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Just another practical sales rep comp plan

d.glezos.com

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Re: Just another practical sales rep comp plan

#31

Post by marcus0x62 »

cqqxo4zV46cp wrote: post #7
marcus0x62 wrote: post #5

Earlier quoted context omitted.

I worked in tech sales (sales engineering) for quite a while, both as an individual contributor and as a manager. It isn't unusual for plans to be way more complicated than what is described in the article, and for sales reps (and managers) to not really understand their comp plan. It is also common for them to shoot themselves in the foot by structuring a deal in such a way that they lose a lot of money because they…

I have a tiny bit of sales experience, certainly less than you. My understanding is that these things end up so complicated for two reasons. In part it can be a reflection of the real-world complexities of an organisation’s financial incentives. It’s easy, especially not being in the sales org and looking in at it from outside, to expect things to be as simple as “more revenue == better”. But then typically businesse…

What you've written about is mostly it. The other aspect is that setting fair quotas (individually, and at the district level) is really, really, hard but managing sales expense is extremely important. The two concepts are inextricably linked[0]. There's a huge amount of information hiding (mostly on the part of the sales reps,) and companies will compensate by putting limits in the comp plan that attempt to prevent windfall situations. Usually, there is a specific windfall clause that is straightforward enough: past a certain commission or quota attainment or transaction size threshold, the company reserves the right to review the circumstances of a particular deal and decide how to pay commission on it outside the usual terms of the comp plan. But beyond that, there will frequently be rules about what counts as new business vs renewals (which generally are paid at vastly different rates,) or even if certain transactions will be paid at all (where this occurs, it is usually limited to large transactions the company knows about, but that weren't forecast for the current fiscal year and therefore not part of the rep's quota.)

0 - while every tech company in recorded history puts their top performers on display at their annual sales meeting and boasts about how these people all exceeded plan by x% and just bought a new lakehouse or something, privately, the sales leadership gets raked over the coals due to over performance. I once received a top district award in front of the whole company, then not 30 minutes later got chewed out along with my colleagues over how many people overachieved and how much extra it cost the company, etc.

Re: Just another practical sales rep comp plan

#33

Post by neilv »

kqr wrote: post #27
neilv wrote: post #12

Why do sales positions tend to have performance-based compensation when many other roles in the same company are flat salary? Is it simply because the metrics are so obvious (i.e., attribute sales to the salesperson's individual performance), that it's easy compared to other roles? Is it because sales work is so close to revenue numbers, that more thought has been given to compensation, or it's thought of differently…

I also think this is weird. These sorts of compensation schemes incentivise short-term revenue at the expense of making the sales that are good for the organisation long term. They encourage an "always be closing" mindset that leads to signing customers that take the organisation on a bad trajectory. But when I asked an actually really good[1] salesperson about this, they said that it's simply that you can't hire goo…

Maybe the more obvious metrics for sales enable the top performers to demonstrate that they are top performers, and therefore demand the high compensation?

A similarly-minded SWE, on the other hand, doesn't have the metrics. Either they're at a FAANG and trying to hit their less-obvious metrics for promotions, or they're instead just packing fresh keywords on their resume, and preparing to refresh Leetcode and job-hop every 18 months, to increase their compensation that way.

(I still don't want to do metrics for engineering; I want engineering thinking and working holistically, as a team -- for the interests of the company, even though leadership won't understand most of the subtle differences of what a great engineering team does for the company. The current SWE careerism grinding mis-alignments will have to end, though, once people acknowledge that we really need SWE not to be, as XKCD said, "our entire field is bad at what we do, and if you rely on us, everyone will die".)

Re: Just another practical sales rep comp plan

#34

Post by fakedang »

kingkongjaffa wrote: post #26
xyst wrote: post #25

Build a product that sells itself and thus there is no need to have a compensation plan, sales people, a VP of sales, and a sales organization. Reinvest the millions of dollars per month in sales org and reinvest in engineering.

> Build a product that sells itself This is such an insane naive take, that it's actually surprising to see it posted here. We're on a VentureCapital backed message board dedicated to startup, company growth, obsessed with valuations and $$$MONEY$$$, and one of the users thinks this is remotely true. Companies are not built on technical merit alone. The perfect product and perfect product market fit, with 0 sales or…

Stripe is a product that sold itself. I think they still manage it.

Webflow and Shopify are also some products that just sell themselves. WordPress too.

Re: Just another practical sales rep comp plan

#35

Post by kingkongjaffa »

fakedang wrote: post #34
kingkongjaffa wrote: post #26

Earlier quoted context omitted.

