As a SaaS start-up, it’s best not to try and copy a comp plan from a large business, such as Salesforce. The behavioural drivers for a company at £15million + ARR with large teams will be different from yours.
A lot of the schemes you will find online are designed with bigger company goals in mind, with large scale recruitment plans and headcount churn rates.
Typical comp plans from a large business:
- Guaranteed, competitive base salary.
Make a great living, just for showing up.
- Commission that is a relatively low % of the deal.
Often, 10% of the first-year ACV, sometimes less.
- Relatively high quota.
You don’t make a lot on each deal, but you will be driven on high volume.
- Complete hand-off of customers to Customer Success or Account Manager immediately after the sale.
Very little/no post-sale involvement with customers and upsell handled by others in the organisation.
- Lots of accelerators and decelerators.
Lots of sub-programs, month to month, quarter to quarter to drive desired behaviour can lead to inconsistent peaks and troughs if poorly managed.
- Make sure BDMs don’t earn TOO MUCH!
If they make too much, the target was too low or the comp plan was too generous. If someone does too well, raise the bar.
What are the possible risks of this type of comp plan?
- Incentives for mediocre to stay.
If you’re mediocre and make a decent base, you just stay. And if the quota is too hard to hit, and you don’t believe you can hit it, you won’t really try!
- Not customer-centric enough.
Low % per deal commissions and no post-sale involvement drive transactional behaviour. You don’t want a boiler room sales environment, especially in the early days when building a reputation and brand. Every lead is precious.
- Good ones don’t make enough.
The mediocre BDMs make too much, the good BDMs don’t make enough. There is no way to incentivise stand-out performers.
- It’s too confusing.
Accelerators, decelerators, micro-incentives???? Keep it simple!
- Doesn’t maximise revenue per lead.
The main problem with a big company sales plan is they are not typically designed to maximise revenue from all leads – a key driver for all start-ups. In the early days, every lead is precious and you want every potential customer to be well managed and appreciated.
What should you consider in a start-up?
- Make sure BDMs are paid a fair, market wage with a great OTE
- Make sure the great BDMs can really make good money.
- Make sure the bad BDMs are not incentivised to stay.
- Make sure the BDMs are paid to love all the prospects and customers, pre-and post-close.
- Do not break the bank with high basics to attract BDMs.
- Aim to maintain positive, long-term, win-win customer relationships.
Suggestions for your Comp Plan!
- Competitive base salary — but you cover it before any bonus.
Whatever the base is each month – £4k, £6k, £10k … cover base and benefits before you earn commission.
- Pay 2x as much in commission once this has been achieved.
Once the BDM has covered their costs, offer a great % of ACV way higher than the 10% you will find on big company comp plans, possibly 25%. This will help stop non-performers sucking up cash.
- Cash up front accelerator.
Naturally, you will want to be cash-flow positive as a start-up. Consider paying more for payment up-front deals, particularly any 2-year contract deals.
- Consider payment upon receipt of cash, not contract signing.
This is a difficult one, often not too well received by BDMs, but if they are genuinely in it for the long-term it can work very well and make sure interests are aligned.
This type of thinking will create the right incentives, drive the right customer focused behaviours and possibly help with cash-flow for very early-stage businesses. They may not be suitable for you, but the underlying theme of rewarding on achievement vs. high, fixed monthly costs should be a key consideration.