your control system. The best sales rep contract with territory makes incentives clear, prevents overlap, and avoids paying twice for the same revenue—while still motivating strong performance.

If you’re drafting from scratch or adapting an independent sales rep agreement template, ensure your sales representative contract nails: (1) the commission base and triggers, (2) renewals/expansions rules, and (3) territory rights supported by lead registration and carve-outs. If you want to generate a tailored agreement faster—without starting from a blank page—consider using Contractable, an AI-powered contract generator at https://www.contractable.ai.

---

Other Questions to Keep Learning

• What is the “procuring cause” doctrine, and should it be included in a sales representative agreement?
• How do you structure commission on multi-year consulting contracts: upfront vs. as collected?
• What’s a fair commission rate for selling consulting services vs. software or products?
• How should a sales rep agreement handle channel partners and referral fees?
• What is a reasonable post-termination commission tail for consulting deals?
• How do lead registration clauses work in practice, and what evidence should reps keep?
• Can a service provider change a rep’s territory mid-term, and what protections are typical?
• Should commission be calculated on gross revenue or gross margin for high-delivery-cost engagements?
• What clauses help prevent misclassification issues for independent contractors?
• How do non-solicitation and confidentiality clauses differ for consulting vs. product sales?