I've been a rep and a manager in several SaaS Sales organizations from 22 people to 90,000. During that time, I have seen just about every compensation model possible from flat percentage, to the tier percentage model, to MBOs. Getting compensation right can help you accelerate sales but getting it wrong can be devastating and lead to massive turnover and forecasting issues.
Per my observations regarding what worked and what didn't, here are my personal rules on this topic:
Keep it simple!
- reps will assume you are trying to screw them if the plan is complex
- do not include decelerators unless you want to risk an uptick in turnover
- they will also cause sandbagging which will destroy your forecast
- at Yammer for a period of time the comp was deadpan simple and reps loved it, we also saw acceleration in sales => flat % for 1st year ARR regardless of quota attainment
- average percentage paid out for new business is 8%-12%, although 8% is pretty low
AE Base Salary
- 50/50 base and variable is a good ratio, 60/40 ok too
- great salespeople are more concerned with the variable upside they can make since they intend to exceed quota
- pay handsomely for multi-year deals
- this will lock in customers/cash-flow and reduce churn
- typical Enterprise rep quota is $1mm ARR, quarterly
- typical Corporate rep quota is $575k ARR, quarterly
- monthly quotas
- are only appropriate if your sales cycle is less than 2 months, ideally if the sales cycle is less than 1 month
- also, only appropriate if you have strong inbound lead flow or a large Outbound SDR team
- if you have a monthly quota with a sales cycle 2+ months or no leads, you are forcing your reps to
- exhibit bad behavior, pushing customer to sign before they are ready
- and offering pricing discounts in order to do so thus damaging your average selling price
- typically top 20% of reps or any rep who achieves 100% quota for the year
- a trip to Hawaii most common
- Ratio of base to variable will be smaller, more like 70/30
- You must define what a qualified meeting is, and refine this over time. If sales doesn't feel they are receiving qualified leads they won't show up for the calls. Include "qualified meeting" as the metric SDRs are measured on
- typical pay is $100 per qualified meeting if outbound
- base $40k-$60k
- quota = 15-20 held meetings per month (depending on lead flow and whether or not they are inbound or outbound)
- typical OTE $60k-$75k
- points system also works for incentivizing setting meetings with top Execs
- ex: 4 points for CXO, 3 points for VP, 2 points for director, 1 point for manager
- its helpful to add a spiff for deals that close so the SDRs can participate in the wins and maintain focus on same end goal as the sales reps they support
- heavy on salary versus variable probably 70%-80% salary since they are not hunting
- typically include a variable component based on MBOs
- MBOs include key metrics around end user engagement
- be careful about tying CSM compensation to sales because it may taint their mindset and steer them away from being trusted consultant
- these trusted consultants gain deep access inside accounts and this helps AEs significantly
- quota is much larger since they are up-selling a large base of existing customers
- you can pay them a smaller percentage because they only work with existing customers and aren't hunting, maybe 2%-5%
- same 50/50 base/variable model as direct sales reps
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