Dear SaaStr: What Sales Comp Plan Should I Use For Our Very First Sales Rep?
At the end of the day you have to solve for two things:
- A plan that gives the reps a living, fair wage; and
- A plan that you know and feel is accretive to the company. Sales reps have to be profitable. If not on Day 1, then at some point.
It can be and feel tough to do both in the early days.
Ultimately, most stable sales comp plans pay the rep about 15% total of the revenue they bring in, in base comp plus bonus. Sometimes as little as 7–8% in big enterprise deals, sometimes 20% or so in SMB (low deal size) sales.
Or put differently, at scale, you want your reps to close at least 4x–5x the amount you pay them. Ideally, the higher end of this scale.
Then the math sort of works out.
But in the early days, that may not be enough to put food on your rep’s plate. Or at least not enough to pay a competitive wage.
If the sales process is still unproven, I’d suggest starting at 1x. At least for the first few months of a rep’s tenure. I.e., expect them just to cover their costs in new sales.
That’s still worth it if it brings in more sales, and/or frees up your time.
Then scale it up to 4x-5x once you have a repeatable process proven out.
A bit more here:
(1x image from here)
