Medical Device Sales Compensation: Talk Dollars, Not Points

One of your best reps asks for a meeting. She sits down, skips the small talk, and asks for more points. Or you’re sitting in front of a competitive rep who is getting 40 points from their current manufacturer and you’re thinking, “There’s no way I can afford that.”

What do you do?

Most distributors do one of two things. They say yes, and give away unnecessary margin (sometimes on business they built). Or they say no, and either spend the next six months wondering if she's about to walk to a competitor, or pass on the competitive rep because they assume they never had a chance.

There is a better way.

Most distributors talk about comp in points. It’s the way it has always been done. “They’re coming from a competitor that used to give them 40 points! I’ll only be able to flip them if I give them something close to that!” They do this without considering the average price of the device they’re selling, the volume, or what that means for annual take-home pay.

This makes sense. Most reps are used to thinking in points too. But if you refocus on what actually matters, the dollars, you can build a plan that works for you and for the rep.

I’ll walk through exactly what to say, what to do, and how to avoid the pitfalls most distributors fall into when designing rep commissions. Maybe you’ll even save a little money in the end.

How should a distributor structure medical device sales compensation?

Start with dollars, then translate them into points. Here's the process you can walk through:

1. Ask how much the rep needs to make in a year. Check it against the market and your internal standards. Look at it in both dollars and points. Remember, this is a negotiation, not a guarantee. If it doesn't line up, negotiate. If it does, move on.
2. Tie points to quota attainment. This is where most distributors miss: they’re stuck paying top rates for reps who consistently miss growth targets and get frustrated that they’re overpaying for a “coverage rep” that they thought would sell.
3. Make sure it’s clear how points decrease or adjust over time: new business doesn’t earn additional points forever. When new doctors move into the territory, points adjust to maintain on-target earnings (OTE) expectations.
4. Decide who covers expenses and associates. My rule: whoever brought in the surgeon pays for the associate and the expenses that come with it.
5. Deliver the offer with your rules of engagement written down and agreed to (more on this later).

That's the playbook. It makes sure everyone is on the same page before anyone signs. Here's why each one matters, and where distributors get burned.

Where should you start when building a rep's comp plan?

Start with the dollars, not the points.

In your first meeting, ask the rep for their desired annual comp. It can sound like this: “I know you probably have financial goals. What would your target annual comp be if you took this new role?”

Sometimes, the rep will punt and ask you instead what the job is worth (I usually take this as a good sign, because it’s a smart move). Be prepared to share what someone in this position typically makes, then follow up with, “Does this fit your expectations?”

If the rep decides to talk points instead, say something like, “Products, markets, and companies are so different that it’s hard to make an apples-to-apples comparison with points. I’ve found it’s best to start with annual comp expectations and back into points from there.”

This handles 99% of cases, including the competitive rep coming off a 40-point deal, and gets you both aligned on expectations.

There are two primary things that usually go wrong in these negotiations:

First: paying too much, too early. This often happens when you’re overly excited about the candidate or desperate to fill the role. When you agree to a number that’s too high, there’s no room left to grow, and they'll be constantly unhappy unless they find a way to get a promotion or a pay bump.

Second: paying too little. That one's simple. You've made it far easier for a competitor to hire them away.

Get the starting number right, then give a few smaller raises early on (as the rep earns them). Each one gives them a feeling of momentum. It sets the stage for them to feel successful at your company.

One more thing. Whenever possible, use a standard comp plan across your entire sales team. This avoids gossip and hurt feelings in the future, because we all know reps will go out for drinks and eventually divulge what they're making. When they do, you want each person to feel like they got a fair deal.

How many points should you pay on inherited vs. new business?

Pay more on new business than on inherited business, and tell the rep up front exactly how the new-business rate steps down over time.

It’s probably obvious that it’s much harder to bring in a new surgeon than to maintain a current one. But a lot of distributors make the mistake of setting a high new-business rate and leaving it there forever. A few years later, that surgeon is just another account the rep covers, and you're still paying the premium. Of course, that’s only a problem if your team is selling new business in the first place. If they aren’t, I wrote a whole post about that: How to Get Your Medical Device Reps to Sell.

Build the step-down into the offer. Say you pay 8 points to cover inherited business and 17 points on new business. Make sure the rep knows up front that it’s 17 in year one, 15 in year two, and a floor of 12 in year three.

The step-down also keeps the rep hungry. The best way to keep their income growing is to go find more new business.

For inherited business, figure out what it's worth to you to have it covered as an annual dollar amount and whether a rep could support themselves on it. If it’s not worth it, figure out which surgeons you can group together that the rep can also cover. Remember, geography is also a factor: if a rep has to drive an hour between hospitals to cover a case, far fewer cases can be covered, so you’ll have to adjust coverage expectations and potentially sacrifice some additional margin.

