Your complete guide to sales compensation
Boy, these commission checks are getting out of hand!
Do you have a quota? Do you like to hit gongs? Do you drive a BMW 3 Series or Audi A4?
If you answered “yes” to any of these questions, you’re in the right place.
This post is positioned at the intersection of Sales and Finance. Today I’ll take you through a litany (SAT vocab word!) of compensation topics, and explain why companies set pay up the way they do. And we’ll rely heavily on data from ICONIQ, who dropped an absolute HAMMER of a report on the state of sales rep pay.
Here’s a TL;DR:
OTE: A typical SaaS account executive makes between $235K - $250K in total cash comp (base + variable)
Base vs Variable Split: Most account executives are on 50 / 50 plans, divided between their base pay and variable pay. Account Managers are usually on 60 / 40 or 70 / 30 plans. Variable pay is comprised of Commission, Accelerators, and Spiffs (and entry level luxury watches)
Quota to OTE Ratio: As a rule of thumb, a SaaS rep should have a quota of at least 5x their OTE. This goes up to 7x or more as the company matures, goes up stream, and adds more products.
Commission Rate: A typical base rate paid on a new or expansion deal is 10%. A typical base rate paid on a renewal deal is half that, or 5%
Commission Stack: CFOs look at not just the individual rep’s payout, but everyone involved in the deal. This gets them to a total effective rate as a % of bookings and revenue.
Getting up to speed
Ramp time: Enterprise reps have more time to get up to speed than SMB reps, as their sales cycles and relationship building take longer.
Ramp types: Quota can ramp linearly or in a curved fashion.
Ramp payout structures: Payouts during ramp can be gamed to help the rep (or gamed to help the company hehehe evil finance voice)
Hitting your plan
Over assignment: Companies usually over assign by 20% to 30% to make sure they hit their plans (SHHH! This is a secret!)
Achievement: On average, 7 out of 10 reps hit their quota. If you are one of the 3, there’s always a job at your local airport’s TSA division; they’ll hire just about anybody.
All Gas, No Breaks
Accelerators: Reps can nearly double their base commission rate when they get into accelerator territory, which is over 100% achievement. Get it while the gettin’ is good.
Spiffs: Another way to motivate teams and incentivize them to sell new products or work with new partners. Or as I call them, “fun coupons”.