> Build a product that sells itself This is such an insane naive take, that it's actually surprising to see it posted here. We're on a VentureCapital backed message board dedicated to startup, company growth, obsessed with valuations and $$$MONEY$$$, and one of the users thinks this is remotely true. Companies are not built on technical merit alone. The perfect product and perfect product market fit, with 0 sales or…

Stripe is a product that sold itself. I think they still manage it. Webflow and Shopify are also some products that just sell themselves. WordPress too.

each of those have a pretty prominent 'contact sales' link on the landing pages and pricing pages, so I have to heavily disagree, they all employ a sales forces.

For certain apps it might seem like they sell themselves for small users or individuals, but as soon as the customer is 'enterprise' the route is virtually always 'contact sales' like on Stripe and Webflow's landing page, on shopify's pricing page the larger tiers are also 'contact sales'.

Re: Just another practical sales rep comp plan

#36

Post by glezos »

DEF14A wrote: post #18

I'm a rep at a big SaaS firm - no one says "OTC", whatever that is. It's OTE. Also, literally no sales org would ever weight an AE's comp more towards base and a VP's comp more towards variable - everyone is on a 50/50 split, and if anything the VP would have more guaranteed comp. No discussion of RSUs or options? Furthermore, I have never in my life seen a plan that withholds the final quintile of variable comp - th…

At Transifex, we always did a 50/50 split. But I've noticed it's not atypical at all for small SaaS firms, who are starting to sell, to weigh an AE's comp towards Base. Especially for more junior people. I've noticed the same for profitable, organically-grown firms that are not as aggressive as well-funded startups.

Regarding the term On-Target Commission, what is the term you've seen used? Because OTE means "Commission at 100% + Base Salary".

Re: Just another practical sales rep comp plan

#37

Post by glezos »

ralph84 wrote: post #4

No. Decelerators and deals that pay $0 are demotivating and unnecessary. You can achieve the same net effect by properly setting OTE and quota without the demotivation.

To start, no decelerator should take the commission to $0, period. :)

Most companies don't do decelerators but require reps to get permission from their manager for anything out of the ordinary. Examples are deals that require non-trivial engineering time, annual deals with quarterly payments, or 3-year deals that allow the customer to exit at year one. If you want to avoid that permission step, I can't think of many ways to do it without decelerators -- but maybe others can.

Re: Just another practical sales rep comp plan

#38

Post by biggestdummy »

kingkongjaffa wrote: post #26
xyst wrote: post #25

Build a product that sells itself and thus there is no need to have a compensation plan, sales people, a VP of sales, and a sales organization. Reinvest the millions of dollars per month in sales org and reinvest in engineering.

> Build a product that sells itself This is such an insane naive take, that it's actually surprising to see it posted here. We're on a VentureCapital backed message board dedicated to startup, company growth, obsessed with valuations and $$$MONEY$$$, and one of the users thinks this is remotely true. Companies are not built on technical merit alone. The perfect product and perfect product market fit, with 0 sales or…

Atlassian, famously, got to very significant revenue before hiring Sales. But even they, eventually, got to a size and complexity where Sales was required. https://www.bloomberg.com/news/articles/2016-05-18/this-5-bi...

The Bloomberg article makes the point that this could be a trend. It was not. I know of no other B-to-B Enterprise Software product which got close to that kind of revenue without hiring Sales.

There are several examples of successful companies who tried this model, and then moved to a Sales model - usually at $30 or $50 million. https://www.saastr.com/eventually-everyone-has-a-sales-team/.

Of course, there's no easy way of knowing how many companies tried this model and failed. But I don't think it was successful too often, because I hardly ever see this model any longer.

Re: Just another practical sales rep comp plan

#39

Post by fakedang »

kingkongjaffa wrote: post #35
fakedang wrote: post #34

Earlier quoted context omitted.

Stripe is a product that sold itself. I think they still manage it. Webflow and Shopify are also some products that just sell themselves. WordPress too.

each of those have a pretty prominent 'contact sales' link on the landing pages and pricing pages, so I have to heavily disagree, they all employ a sales forces. For certain apps it might seem like they sell themselves for small users or individuals, but as soon as the customer is 'enterprise' the route is virtually always 'contact sales' like on Stripe and Webflow's landing page, on shopify's pricing page the larger…

There's still a difference between having an account manager at a company, in charge of implementation and support, and an active sales force that goes out of its way to sell stuff, lie to prospects, wine and dine them, etc. Stripe, Webflow, Shopify, etc. have the former - they don't really have to sell themselves.

Enterprise needs a different "sales" channel, because most enterprises are bulky, cumbersome sloths who need handholding. At the same time, there isn't anything in particular that's stopping enterprise users from using these products on a lower tier - I've used Zapier before with blessing and no issues, on the company card, at my old job at a megafund (where we had strict restrictions on a lot of software otherwise). No questions asked.

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