RevOps is pivotal in aligning sales, marketing, and customer success teams to maximize revenue generation and operational efficiency. However, many organizations struggle with launching RevOps internally and often require external expertise to navigate this complex field effectively.

Enter RevOps agencies. 

These agencies, sometimes called fractional RevOps teams, offer services that align sales, marketing, and customer success departments to optimize revenue generation processes. Their knowledge and focus areas include technology implementation, data analysis, process optimization, and strategy development to help businesses improve their overall revenue performance.

And, as the RevOps market continues upward, the number of RevOps agencies and consulting groups is keeping pace. As such, making informed decisions is essential when choosing the right agency for your company’s success. 

The relationship between a business and a RevOps agency is a two-way street, like any partnership, requiring the active participation of both parties. 

During selection, it’s crucial to consider the agency’s specific expertise regarding the goals you want them to help you achieve.

To learn more about when and how to hire a RevOps agency, we interviewed Joe Birkedale, the founder and CEO of Project36. This purpose-driven, strategic RevOps agency delivers transformational projects for global sales and marketing teams using HubSpot and Generative AI. They help RevOps leaders exceed revenue targets through efficiency, innovation, and alignment.

This interview aims to shed light on the dynamics of agency-client relationships, the evolving landscape, and the critical factors to consider when partnering with an agency. 

Enjoy!

Q&A with Joe Birkedale | Project36

QuotaPath: Joe, thank you for joining us today. Tell us more about your background and Project36.

Joe: For the last 18 years, I have helped companies position their products and services exactly as their prospects need to see them. I’ve helped them nurture their customers to make the right choice.

In 2016, I set the wheels in motion to create a genuinely disruptive agency with people and technology at its core. Over the following two years, I built the software stack, the sales proposition, and the brand. Today, Project356 serves clients from all sectors globally with a full-service remit.

My role as CMO is to ensure our creative team, strategists, and account directors achieve and maintain peak performance in their given specialty. Additionally, some businesses hire me as a fractional CMO.

What business types, sizes, and industries do you work with the most?

Joe: We have a clear ideal customer profile (ICP) of Series A or above funded. They’ve got to have a product in the market and investor pressure to grow and expand. That’s our sweet spot. We help these clients systematize and create an effective revenue machine. The size and stage of the companies we support is a 50/50 split regarding client volume and value. Our startups tend to spend about the same as the enterprises because they’ve got to grow as enterprises need to systemize, check, and balance what they’re currently doing aggressively.

 We work globally—with the only limit being that they speak English.

When is the right time for a company to work with an agency?

Joe: Everybody comes to us with an urgent demand, but that’s slightly too late. We are an agency that adds value. You extract that value by telling us what’s going on before it has happened and what you want to achieve. Then we can shape our response, strategize, and deliver accordingly. So, bring us in earlier from a thinking point of view, and we can jump on things immediately.

“You extract that value by telling us what’s going on before it has happened and what you want to achieve. Then we can shape our response, strategize, and deliver accordingly.”

Can you provide an example of an exemplary client scenario where they came to you before the problem was too hot?

Joe: Seven months ago, a client came to us with a legacy CRM no longer fit for purpose. It did everything for them, including all their client contact and interaction and audit history as it synced to their accounts program.

They heard about HubSpot and reached out to us to find out if it would be a fit for them. We went in and effectively mapped their current setup, how it works, and the limitations. Then, we presented a better solution that included HubSpot, a migration, setup, and a training plan.

That has been fundamental to their business, adding $4.5 million net new opportunities to the pipeline, which they have begun closing in the last two months since they’ve gone live.

This relationship is strong because it’s a two-way respectful relationship where they are the product experts of what they do, and we listen to that verbatim.

 Likewise, we’ve got their trust, and that makes a massive difference.

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What should I look for when evaluating an agency?

Joe: A partner agency should be certified and tiered and provide customized HubSpot onboarding unique to you. It should include proper pipeline management, customization of fields to match your lifecycle stages, and training on how to use all of it. There are two benefits to this:

1. The HubSpot product gets properly adopted and absorbed into the company, becoming the system of record.

2. If the implementation period is quick, well done, and delivered on budget, then that opens the door to do more with the agency, such as content marketing, inbound marketing, account-based marketing (ABM), advertising, pay-per-click, and SEO.

So, the implementation is where you’ll get a good feel for the agency.

Is there anything you’d like to add about evaluating agencies in terms of having access to the team?

Joe: International clients need to consider the impact of any time difference with an agency so they aren’t left eight hours behind. For example, we can “race the sun.” If a job comes out of the East Coast, we can send it West and get it done by the time the client wakes up.

You should have direct access to the agency team through a centralized communication platform. This keeps communication clean by eliminating the back-and-forth of email and the risk of requests or input being lost in the shuffle. 

For instance, we have an internal project management platform to enable two-way live communication with our clients. They can log in anywhere in the world at any time to see the status of any task and comment directly on it. They can also add a task, review the tasks, see the status, get an update, see the artwork, and review the latest revision, and nothing gets lost because it’s all on a live dashboard.

Another thing to remember is how the agency handles unused time on a retainer. For example, we offer rollover on our retainer. If the client doesn’t use time, it can roll over into the next period, so they don’t lose it. We can also adjust the retainer accordingly.

How should companies identify what to lean on an agency for?

Joe: Agencies help accelerate the learning curve and can supplement the capacity of internal teams. For instance, internal teams can learn HubSpot, but it takes months of trial and error. This costs the company time and salary during the learning period.

Plus, the internal team already has its day job. Something has to give when a new campaign comes along and adds to the existing day job. This adds pressure on the internal teams, and people leave when they get fed up because they’re constantly getting dumped on. An agency can take up the overflow and alleviate this pressure. The experience and capacity of an agency mean that more gets done in a shorter period.

“An agency can take up the overflow and alleviate this pressure. The experience and capacity of an agency mean that more gets done in a shorter period.”

What other things stand out to you regarding a healthy agency partnership between a client and agency?