Who should pay for a rep's associate?

Whoever brought in the surgeon pays for the associate. That's the easiest and cleanest answer.

Here's why. If it's my business and I pay you to cover it, and then you need help covering it, that usually means the physicians I had you cover are getting busier. I should pay.

If you brought in your own doctor, it's up to you to figure out how to pay for the associate. That's why the distributor gives you more points on new business. That floor of 12 to 15 points should be high enough that the rep can hire an associate and still make a good margin, while still having every reason to go find more business.

Set this as a policy before you hire anyone. It's not a negotiation.

And if you pay for the associate and own that relationship, it's harder for the associate to leave if your rep leaves and tries to flip the business.

There's one more reason to help pay. Reps won't sell unless they have the time to sell.

One distributor I've advised handles this better than almost anyone. They pay the full cost of a rep's associate for the first six months. Then 75%. Then 50%. By year two, nothing.

I like this for a few reasons. The slow taper gives the rep a reason to grow the value of their business before the bill becomes theirs. The time the associate frees up should go straight into winning new business. It also shows the rep you're willing to invest in the business.

What sales policies should you set for medical device sales reps?

These are the policy questions (rules of engagement) that you should answer up front, before they become arguments:

• How are new leads handled?
• When a new surgeon moves into the territory, how do points adjust?
• How does quota increase over time, and how do points change with it?
• How does the new-business rate step down, and where is the floor?
• When multiple people help win a deal, how are points decided?
• How do you decide whether the distributor or manufacturer won the business instead of the rep, and how does that change what's paid on it?
• Who pays for trips, dinners, visits to corporate, trainings, etc.?

Decide every one of these before you deliver the offer, and get the rep to agree to them. They're policies, not negotiations, and every one you settle now saves you a headache later.

I keep all of these in one document that every rep sees before they sign. I'll give you my template at the end of this post.

How should you pay a sales manager at a distributorship?

If you’re big enough to hire a sales manager, we should talk, because this is where things get tricky. For a manager, I typically recommend a 50/50 split between a guarantee and commission, with the commission tied to their team's total quota.

Here’s the philosophy and the math:

The guarantee pays for the management work. The commission pays for quota attainment.

Depending on the size of the business, add a commission cutoff. For example, if the team finishes below 80% of quota for the month or quarter, the manager earns no commission. Above 80%, they earn the points that line up with the total annual comp target you agreed to.

Here's how that looks. Say you and your manager agree on $300K a year in on-target earnings (OTE). $150K is the guarantee, and $150K is target commission at quota. If the quota for the territory they manage is $15MM for the year, you pay the manager 1 point across their territory at quota.

If you also want to reward them for the company hitting its goal, split the commission between their territory and the company. This also fosters collaboration across multiple managers. Make sure they earn the majority of their comp on what they can most impact: their own territory. For example, 75% of the commission rides on their territory and 25% on the company. In a business doing $50MM in topline, with one manager covering a $15MM territory, it can look like this:

• Guarantee: fixed, $150,000
• Territory commission: 0.75 points on $15MM = $112,500
• Company commission: 0.075 points on $50MM = $37,500
• On-target earnings: guarantee plus commission at quota = $300,000

I'm also a fan of accelerators or flat bonuses when they beat quota. They can keep managers from sandbagging deals into the next quarter.

What I don't do is pay managers a different rate on new business. If new business comes in but they lose business somewhere else that year, the two can cancel out. The objective is to hit quota, not just to bring in new business. If their territory grows, have a policy in place that allows their points to adjust so their pay stays in line with the OTE you agreed to. That belongs in the manager's written comp plan, and I'll share a checklist for building one at the end of this post too.

Whatever you do, keep it simple enough to get excited about.

Why should you talk take-home pay instead of points?

Because a fraction of a point can mean six figures in take-home pay, and take-home pay is what reps care about. Look at that breakdown again: 0.75 points.

To a rep used to 10, 20, or 40 point revenue shares, 0.75 points looks like an insult. Most of the reps my principals work with flinch when they first see it.

Now look at what it pays. $112,500, on top of a $150,000 guarantee. That's a lot of income for anyone.

Fractions of a point look small, but they equal big dollars at the territory or company level. It's one of the biggest shifts distributors need to make, and one they find very difficult. Sell the take-home pay, not the points.

When should you use a guarantee?

For managers, the guarantee is part of the plan, like the 50/50 split above. For everyone else, use one only in extreme circumstances or for a new associate, and only until they can cover the business.

At that point you can convert them to points that balance their take-home pay needs and what your competitors pay.

