Your Complete Guide to Sales Rep Compensation - Part I: Designing Comp Plans

March's three part series on sales rep compensation planning at startups

Welcome to our March series on Sales Compensation.

I was going to hold out on ya’ll until December to drop this blockbuster series. But I realized people want BANGERS. They want HITS. And they want them NOW.

Kanye West doesn’t just sit on an album until December because he thinks it’s the right “time” to drop.

No; he calls up Ty Dolla $ign and says let’s assign some damn quota.

You can delay your gratification in other areas of life, BUT THE METRICS SHALL NOT WAIT!

Part I: Designing Rep Comp Plans

• Who’s involved in comp plan design

• Getting the split right: Base vs Variable

• Quota to OTE ratio

• Baselining achievement

• Accelerators

• Paying sales managers

• A case study: Salesforce’s early comp plans

• What counts as a booking?

• Comp plan flaws

Part II: The Art and Science of SPIFFS

• Why do spiffs succeed or fail?

• When’s the best time to run a spiff?

• How should you structure spiffs?

• What do common rewards look like?

Part III: Commission Stack Benchmarking

• What percentage should an Account Exec (AE) make on a deal?

• How much should the rep’s manager, SE, and BDR make?

• What does a “good” total commission stack look like?

• Does this differ based on pricing model?

Source: ICONIQ

Comp Plan Design

There are three parties involved in designing rep comp plans:

1. People Operations - Market comp benchmarking

   1. What’s competitive for talent?

2. FP&A - Guard rails

   1. What are we trying to achieve from a topline perspective, and what are we willing to spend to get there?

3. RevOps - Ground game

   1. What will actually motivate and drive the right behavior on the ground when it comes to rep activity?

All three parties need to have a firm understanding of the organization’s high level goals and how the company monetizes its product. And they need to be consistent when they communicate objectives to reps so they can manage their time accordingly.

Getting the split right

• The technology account executive is typically on a 50/50 plan.

• When you get outside of concentric circles of sales supporting roles, a Sales Development Rep may be 65 base / 35 variable.

• An account manager might carry a hybrid quota of existing customers plus new customers. And maybe it’s 55% or 60% base.

• If you are a people manager of account executives you will still be close to 50/50, but measured against a more forgiving plan (more on that below)

Source: ICONIQ - Split by Position

• The atomic unit of any sales org is the Account Executive. And at most software companies they are looking at 50/50 base variable.

  • For example: Take a $100K base salary which is guaranteed. So if you hit right on your quota / plan / target you would expect another $100K.

Source: ICONIQ - Split for Account Execs

Ratio

So what should a rep’s quota be relative to their pay? That, my friends, is the million dollar question.