Joe: Mutual respect is essential in valuing the agency’s input and vice versa. Everybody’s an equal and brings their expertise. This also means respecting each other’s time.

 For example, just because something’s urgent for the client doesn’t mean it should be urgent for the agency. The client needs to do their part too. If the client is disorganized and not doing their part of a project, the agency will help where they can, but there will come a point where they won’t want to work with that client.

Is it time to hire a RevOps agency?

Thanks for sharing these insights about partnering with a RevOps agency, Joe!

According to Joe:

• Engaging with an agency is best before you have an urgent request.
• Agencies bring expertise, experience, and additional bandwidth to accelerate revenue goal attainment.
• An agency and client partnership is a two-way street where parties are accountable and respect one another’s expertise.
• When selecting an agency, identify what you want the agency to help you achieve, then choose one best suited to help you reach your goal.
• Consider geographic time differences and communications when selecting an agency.

RevOps can be complex to implement. Is it time for you to hire a RevOps agency to help accelerate the attainment of your revenue goals?

Contact Project36 to discuss your upcoming RevOps needs.

QuotaPath supports revenue leaders with resources and solutions that automate sales commissions, provide past, present, and future visibility into compensation performance, and drive revenue.

Chat with our team, or try QuotaPath by signing up for a free trial to learn more.

As much as we want to mark every opportunity as “closed/won” and retain every customer, sometimes it makes more sense to cut ties than to overextend your team’s resources, workloads, and patience.

“There are no ‘bad’ customers, but there are some that are simply not a good fit,” said Susan Collins, SVP of Strategy at P360.  

When that happens, it’s essential to recognize the value of setting boundaries and prioritizing allocating resources where they will yield the greatest return. While parting ways with a customer may initially seem daunting, it can ultimately free up time and energy to focus on serving clients who align more closely with your organization’s objectives and values. 

By clearly understanding your ideal customer profile and proactively managing client relationships, you can ensure that your team operates efficiently and effectively while delivering exceptional service to those who matter most.

Below, we connected with five Sales and RevOps leaders from Women in Sales and RevOps Co-op to learn when they’ve intentionally churned customers and prospects and how they did so tactfully.  

Susan Collins, SVP of Strategy, P360

When it’s time to churn: Cost of service > revenue

Susan: The obvious metrics are customers for whom the cost of service is higher than our revenue/we have a negative LTV for that business, and there are no offsetting advantages that make up for the shortfall.

I might tolerate thin or even negative margins for a customer that provides great references, a big (referenceable) logo, co-development expertise, or intros to a desirable market segment that I otherwise would struggle to access.   

In those cases, the LTV would encompass more than just that single revenue stream.  

However, without those other factors, we either re-negotiate or decline to renew the business.   (VERY important IMO to offboard them professionally; there is no point in creating negative noise.).  

Other times to consider proactively churning a customer:

• Planning to exit a market due to regulatory reasons or data suggests there’s not enough business there to warrant the investment
• “Customers who are abusive to our team. I don’t tolerate that for any amount of money,” said Susan.

“Customers who are abusive to our team. I don’t tolerate that for any amount of money.”

Best practices when saying goodbye

Susan: If the numbers don’t work, we understand, and we will bend over backward to ensure we support them as they look for alternatives.  

This could include: 

• providing a file of historical data
•  making introductions to other service providers,
• Thanking them for their business and wishing them well.   

If it is a case of exiting geography or something along those lines, we have notification clauses in our contracts for nonrenewals, and we follow those constructs.  

For the (very few) customers who are abusive, I expect to speak personally to their leadership and explain that we only maintain business relationships that are conducted professionally and in accordance with our terms of service.  

Our contracts are quite clear about violations of our TOS resulting in a loss of service. 

The response might be shock and assurances that they would not tolerate abusive behavior either, in which case we might extend a “second chance” (obviously with different representatives from their organization). 

Amber Milks, Co-Founder and COO, BILLIONS

When Amber churned a customer: Customization demands

Amber: We had a contentious scenario at a former company when we onboarded a small customer into a very big enterprise product. This happened before I arrived, and the team had to custom-build the product for them. It was constant, and it would never be a good fit. 

They told the customer that we can’t continue supporting their customization needs. You can find someone who can, or we can decide to cut ties. 

This was hard because this sector was an area our company was testing the water to get into. But, the company wasn’t prepared to handle the customer, and they had to tell the customer that. 

At the end of the day, you have to explain to the customer, “Do you want to keep paying for something that’s not worth your time and money?” Ultimately, they’ll agree to part ways. And that’s when you allow early terminations without cancellation fees. 

Other times to consider proactively churning a customer:

• Customer at renewal says they’re going to a competitor and asking for a discount. “Let them churn!” said Amber. “You shouldn’t be the favored tool just because you’re cheaper.”
• If it’s a feature you’re never going to have. “If you’re coming to me and asking for one must-have that we don’t have, and there’s another tool that does have it, be honest upfront,” Amber said. 

If they leave you, let them leave you in the best way possible.

Best practices when cutting ties

Amber: If you’re trying to fight with your customer about cancellation nonsense, it will cost you more in manpower than to let them cancel. It’s not worth the fight. Let them churn. Eat the cost, and move on. You’ll spend more cycles fighting, collecting on it, and then compromising your company’s reputation.

Choose your battles. If they leave you, let them leave you in the best way possible. 

Ashleigh Early, CEO, Other Side of Sales Consulting

When Ashleigh churned a customer: Lack of usage/not solving problem they had

Ashleigh: I worked with a client for six months who declined to renew their client for two reasons. First, their client was not using the product regularly, and second, they weren’t using it because it wasn’t solving their problem. 

They approached it from an ethical standpoint: do the right thing. They didn’t think it was fair to continue taking money for a product they wouldn’t use. 

Additionally, my client was concerned about product reputation. They didn’t want metrics built on someone not using the product properly or forcing it to do something it couldn’t do.

