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Building, scaling, motivating your team through a structured compensation and commission plan
Compensation plans, commissions, quotas and SPIFs…oh my!
In this week’s edition of Stretch Weekly, its all about building, scaling, and motivating your team through a structured compensation and commission plan.
In SaaS, there’s a lot of complex algorithms and calculations - but rest assured - smarter people than me have it all figured out.
David Skok and Harry Stebbings give us THE blueprint for building our teams structure and compensation
Brett Queener gives us his “10 Golden Rules” for SaaS Sales Compensation
Salesloft outlines their 6 Steps to SDR Compensation
Plus- great nuggets and pearls of wisdom on SPIFs, Incentives, Commission Structure, Quotas and the best way to use these to motivate the team.
Give it a read and let me know what you think.
And lastly - as always, if you find this newsletter valuable- consider sharing it with someone who might as well 👊.
STRETCH SHARES
Scaling SaaS and Compensation Models w/ David Skok
This is one of my favorite podcasts on all things SaaS. As a VP of Sales (or founder) its a must listen.
David Skok and Harry Stebbings will take you through the nuts and bolts of how to build, structure and scale your sales team.
Although this episode isn’t entirely focused on compensation models - there are some great nuggets of wisdom to learn from as you build this for your team.
SaaS Sales Compensation Simplified
One of the more well written and articulated pieces on SaaS sales compensation I’ve come across. Brett Queener - Venture Parter at Bonfire Ventures outlines the “Ten Golden Rules of SaaS Sales Compensation Plans”.
Make Your Plans Easy to Understand
Use the Rule of Four to Set Your Compensation
Ensure your Quota Periods & Sales Cycle Lengths are Sympatico
Focus your Comp Plans on Annualized Recurring Revenue
Your Plans Should Incorporate Cash and Multi-year Agreements
Use Aggressive Accelerators to Attract the Best Sales People
Resist Adding/Hiring “Farmer” Reps for as Long as Possible
Never Pay AE’s for Renewals
If Possible, Do Not Make Your Account Execs Collections Agents
Thou Shall Pay Appropriately for Services
Check out the full write up HERE
6 Steps to Designing a Sales Development Compensation Plan
I’ve had many conversations with sales leaders around varying models between AEs and SDRs. We all acknowledged structuring your compensation and quota for SDRs will be a unique animal of itself. Salesloft has a detailed guide to setting this up - even with recommended stages, compensation metrics and OTE models. Their 6 steps are:
Step 1: Determine On-Target Earnings (OTE)
Step 2: Choose the target pay mix
Step 3: Select variable performance measures
Step 4: Set quotas
Step 5: Set thresholds and accelerators
Step 6: Set the performance period and payout frequency
STRETCH VP POST 👇
People Perform According to How They Get Paid
Recently I had a conversation with the CEO of a large media/advertising company. We talked about using compensation plans as a way to build confidence and trust between the company and employee. Brief synopsis (cliff notes version) below:
People are motivated by different things.
As leaders within a company – we need to realize this to get the best out of each person.
What are the shared and mutual goals between the rep/company? As the rep does well – the company should as well. But what does this mean?
Let’s be proactive and find out what makes an employee tick. Are they trying to just pay the rent? Or do they have their eye on a new Model S?
Structure a shared plan around these common goals. Numbers should be based on employee financial goals and company goals. Provide a plan for each person (HR may complain and have to get creative) but look towards something custom for each employee. This can be really rewarding. (Scott Leese talks about this in his book – Addicted to the Process)
Also at this particular CEO’s company -everyone has a number by their name. He remarked that this is an easy answer to question of “How am I measured?”
Whether you are in marketing, success, support – he believes all employees should have some skin in the game and reward for doing so. Numbers should be based on both employee’s financial goals and the company’s goals. Provide a plan for each person (HR may complain and you may have to get creative). Custom for each employee can be really rewarding.
(Plus – Jeremey Donovan says that experienced salespeople negotiate their quota – so you likely are already customizing plans anyway).
If there are issues with performance – look at the compensation model and see if they are incentivized properly?
As you look to structure or tweak your compensation models – don’t be shy to customize models, quotas and plans for each person. Because people perform to how they get paid.
STRETCH SNIPPETS
🤔 50% of reps and 36% of managers say they don't fully understand their compensation plans. - Korn Ferry Survey
😎Jeremey Donovan points out that experienced sales people negotiate their quota
🎉Scott Leese outlines How to Build Friendly Sales Competitions
👉 3 Ways to Motivate Your Team During Tough Times from the team at Spiff
💸More great insight on the Best Way to Handle SaaS Sales Compensation from - XaaS Journal
🎯Hubspot has a quick read on Spifs: What They Are and How to Do Them Properly
🧲Pipedrive provides tips on commission and compensation plans: How to Attract and Keep Star Sellers
💰On LinkedIn, a Stratford Canning survey showed given a choice, 63% of sellers prefer cash SPIFs versus other options.
✅The Ultimate Guide to SaaS Sales Compensation from SaaStr.
🧠 Mindset Matters
Thanks for reading!
My hope is if you find this valuable, consider sharing it with friends (or signing up if you haven’t already).
— Grant 👋
About stretch vp: confessions, learnings and insights from sales leaders in SaaS
Compiled and aggregated from a network of sales leaders in SaaS, Stretch VP showcases learnings, insights and experiences as well as best practices to overcome common hurdles, obstacles and setbacks in your quest for excellence as a sales leader in SaaS.
Are you a VP, Director, thought leader or content producer in the SaaS space? We’d love to have you contribute. Contact Me HERE.
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