
Ask HN: How to structure sales compensation package at b2b startup? - louisswiss
I am the founder of a startup which provides a SaaS to small business owners. Given the specific branch of companies we are targeting, direct sales works best.<p>We expect our sales reps to make between 3-6 sales each month, yet we are struggling to find a compensation structure which works well for the team and we are comfortable scaling up to 40-50 people over the next few months.<p>Ideally it would be a mix of fixed salary and commission, incentivising those who can constantly achieve 4-6 sales&#x2F;month and providing no incentive for those with 2 sales or fewer each month to stick around.<p>Thanks for any tips&#x2F;links.
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sharemywin
[https://www.glassdoor.com/Salaries/sales-representative-
sala...](https://www.glassdoor.com/Salaries/sales-representative-salary-
SRCH_KO0,20.htm)

Eighteen percent of respondents used a mix of 80 percent salary and 20 percent
commission. Sixteen percent used a 70 percent salary, 30 percent commission
ration. And 14 percent reported a mix of 60 percent salary and 40 percent
commission. [http://www.inc.com/guides/sales-compensation-
plan.html](http://www.inc.com/guides/sales-compensation-plan.html)

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sharemywin
As for 2 or less sales you need to set up a quota and if they don't hit it
over 2 months they're gone(or something like that). But you need to also
figure out your sales cycle. How long does it take someone to make a buying
decision. The longer the decision cycle the more the salary.

~~~
louisswiss
Thanks for the reply.

We have a good idea of the sales cycle etc, just weren't/aren't happy with the
compensation structure. Evaluating a sales person's performance is not the
difficult part, we were hoping for a change which puts off the kind of person
who sits around for two months just going through the motions, yet gives a
motivated team member the space they need to reach an amazing salary.

Thanks for the food for thought.

~~~
wayn3
You don't structure your compensation in such a way that makes people leave.
If they don't perform, you just fire them. That's the sales game.

Your comp plan doesn't concern itself with punishment. You lay out quota and a
stretch goal and if your reps hit them, you compensate them dearly. Why not
just hire a VPS who can do this for you if you want to scale to 40 reps
anyway.

Are you in a jurisdiction where firing someone is not as easy?

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aynulhabib
Luckily, SaaS sales compensation has been largely figured out and documented.
I implore you to NOT benchmark numbers to inc.com guides or sales jobs in
general.

If you do, you will likely frame your salary targets poorly against the wrong
baselines and your reps will figure this out and quickly get jobs at other
SaaS companies.

"Sales Rep" is a bit ambiguous to SaaS orgs which are usually made up of
"Sales Development Reps" (entry level, openers, demo-bookers) and "Account
Executives" (demo-performers, closers, opportunity managers).

I would search for the title "Account Executive" in your region on Glassdoor
for hints on base salaries and total compensation.

Angellist is also a great place to get a sense for how similar start-ups are
positioning themselves in job listings. (maybe look up your competitors)

Sales salaries are typically presented in OTE (On Target Earnings) or
essentially, Base Salary + Commission for the year. OTE is usually around 20%
of annual quotas. SMB annual quotas are usually in the range 300k - 500k
quotas = so $60k-$100k OTE packages.

Best Practices: Cost of living should guide a guaranteed base salary. Don't be
stingy on the commission, read the Jason Lemkin article at the bottom to get a
sense for what those %'s should be.

Hyperbolizing a bit, but you generally get what you pay for, no SaaS company
ever went under because it paid too much commission, assuming it did so with
cash-flow in mind and had minimal churn. Also, uncapped commission is the norm
in SaaS, don't brag about it, it's like bragging about having bathrooms.

Commission should also be a clear % of every incremental sale or super easy
mental math, so that the rep can visualize for every X in sales they get Y
without having to pull out an excel model. (although the best ones will
anyway)

Try to avoid complicated accelerators, multi-tiered goal structures,
decelerators and building a too Darwinian firing culture, those places can be
toxic. 1 accelerator is okay.

DO - build a model where most hires can hit quota and that you can really kill
it if you go above and beyond. A culture of winning.

DONT - make quota the pie in the sky, penultimate, out of reach thing. It
sounds obvious but it's not, set people up for success and you will find it.

You should read _everything_ by Jason Lemkin and Tom Tunguz on this topic,
especially these two posts:

[https://www.saastr.com/a-framework-and-some-ideas-for-
your-f...](https://www.saastr.com/a-framework-and-some-ideas-for-your-first-
sales-comp-plan/)

And really, really think about this: [http://tomtunguz.com/smallest-acv-to-
justify-inside-sales-te...](http://tomtunguz.com/smallest-acv-to-justify-
inside-sales-team/)