So, they let them out of a 3-year contract and let them buy it out for a reasonable amount.

It hurt… but it didn’t hurt hurt. 

Other times to consider proactively churning a customer/prospects:

• Client outgrows you. “I churned a client because I’m too expensive for them. It was a mutual decision. ‘You have a solid sales process, solid sales reps, you do not need to keep paying me to tell you you’re doing a good job,” Ashleigh said. 
• Cutting ties with prospects due to misogynist and racist language. “The customer is not always right; sometimes the customer is a jerk, and if that’s the case, protect your team because you’ll protect your customers, and that protects the bottom line.” 

The customer is not always right; sometimes the customer is a jerk, and if that’s the case, protect your team because you’ll protect your customers, and that protects the bottom line.

Best practices when cutting ties:

Ashleigh: Start with an honest conversation, transparency, and communicating intent. There have to be conversations about what’s working and what’s not. This should be evidence-based, not ‘it feels like’ or ‘it seems like.’ Instead, ‘here is exactly what we are seeing.’

A classic negotiation tactic is to come up with three options. I don’t find that very collaborative. Ask them, ‘What does success look like to you? What’s your ideal outcome?’ You’ve got your three ideas in the background, but then you meld those to create an exit deal.

You know you’ve done a churn correctly when the churned customer will still refer you to do business. 

Christian Freese, Founder, RevPal

When Christian churned a client: 3rd customer woes

Christian: I provide RevOps as a service or fractional RevOps to teams, primarily in the SaaS industry. My third customer, because I was so new — and I think many startups feel this way — we want the customer, and we’ll figure out the rest later.

So, I focus on CRMs like HubSpot, Salesforce, and best-of-class solutions. But this customer was on an outdated platform… it was terrible. I knew this. I looked at YouTube videos and tutorials, and after figuring it out a bit, I realized it was very similar to Salesforce. We can figure it out. 

But — we did not figure it out. A lot of the solutions I prescribed would not work with their setup. So, there are two routes I could have taken. 

I could have kept working and provided a half-assed solution and risked a little black mark on my reputation or lost a potential reference down the line. Instead, I began documenting why we couldn’t do X, Y, and Z. Then, over our 1:1, I prepped them and asked for a full hour versus 30 minutes. And, I laid everything out to them. 

He appreciated it, and to this day, he refers people my way. 

Ways to avoid intentionally churning customers:

• Preach fit in discovery calls
• Have a checklist for you and your reps: “It should include ‘this is what to look for,’ ‘this is how we qualify them,’ and ‘if they don’t qualify, how to communicate this and how to refer them to someone who can help them,’” Christian said.
• Identify commonalities across customers and prospects you’ve churned over the past quarter

Lindsay Rios, Advisor, Fractional Leadership

When Lindsay churned a customer: Using product differently than intended

Lindsay: At a previous organization, as Head of CS, I had my first renewal coming up, and it was a really big logo. One that everyone knows. But they never really used our product for what it was meant for. At the time, we didn’t care. But as the company was gearing up for our Series A round, we needed testimonials.

The founder asked them if they’d be open to it, and the customer replied, ‘You probably don’t want our testimonial.’

So when I stepped in, I asked for the lowdown. Why are they so snarky?

It turns out there was a product bug that allowed anyone who logged in to get a single-sign-on (SSO). There were hundreds of people who had SSO and joined our platform as users. At this time, we sold this by seat at $100/seat. And they had about 300 people logging in.

Moreover, our product is specific to product teams, primarily designers and a few developers — not hundreds of people typically. They were using it for documentation, almost like a Notion. And they had a lot of feedback that was not based on what our product was intended to be used for.  So, when the renewal time came, I laid it out. If you want to continue using us for what you do, that’s fine. You need to pay for the users using it and understand that the feedback your team is providing us, like that our product doesn’t work very well, is because you’re not using it how it’s supposed to be used. 

They didn’t churn that year, and we got them to pay more than double the previous year. But for the next renewal, I said that I don’t think we should let them renew, but we need to make it their idea. And we did.

Other times to consider proactively churning a customer/prospects:

• Disrespectful contacts

Be absolutely truthful. Tell them the truth! And be professional no matter what.

Best practices when having to churn a customer: 

Lindsay:  Be absolutely truthful. Tell them the truth! And be professional no matter what. I think there will be a lot of scenarios – maybe someone who got your blood boiling – you have to kill them with kindness. It will always go better, even if they are irate. If it comes back around, at least you know you composed yourself and the company in the greatest way possible.

Lastly, stand your ground. Don’t backpedal. Make your decision internally with your team. 

Conclusion

So, there you have it. Some customers are not in your best interest to keep. Prospects too.

However, that doesn’t mean just to send them on their way. These five leaders each emphasized the importance of communicating clearly and honestly, collaborating with clients on the best exit paths, and ending things amicably. Just because they aren’t a good fit now, doesn’t mean they won’t in the future. 

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Creating a sales compensation plan requires careful consideration of various factors. These include Go-To-Market team size, average deal value, selling motion, sales complexity, team member role, and pricing model — all of which may change throughout the year. 

Tailoring your plan to your current situation is crucial rather than simply copying a previous one.

Therefore, creating a sales compensation plan each year and adjusting as factors evolve is essential. Otherwise, you risk misaligning your organizational goals, potentially causing you to fall short of targets.

With so many elements to consider and so much at stake, it’s unsurprising that 100% of surveyed business leaders admitted to having challenges with the compensation plan design process.

Sound familiar? If so, we’re here to help. 

In this blog, we will guide readers through building a compensation plan. Let’s get started.

How to Structure Sales Compensation

There are many sales commission structures to choose from that define the rule for the commission aspect of the compensation plan.

Some popular use cases include:

Base salary plus commission

The most common commission structure type across SaaS combines a base salary with a commission plan. We recommend a 50/50 split, where 50% of a salesperson’s pay comes from their base salary while the other half consists of sales earnings. Some organizations adopt a 60/40 ratio, with 60% of earnings from base salary and the remaining 40% from variable pay.

