Is 10x base salary as a quota standard? It seems like a really high target.
Look at it the other way round: the company is bearing a cost 10% of revenue just in commission to salespeople. If all salespeople are exactly meeting quota, then the total cost of sales is 20% of revenue. The same applies to their manager, at 2.5%, for a total of 25% of revenue. The remaining 75% has to pay for everyone else in the company, and external costs!
It’s not 10% of revenue, it's 10% of the first year of ARR. So if the company is doubling revenue every year, it is 5% of revenue. Any slower growth, it's a lower percentage.
I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…
I’m not sure what line of work you are in, but I will humbly suggest that you probably have not worked with a good sales person. Good sales people (perhaps mostly from good orgs) are typically very welcomed into an org because they will help solve problems or point you to solutions if they don’t have it themselves. These are the sales people I know who make the most money, and it’s fairly effortless for them since th…
Just about every sales rep I've interacted with couldn't solve their way out of a wet cardboard box. Instead, they'll sing whatever lie they think will get you to buy a product, up to and including promising functionality that later when you get the lead engineer on the phone you are informed "it was never designed to do that".
I’m not sure what line of work you are in, but I will humbly suggest that you probably have not worked with a good sales person. Good sales people (perhaps mostly from good orgs) are typically very welcomed into an org because they will help solve problems or point you to solutions if they don’t have it themselves. These are the sales people I know who make the most money, and it’s fairly effortless for them since th…
Like in any trade, I'm sure that the best are great at what they do, but I suspect I'm not alone in finding that the vast majority of my interactions have not been with a good sales person (and maybe by your definition not with good orgs either). I've never been told that I might be better off going elsewhere. Many times I've been told that whatever problem I describe, they can handle it, or my problem isn't what I t…
I've had hardware stores tell me where I could get the solution that I needed at their competitor, because they didn't have it. Those are the interactions I have been most impressed with from any organization. It makes me want to buy stuff from them just to reward their honesty and helpfulness.
I must admit that I haven't really had that experience from many tech companies or "professional" companies.
I’m not sure what line of work you are in, but I will humbly suggest that you probably have not worked with a good sales person. Good sales people (perhaps mostly from good orgs) are typically very welcomed into an org because they will help solve problems or point you to solutions if they don’t have it themselves. These are the sales people I know who make the most money, and it’s fairly effortless for them since th…
Like in any trade, I'm sure that the best are great at what they do, but I suspect I'm not alone in finding that the vast majority of my interactions have not been with a good sales person (and maybe by your definition not with good orgs either). I've never been told that I might be better off going elsewhere. Many times I've been told that whatever problem I describe, they can handle it, or my problem isn't what I t…
> But the reality is for most sales jobs, as a former colleague once told me, you're never more than 2 missed targets away from being let go.
That sounds... fair? It’s like having a programmer that cannot program. If your job is literally to sell, and you’re not doing it?
I guess it doesn’t have to be black and white as long as you bring in more than you cost though.
Great article. This has real implications for SaaS pricing.
e.g. If your market is SMBs, your JR AE sales person costs ~$50k/y with a reasonable expectation of selling 10x their salary in ARR, your pricing needs to be proportional to the number of customers in the top of your funnel / sales salary. It seems obvious, but often we think about price from a user and individual work perspective, with no sense of why it's worth $50k/y for a subscription to a SaaS tool.
I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…
My take in B2B (private and public sector) is that a sales team is a necessary counterpart to how procurements works. Answering RFP, navigating orgs and finding sponsors, organizing meetings and doing presentations, customizing the contract and negotiating, etc. is a full-time job (source: bootstrapped and done that myself).
I know from a mathematical perspective this works in order to ensure that the company can be profitable at some point but a part of me wonders if it’s really necessary. I’ve never had a positive interaction with a sales person. But I’ve had countless positive interactions with customer support reps. One is over paid, the other under paid. If companies just created a sales team from their highest performing customer s…
My take in B2B (private and public sector) is that a sales team is a necessary counterpart to how procurements works. Answering RFP, navigating orgs and finding sponsors, organizing meetings and doing presentations, customizing the contract and negotiating, etc. is a full-time job (source: bootstrapped and done that myself).
Exactly. Add to that that good sales people will build up a lot of "soft" knowledge about the orgs they will be selling to, like: When does their fiscal year start, what's their budgeting timeline, who has purchasing authority, am I talking to someone whose job it is to negotiate a discount, how long will the sales process take to close, should I try to go through a reseller for this deal, is the customer gonna nickel-and-dime every item on the quote, how anal is their legal department, etc. If you do it right it is indeed a full-time job for B2B enterprise sales.
Having sat in some meetings where these structures get discussed/decided, I've got to admit it's not easy. Even territory assignments alone can have huge differences in how all the theory falls flat pretty quickly.
Like in any trade, I'm sure that the best are great at what they do, but I suspect I'm not alone in finding that the vast majority of my interactions have not been with a good sales person (and maybe by your definition not with good orgs either). I've never been told that I might be better off going elsewhere. Many times I've been told that whatever problem I describe, they can handle it, or my problem isn't what I t…
> But the reality is for most sales jobs, as a former colleague once told me, you're never more than 2 missed targets away from being let go. That sounds... fair? It’s like having a programmer that cannot program. If your job is literally to sell, and you’re not doing it? I guess it doesn’t have to be black and white as long as you bring in more than you cost though.
I can tell with certainty is that I was never ever under such pressure regarding my programming ability. I was never close to being fired and I seen only one company where people were often close to being fired due to temporary slip.
Even under pressure, programmers don't really get to have hard to reach targets else they will be fired.
This is really well written and helps make plain something that can get pretty dicey quite quickly. The main thing I would spotlight to new companies looking to add sales people: make their comp exactyl the same and use a formula (this one is pretty good) to structure the comp. It is easy to find yourself in a position where an attractive candidate is wanting to negotiate for a little more salary or better accelerator...resist the urge. Stick to the formula. You can find a good candidate eventually.