Sales compensation is always tricky… Most folks that haven’t “carried a bag” (vernacular for being in sales and carrying a quota) aren’t aware of the high risk, high reward nature of sales compensation plans.
We recently updated our comp plans and I thought I’d share the datapoints that I gathered.
The big concepts to focus on are:
- Quota – What is the rep responsible for bringing in to the company in new revenue?
- Base – What does the rep get for showing up?
- Variable – What commission do they earn for hitting quota?
- OTE – On Target Earnings – Easy… this is simply base + variable. This is also a confusing number since people who don’t live on a comp plan assume that this is what sales reps make. They don’t. A third of your reps will make or exceed quota. Another third will bobble around it. The last third will feel the heat and will move on or be moved on. (Hence the high risk, high reward nature of sales compensation).
- Efficiency – This is a measure of what percent of new revenue you are paying out in quota to get the new revenue.
The averages we found for the Account Executive 1 role were:
- $370k Quota
- $42k Base + $37k Variable for $79k OTE
- 22% Efficiency
- Startups tended to have a higher risk reward scenario (lower baser, higher OTE)
- Established firms tended to have a higher base, with a lower OTE (less risk, less reward)
- Recruiters play to established firms (who can pay the commissions required for head hunting) and they reported in numbers that looked more like the established firms.
My google spreadsheet (link).
What are your thoughts on sales compensation plans? If you’d like to offer additional data points to help flesh this out, I will add them anonymously. Just reach out to me directly.