Tiered sales commission

Another popular option is a tiered sales commission structure, also known as a multiple rate, escalators, accelerators, or multipliers. 

This is an effective way to incentivize top performers. This structure designates that reps unlock higher commission rates as they attain specific deal or revenue benchmarks.

A tiered sales commission structure example may include a 7% commission rate on deals up to $85K in bookings. Once they’ve exceeded $85K, the rep then begins earning 9% on all new deals within the same period. 

Single-rate sales commission

A single-rate sales commission structure is also known as flat-rate commissions, fixed-rate commissions, or simply commissions. We define this structure as variable pay earned off a fixed percentage from every deal closed. In case you’re wondering, the standard commission rate in SaaS is 10%.

Commission payout structure best practices

Once you have chosen a commission structure, follow these compensation planning best practices to tailor it to your business so it will motivate your reps and drive your business goals.

• Make it a team effort: The best commission structures are created collaboratively with revenue operations, finance, and sales reps to build alignment with business goals.
• Keep it simple: Your commission structure needs to be easily explained. If it’s overly complex reps will struggle to understand it and find it difficult to follow.
• Incentivize the right behaviors: Reward behaviors that align with company goals and drive their achievement with goal-oriented compensation.
• Make it fair and equitable: Increase sales compensation equity by standardizing your sales compensation plans for everyone with the same role and then evenly distributing territory.
• Use a clear compensation communication plan: This ensures your team understands the plan, its reasoning, and how you support reps under the new plan.
• Test it: You can run historical compensation data through your new commission structure. Then test it for extreme situations, such as if a rep attained 400% quota. Pressure testing can prevent you from paying a rep more than 100% of their annual recurring revenue.

Test & Model Comp Plans

Next time you’re considering changes to your comp plan, use QuotaPath’s plan performance modeling and testing tools to see total costs based on historical data and quota attainment predictions.

Learn More

Steps in Designing a Compensation Plan

Next, you’re ready to begin designing your compensation plan.

1. Define your company objectives: Target one or two business goals that incentivizing behaviors can achieve. A company objective might be to increase new business or net revenue retention.
   
2. Review the role for whom the comp plan is for: Consider the role’s responsibilities, how their job supports the company objectives, and what you can incentivize that is in their control. For instance, customer success (CS) reps can control license allocation, active users, and new dollar retention. Therefore, the most effective incentives for CS will be tied to these elements.
   
3. Defining your sales compensation objectives: Identify sales compensation levers that can be incorporated into each role’s comp plan and align to company objectives. For example, to promote gross revenue retention, offer AEs a higher commission rate on ideal customer profile (ICP) deals that are more likely to renew.
   
   This can be challenging because Sales, RevOps, and Finance collaborate on comp plans. Our survey revealed that 49% of RevOps leaders felt their plans weren’t fully aligned with business goals despite 64% of Finance leaders declaring alignment. This is caused by Finance having the final say on what’s included in plans. 
   
   Recommended Reading: RevOps and Finance Alignment: Enhancing Sales Performance
   
4. Set your budget: Determine how much you can allocate for compensation, considering cost-effectiveness and market competitiveness. Remember that budget constraints can influence your compensation mix.
   
5. Choose your compensation mix: This is the blend of different pay elements you’ll offer. Standard options include:

• Base salary: Provides stability and security through predictable earnings.
• Commissions: Rewards performance based on sales attainment. Set your commission rates including standard, decelerated rate for underperformance, and accelerated rate for overperformance.
• Bonuses: Incentivize achieving specific goals beyond quotas.
• Profit sharing: aligns team success with company profitability.
  

6. Establish payout frequency: Determining the right payout schedule for your business involves various factors. You need to establish a frequency that will help you attract and retain top talent while managing cash flow and covering operational expenses. For example, compensation can be paid monthly, quarterly, annually, or based on milestones. An important consideration here is the motivational impact of each frequency and its alignment with your sales cycle.
   
7. Design your commission structure: The sales commission structure defines rules for what, when, and how reps earn commission from sales. An effective sales commission structure aligns with the results you strive to achieve. Consider using a flat rate, tiered commissions, accelerators, or another model to motivate your reps. Then tailor the structure to your business goals. Overly complex plans can cause reps to miss quota. After all, if salespeople can’t understand how they earn commissions, the plan won’t motivate them. So, align it with sales performance metrics and make sure the complexity balances clarity and motivation.
   
8. Define quotas and performance metrics: Set clear and attainable quotas aligning with your objectives. Use the QuotaPath Quota:OTE calculator to determine a quota for each role based on their total on-target earnings (OTE). Next, choose relevant performance metrics to track and measure achievement. Ensure quotas and metrics are fair and objective, avoiding bias or favoritism. Getting this wrong can lead to reps falling short of quota as our survey revealed that 91% of reps don’t hit their quota targets.
   
9. Implement tracking and reporting systems: Our survey showed it takes reps an average of 3 to 6 months to understand their compensation plan fully. Choose or develop tools to track performance, calculate payouts, and generate reports to streamline commissions for RevOps, Finance, and Sales teams. These tools ensure data accuracy and transparency in reporting systems while allowing reps to understand how they earn commissions more quickly and find it motivating. QuotaPath helps you ensure your team understands their comp plan by increasing transparency.  This platform allows reps to see how much they earn based on deals in their pipeline and forecast how much to expect in their paychecks.

Types Of Sales Compensation Plans

Each role requires a different type of sales compensation plan. This section outlines a few comp plan examples to demonstrate the differences.

(AE) Commission

An account executive is a type of sales rep. When creating an AE commission plan start simple and add complexity later as needed. A simple comp plan doesn’t always involve paying a flat rate commission. You can add accelerators/decelerators or a bonus or change the commission rate based on the length of the contract, for example.  It depends on the specifics of your company and what you’re hoping to achieve. 

Below, is a sample AE commission plan that an effective option.