So why do guarantees hang around for years? Because distributors are afraid to have the conversation. It's the same fear that makes the "more points" meeting so painful.

The fix is to have the conversation before they sign. Make it clear in the offer that the guarantee ends in six months to a year, and there's nothing to argue about later.

What should you do when a rep asks for more points?

So, your rep is sitting across from you, asking for more points. Answer in dollars: find out how much more she needs to make, compare it to the market and your team, and decide between a raise, a bonus, something other than money, or a no.

Your prep starts before the meeting. Check two things first: what your competitors pay, and what the rest of your team makes. Then:

• If she's below market and below your company rates, give her what's fair and in line with the company and the market.
• If she's a great team player and there's competitor risk, ask how much more money she needs to make in a year. Pull up what she made last year and what she's on track to make this year, and ask how much more she needs. If it's reasonable, offer a dollar bonus, not points, and tie it to goals or metrics you want her to hit or improve.
• If the number isn't reasonable, or she's already well above the rest of the team, offer something other than money: a title change, more responsibility, or help from an associate. These often go a long way. If nothing else is on the table and you are in a highly competitive position (great product, great culture, etc.), encourage her to interview elsewhere to see what it’s like at other companies. 95% of the time when I’ve done this, reps come back with renewed excitement and commitment.
• If she isn't in good standing, or there's no way to justify an increase, tell her you can't, because she's already above the market and the team. Tell her you'd prefer she stay (if that's true), but you'll understand if she needs to interview elsewhere.

The key to having a strong working relationship with your reps and maintaining a strong negotiating position is to start with a strong foundation of culture, training, product, and brand. One distributor I know learned this too late:

He told the rep no when she came to ask for more points. The rep threatened to leave. In the end she didn't leave, but she created a lot of problems.

The points were never the real issue. The rep was a poor culture fit to begin with. And the distributor hadn't laid the groundwork of adding enough value or building a strong culture, so when the moment came, he didn't have much negotiating ground.

Build culture first and hire well, and these conversations get easier. If you don't, people will turn their unhappiness into asking for more pay. A bad culture and bad hires are very expensive in the long run.

The best version of this meeting is the one that never happens. Give raises before people ask. A smaller raise given before it's asked for generates a huge amount of goodwill. It builds trust and loyalty, and it shows you're an observant leader.

And when money isn't the answer, don't underestimate a title. It may not mean much to you, but everyone loves to go home and tell their husband, wife, mom, or dad that they got a promotion.

Nobody goes home and tells their family they got 0.75 points. They tell them what they're making, and what they've become. Talk dollars, not points.

Frequently asked questions

What is on-target earnings (OTE) in medical device sales?

OTE is what a rep or manager earns in a year if they hit 100% of quota: their guarantee or base pay plus their target commission. A manager with a $150K guarantee and $150K in target commission has an OTE of $300K.

How many points do medical device reps get paid?

In my experience, in mature markets and companies, around 8 points on inherited business. New business pays more, typically somewhere between 12 and 20 points, with a step-down spelled out up front, like 17 in year one, 15 in year two, and a floor of 12 after that. Your margins and your market decide the real numbers.

Should every rep be on the same comp plan?

Whenever possible, yes. Reps talk about what they make, and separate deals create complaints when they find out.

Should sales managers get a higher rate on new business?

No. New business can be canceled out by losses elsewhere. Pay managers on their team hitting quota, and add accelerators for beating it.

How long should a guarantee last?

For associates and special circumstances, only until the person can cover the business, and no longer than six months to a year. Put the end date in the offer. Managers are different: their guarantee is a standing half of a 50/50 plan.

What should a rules of engagement document include?

Expense and approval rules, territory and deal ownership, how new leads and new surgeons are assigned, how points are split when several people help win a deal, how new-business points step down, who pays for associates, and when guarantees end.

Get my rules of engagement template

Every policy in this post belongs in one document your reps see before they sign. This is the template I use with distributors. It covers compensation and step-downs, expenses and approvals, territory and deal ownership, and associates, with blanks for your own numbers. Hiring a manager? Grab my manager comp plan checklist too.

Get the rules of engagement template

About the author

Chris Leithe is the founder of Leithe Labs and a strategic advisor to medical device distributor principals and high growth CEOs. The medical distributors he advises are responsible for almost $200MM in revenue and several are in the top 10 for their manufacturers. Before that, he helped scale ShareFile’s sales team from 30 to 300 and helped grow Adwerx from $10MM to $27MM in revenue, and built the sales process for an SF based healthcare tech company that sold to PE for $200MM. Chris primarily advises medical distributors, tech companies, and services companies on revenue growth and leadership.