Sample AE Commission Plan:

Quota: $160,000 of ARR per quarter

On-Target Earnings: $140k per year

Base Salary: $70k per year

On-Target Variable: $70k per year

Commission Structure: 11% commission on all ARR sold until quota is reached then 17% commission on all ARR above quota

Notes: This plan features a simple accelerator to encourage overperformance. The sales rep’s commission is flat until they achieve their quota. Once that quota is reached, the commission rate increases for all subsequent revenue. Because this commission rate doesn’t apply to the previous tier, they only get the higher rate on the revenue above their quota, not everything they sold that quarter.

CS compensation plan – Retention-based commission

This sales compensation plan example is for businesses that pay CSMs a commission for each renewed account. In this case, the CSM has a target retention number with an expectation of renewing a percentage of the contracts that they manage. 

For example: A customer success manager has a monthly retention quota of $33,000 ARR and earns a 10% commission of every deal they close

The details of this plan are as follows:

Retention-based commission with 1 Path to earnings

Quarterly net revenue quota of $300,000

Earnings rule:

0% – 100% = 7.5% commission rate

> 100% – 150% = 12.5% commission rate

> 150% = 15% commission rate

SDR compensation plan

An SDR, or sales development rep, is typically responsible for scheduling meetings for the sales team. This role is sometimes referred to as a MDR (market development rep), BDR (business development rep), or LDR (lead development rep). Regardless of their title, they manage the top of the funnel for a sales team by qualifying marketing leads, running outbound calls and emails, or holding discovery calls. The three plans below are the most common SDR comp plans.

• Number of meetings: This SDR compensation plan is often instituted by early organizations that want to fill their sales reps’ calendars. For each meeting the SDR sets (that actually takes place) they receive a bonus. This bonus varies based on the company’s ASP (average sales price) and demo-to-close rate. Generally, the bonus falls anywhere between $20 and $300. 
• Number of qualified opportunities: This SDR comp plan is most effective for organizations with a clearly defined ICP (ideal customer profile) that only wants sales reps on the phone with qualified prospects. It’s important to establish clearly defined rules as to what a qualified opportunity is so there is no confusion. This bonus also varies greatly by company but is typically a higher dollar figure than simply paying for demos. 
• Percentage of revenue generated: While many organizations believe this is the perfect SDR compensation plan, it is only the right choice for specific companies. Essentially, in this example comp plan, SDRs get paid a commission on all closed won deals that originated from the opportunity they created. This is only effective if you have a shorter sales cycle (ideally less than 60 days) because the SDR should have control over their income. The SDR commission percentage typically ranges from .5% to 4%. 

The most common SDR compensation plan is often a combination of 2 or more of these components. Below is an example of this. 

Sample SDR Compensation Plan:

Quota: 10 qualified opportunities per month and $60,000 of revenue per month

On-Target Earnings: $70k per year

Base Salary: $46k per year

On-Target Variable: $24k per year

Commission Structure: $100 per qualified opportunity and 1.66% of all deals they generate

Notes: There are two different quotas and therefore two different commission rules for this sample SDR plan. They are paid a flat $100 bonus for every qualified opportunity they generate and are expected to create 10 qualified opportunities per month. Their second target is to generate $60,000 of revenue per month and they are paid 1.66% of all revenue generated.

Sales Manager Compensation Plan

Sales managers are responsible for managing salespeople.

Unlike sales reps whose quotas are unique to themselves, sales managers’ quotas are usually based on the combined quotas of the reps reporting to them. Their quota is not always the total of their team’s quota. They are sometimes given a “buffer” of 10-20%. This means that if a sales manager has 5 reps reporting to them, each with a $150k quota, the manager’s quota is 90% of that sum. So, instead of $750k (5*$150k) it is $675k ($750k*90%).

Because the sales manager compensation plan sample is based on the deals their reps close, it enables them to spend their time coaching their sales team to close more deals. 

Sample Sales Manager Compensation Plan:

Quota: $945k per quarter (based on a team of 6 reps at a $175k/quarter quota, held to 90%)

On-Target Earnings: $200k per year

Base Salary: $100k per year

On-Target Variable: $100k per year

Commission Structure: 2.65% of all deals their reps close

Notes: This plan is a very straightforward plan, utilizing a single rate commission. That means that the manager earns the same amount on all deals their team closes, regardless of their team quota attainment. This type of plan is somewhat common because it is easy to understand, very simple to roll out, and allows additional complexity to be added in at a later date.

Sample Sales Compensation Plan Templates

Use our Compensation Plan Templates Library to build your first sales compensation plan or modify existing plans. You can auto-populate commission and bonus rates based on your business numbers, determine deals per quota period, and balance quota to OTE ratios.

Here are some popular templates and their use cases to help you get started:

• Single Rate Commission: A near-perfect plan for early-stage startups
• Commission with Accelerators & Milestone Bonus: Excellent plan to incentivize consistency when you have a high velocity of sales and lower contract values.
• Commission with Accelerators: This tiered commission structure that rewards over performance is best for companies confident in the math behind quotas and targets.
• Multiple Rate Bonus (Revenue): This comp plan best suits sales with high seasonality and adjusted quotas throughout the year. It extends the Single Rate Bonus plan by offering a higher bonus rate after surpassing quota.
• Opps Created & Demos Completed Bonuses with Closed Won Commissions: Best for mature sales teams who want to reward SDRs across the entire funnel.
• Demos Completed Bonus: This is a great first SDR plan.
• Qualified Opportunity Bonus & Close Won Commission: This SDR comp plan well suited for fairly mature sales organizations focused on quality leads and preparing their SDRs to advance to AEs.

Top Sales Compensation Strategies

When creating sales compensation plans, the goal is to strike a delicate balance between motivating your team, achieving your business goals, and staying within budget. Here are 3 top strategies to keep in mind:

1. Align your plan with your objectives: Don’t just throw money at goals. Clearly define what you want your sales team to achieve (e.g., increased revenue, shorter sales cycle, higher customer retention).

Tailor your compensation mix and quotas to reward progress towards these objectives directly. For example, if shortening the sales cycle is key, consider a tiered commission structure based on deal turnaround time. Remember, misalignment leads to confusion and demotivation. Ensure every element of your plan is pulling in the same direction.

2. Prioritize clarity and fairness: Complexity kills motivation. Keep your plan simple and easy to understand for your sales team. Avoid convoluted formulas and hidden incentives.

Transparency is key. Clearly communicate the plan, including payout calculations, eligibility criteria, and potential adjustments. Openly address concerns and answer questions.

Ensure fairness and equity. Quotas and performance metrics should be attainable and objective, avoiding bias or favoritism based on territory, product, or individual relationships.

3. Focus on motivation beyond just money: While commissions are powerful, they aren’t everything. Consider incorporating non-monetary sales team rewards like recognition programs, leadership opportunities, or exclusive experiences.

Create a positive and engaging sales culture that values collaboration, knowledge sharing, and continuous improvement. Celebrate successes and acknowledge individual contributions.

Offer flexibility and choice. When possible, consider options like allowing reps to choose their preferred benefits package or participate in profit-sharing initiatives.

By focusing on these three key strategies, you can design a compensation plan that not only rewards performance but also motivates your team to consistently strive for excellence, ultimately driving sustainable success for your business.

Bonus Tip: Track the effectiveness of your plan continuously using a solution like QuotaPath. Monitor key performance indicators, gather feedback from your team, and adapt your plan as needed to ensure it remains relevant and impactful.

Communicating Your Sales Compensation Plan Effectively

Communication is key to the success of your sales compensation plan. Make sure your reps understand their plans. Otherwise, you risk poor performance and falling short of your business goals. Here are a few best practices for communicating your sales compensation plan to help you get started. You can find additional compensation planning tips for a successful comp plan rollout in this blog.

• Transition from general to detailed messaging. Start with a broad overview of the plan when you introduce it to the entire sales force. Then provide more specific details for increasingly smaller groups or 1:1.
• Plan documents should balance detail with clarity and brevity. Keep comp plan documentation as brief as possible but clearly provide enough details.
• Use various methods to explain the new plan. Options include group presentations, 1:1 conversations, written documents, and an explainer video. Exposing reps to this information allows them multiple opportunities to present their questions and receive immediate responses to increase understanding.
• Create a Frequently Asked Questions (FAQs) document. Share it with the plan documents to answer common questions and accelerate plan understanding.
• Provide various calculation examples. Share this information with your plan documents or offer the sales team forecasting software that calculates earnings based on each pipeline opportunity. This type of tool answers questions while increasing clarity and plan understanding.

How To Monitor and Adjust Your Plan For Success

The success of your sales compensation plan hinges on many evolving factors. That’s why it’s essential to create a new sales compensation plan each year that’s aligned with and drives company objectives.

Start to design your compensation plan considering individual roles, company objectives, and your budget. Choose your compensation mix, establish payout frequency, design your commission structure, define quotas and performance metrics, and implement tracking and reporting systems.

Various types of sales compensation plans exist. You can get started by referring to the examples in this guide or leverage one of the free templates in our compensation plan templates library.

Whichever approach you choose to get started, remember that it’s essential to align your plan with company objectives, prioritize clarity and fairness, and focus on motivation beyond monetary incentives.

Finally, prepare an effective sales compensation communication plan to ensure the success of your new sales compensation plan. It will boost rep understanding, getting them onboard and motivated to go the extra mile.

QuotaPath’s new compensation reporting and modeling tools allow leaders to measure and model the effectiveness and costs of their compensation strategies. You can predict new plan costs, see real-time attainment health, and identify performance anomalies in one place to gain confidence in your compensation structures and optimize your team’s success.

No more scenario modeling through a series of compensation spreadsheets and reporting based on data from your CRM and payroll platforms. Now you can reference, report, and predict plan performance directly in QuotaPath.

See QuotaPath in action by booking a demo and witnessing the power of these new features firsthand.

Or, experience it yourself: Sign up for a free trial and start building smarter compensation plans today.

This is a guest blog written by our friends at Vonage on sales outreach strategy.

Sales outreach strategies have come a long way since the days of hiring sales reps to cold-call prospects with the hope that the caller’s charm is enough to convince prospects to make a purchase. In modern times, sales outreach strategies constitute a multi-pronged approach that leverages emails, calls, texts, and social media to move prospects along the sales funnel.

But what does a modern sales outreach strategy for B2B companies look like, and how does it translate to real results in the form of an increase in sales?

In this article, we explore five ways of using sales outreach strategies to increase B2B sales, including the creation of a buyer profile for better propositioning, the use of social proof to convert interest into action as per the AIDA model, and much more.

Understanding sales outreach strategies

A sales outreach strategy is exactly what it sounds like—a method sales professionals use to guide prospects from initial contact through to purchase. Successful sales outreach strategies require companies to manage sales performance through insights and use many communication channels to reach out to prospects, including emails, calls, social media, paid advertising, and more.

The obvious benefit of a sales outreach strategy to a B2B company is an increase in sales revenue, but this isn’t the only one. Sales outreach strategies also increase how efficiently sales are acquired because they generate qualified leads (leads that are more likely to convert because they fit the profile of a customer with high purchase intent).

Effective sales outreach strategies help B2B companies establish trust with prospects, leading to a greater probability of prospect conversion and retention. Now that we’ve defined what a sales outreach strategy is, here’s how it can be used to boost B2B sales.

How to use sales outreach strategies to boost B2B sales

1. Create a clear value proposition

The first step is to create a clear value proposition based on the needs and desires of your customers. Ask yourself: how does your ideal customer behave? What was their journey like from being a prospect to purchasing something from your company? What type of proposition did they respond to? The answers to these questions will help you to establish a proposition that reflects your company’s brand identity while also generating interest among prospects. 

The idea is to position your company’s product range as the solution to your prospects’ problems using a tone that instills confidence and trust. 

For instance, if you are selling cloud based call center solutions, start off by creating a buyer profile based on the sizes and goals of the companies you’re targeting as well as the industry they operate in.

This profile can then be used alongside an engaging and professional tone to convey a value proposition highlighting the power of your call center software to save your prospects time and money, increasing the probability of sales.

2. Engage in multichannel outreach

As the name suggests, multichannel outreach is all about using emails, calls, social media ads/messaging, and text messages collectively to move prospects down the sales funnel.

It’s not a new concept; physical stores have been known to conduct email marketing for years, and text message marketing for eCommerce is just as popular. This approach maximizes the chances of keeping your products in the minds of your prospects, provided you implement two key tactics.

1. Select channels where prospects are most active to increase their responsiveness to your strategy. The resulting attention toward your products and engagement with your company increases the likelihood of moving the prospects down the sales funnel. 

2. Reach out to prospects at the right stage of the sales funnel. The funnel contains four stages (awareness, interest, desire, and action), and each prospect’s position determines what channels are ideal for reaching out to them to maximize sales.

If prospects are merely aware of your products but have yet to show intent, offering a demo or sharing case studies from previous clients can be used to invoke a desire to purchase your products. This leads nicely to our next point.

3. Relay success stories to convince buyers

Put yourself in your target audience’s shoes for a second. Imagine receiving sales communication from a company showcasing the benefits of their products without any real-world examples of its usefulness. 

Now imagine being pitched the product and receiving case studies showcasing how it has helped others solve their problems and achieve their goals. Which scenario would entice you more?

It might seem obvious, but you would be surprised how many companies don’t relay success stories as part of their sales outreach strategies. Customer testimonials on social media, detailed case studies with data proving product success, and referrals from previous clients are just some of the avenues that are useful to relay success. 

We especially recommend case studies made up of detailed reports that describe how your solution has helped past customers overcome challenges because the best way to back up claims is with numerical data.

For example, suppose the call center WFM (workforce management) software that you sell helped your last client generate a 20% ROI, earning you a detailed positive review. Sharing this kind of data (with permission) with future prospects is highly likely to establish trust and confidence in your products, while also adding a human touch to your company, boosting further sales and strengthening market share.

4. Split-test outreach methods to establish best practices

Have you ever thought about split-testing your sales outreach strategies to hone in on the best ones to improve sales? 

Split testing is all about splitting your pool of prospects into two equally numbered groups and testing variations of an outreach strategy to see which variation works best.

Examples of variables worth testing in this manner include a specific stage of the sales call flow or two different case study examples showcasing the past success of your products.

Split-testing these kinds of components of your sales outreach strategies unveils what works and what doesn’t, resulting in a set of best practices for generating leads and engaging prospects. However, there are a couple of caveats to consider.

Firstly, what works for one prospective customer will not necessarily work for another. For instance, if you use a voice-over IP phone service to perform outbound sales calls and find that a 5 pm initial call works better than a 9 am initial call, there are likely to be many potential reasons why.

Perhaps your clients are based in a specific part of the world, or their managers happen to be free to take sales pitches later in the day as opposed to in the morning. These factors affect response rates, affecting conversion and sales success, so it’s important to be wary of them when analyzing the results of split testing.

5. Analyze strategy efficacy for continuous improvement

Whether a sales outreach strategy remains successful in the long term depends on how you go about measuring its effectiveness and evaluating the results to improve the outreach process.

This involves carefully analyzing the data gathered from the methods we mentioned earlier, such as split testing, to devise and test hypotheses on how to improve the sales process and make it as efficient as possible. 

Improving sales outreach strategies depends on how well you analyze metrics such as click-through rates on landing pages and call durations for prospecting to gain insights into what works best for prospects. 

The key is to arrange this data into detailed sales reports and identify trends to form the basis of hypotheses. This can then be used to adjust your sales outreach strategies to increase leads and conversions.

Summary

Sales outreach strategies require a multifaceted approach integrating multiple communication channels to push prospects through the sales funnel. Establishing a clear value proposition serves as the foundation of sales outreach, and conveying success stories through reviews and case studies establishes credibility in the eyes of the prospect. 

This combination increases B2B sales and is further enhanced by tweaking the various components of outreach strategies by split-testing variables, such as different versions of landing pages for outbound sales emails. Analyzing the results of these tests to fine-tune outreach strategies is the final step to boosting sales.

Apply the five methods outlined in this article to improve your outreach strategy and enjoy the results of increased B2B sales.

This is a guest blog written by Paul Aroloye.

Are you looking for ways to streamline your sales compensation process and maximize your team’s performance? Look no further than AI-powered strategies.

Artificial Intelligence (AI) is revolutionizing the sales landscape, creating new opportunities for optimizing compensation strategies.

With its potential to analyze vast amounts of data, predict trends, and automate tasks, AI promises a future where sales compensation is fair, motivating, and conducive to business growth.

In this guide, we’ll dive into 9 AI-powered strategies that can help you optimize your sales compensation plan and propel your team toward success. Are you curious how AI could reshape your current compensation model?

Let’s dive in!

Model and Predict Compensation

With QuotaPath, plan and predict the cost and performance of your compensation plan before putting it into effect.

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Understanding AI in Sales Compensation

AI in sales compensation involves leveraging intelligent systems to manage and enhance the reward process for sales teams.

Conventional methods of sales compensation involve manual calculation and distribution, which often result in errors and bias, negatively impacting the morale of the sales personnel.

AI, however, mitigates these issues through algorithms designed to ensure precision, fairness, and adaptability. These algorithms analyze diverse data sets, including sales performance, market trends, and individual targets, to generate compensation plans that motivate and reward appropriately.

This allows AI to transform sales compensation from a mere administrative task to a strategic tool that aligns the sales team’s efforts with the company’s goals.

Why Should You Use AI-Powered Strategies for Compensation Optimization

Just like an AI comic generator saves time and resources while promoting creativity, incorporating AI into your compensation strategies can bring remarkable benefits to your sales operations. 

Here are a few reasons why you should consider the shift:

• Enhanced Accuracy: With AI, you’re less likely to encounter errors in commission calculations, which are commonplace in manual processes. 
• Real-time Adjustments: AI systems can analyze real-time performance data to see if you need to adjust compensation plans. You could see an immediate reward increase if you’re outperforming your targets.
• Fairness and Transparency: AI removes bias, ensuring each team member is compensated based on their performance. Tech giants like Google are already utilizing AI to analyze and rectify pay disparities.
• Scalability: As your sales team grows, manually managing compensation can become daunting. AI can effortlessly scale up, saving you from hours of administrative work.
• Informed Decision-making: AI’s predictive analytics capability can help plan future compensation strategies. Companies like Adobe use AI to forecast sales and optimize their compensation plans.
• Employee Motivation: By providing a clear and fair link between performance and reward, AI-powered compensation can significantly boost your team’s morale and motivation.
• Cost Savings: Automating tasks associated with compensation management can lead to substantial cost savings. A study by Forbes reported that AI could boost profits by 38% by 2035, partly due to reduced labor costs.

Key AI-Powered Strategies for Compensation Optimization

Now that we’ve seen the benefits of AI in sales compensation, let’s explore 9 strategies to optimize your compensation plan:

1. Predictive Analytics for Sales Performance

The first step to leveraging AI in sales compensation is analyzing your data to identify patterns and trends. By analyzing vast amounts of historical and real-time data, AI can predict future sales performance and guide your compensation strategy.

Imagine you’re no longer basing your compensation plans on guesswork and formulas in spreadsheets but on data-driven insights. This can bring a new level of fairness and transparency to your compensation structure.

Moreover, linking performance to compensation becomes seamless with AI. AI algorithms can track individual performances and tie rewards directly to outcomes.

This means if you’re outperforming your peers, your efforts are rewarded appropriately. This strategy motivates your team and fosters a healthy competitive environment.

2. Dynamic Commission Structures

Thanks to AI, keeping your commission structures static is a thing of the past. With Artificial Intelligence, you can adapt your commission structures based on real-time insights.

Imagine a scenario where your sales team closes deals left and right, exceeding the targets much earlier than anticipated.

Insights from AI can help flag when it’s necessary to adjust commission rates to reward overperformance. This dynamic approach ensures that your team’s hard work is consistently recognized and rewarded, driving a more productive and motivated sales force.

3. AI-Enhanced Sales Quotas

The third strategy involves leveraging AI to set and adjust sales quotas. Traditional quotas are often based on past performance, industry benchmarks, or guesswork.

AI can offer a more accurate approach by analyzing historical data, current market trends, and individual team members’ capabilities to set realistic, challenging targets.

This strategy ensures that your team is consistently challenged and sets them up for success by providing attainable goals.

4. Real-Time Performance Feedback

Embracing the power of AI doesn’t just enhance your compensation strategies; it also revolutionizes how you give feedback.

Gone are the days of waiting for quarterly or annual reviews. With AI analytics, you can provide your team with real-time performance feedback.

Think of it this way: you are not just telling your team how they’re doing but showing them with tangible data. This enables them to see where they excel and where they can improve, facilitating continuous growth and learning.

Plus, with instant feedback, your team can immediately adjust their strategies and efforts for better results. So, you’re not just motivating with rewards but also encouraging self-improvement

5. Sales Gamification with AI

Sales gamification with AI is another strategy on our list. By incorporating elements of game design, such as competition, challenges, and rewards, into your sales compensation plan, you can significantly boost motivation and engagement levels.

Picture this: your sales reps accumulate points for every customer interaction, deal closed, or target achieved. These points could be redeemed for rewards or recognition, feeding into your compensation plan.

The competitive element also fuels the drive to perform and score higher points. AI comes into play by tracking performance, tallying points, and even offering real-time leaderboards.

Integrating gaming elements into your compensation strategy can keep motivation high and make achieving sales targets more fun!

6. Customer Segmentation for Targeted Sales

In the world of sales, understanding your customers is paramount. But how do you identify your most valuable customer segments? Here’s where AI comes to your rescue.

AI algorithms sift through mountains of customer data, analyzing patterns and behaviors to identify high-value customer segments.

These customers bring the most profit and are most likely to remain loyal. Suddenly, you’re not just shooting in the dark; you’re targeting your efforts where they’ll make the most impact. Your sales outreach and cold emails can be more targeted than ever. 

By focusing on high-value customers, you ensure your sales efforts – and subsequently, your sales compensation – are invested wisely. So, you’re not just rewarding sales but smart sales.

7. Adaptive Pricing Strategies

Dynamic pricing, guided by AI algorithms, is another sales game-changer.

Picture this: instead of having fixed prices for your products or services, the prices fluctuate based on various factors such as demand, customer behavior, or even time of day. Sounds complex? Well, that’s where AI steps in.

AI algorithms can analyze these factors in real-time and adjust your pricing strategy accordingly, ensuring you’re always pricing your products competitively. This gives you an edge in the market and maximizes your profits.

So, you’re not just making sales; you’re making smart, profitable sales. And the best part? AI handles all the heavy lifting, so you can focus on what you do best – selling.

8. AI-Powered Sales Coaching

This is one of the most exciting applications of AI in sales compensation. With AI-powered coaching, your team can always access personalized training and guidance on their performance.

By analyzing data from customer interactions, deals closed, and more, AI can identify areas where each needs improvement and provide tailored training modules to help them grow.

This boosts overall team performance and motivation and ensures that each team member has the necessary skills to succeed.

With AI-powered coaching, you’re not just compensating for sales but investing in your team’s growth and development.

9. Better Sales Forecasting

Last but certainly not least, AI can significantly improve sales forecasting. AI algorithms can provide accurate predictions for future sales performance by analyzing past sales data and current market trends.

This enables you to set realistic targets and quotas, adjust your resources and strategies accordingly, and make informed decisions about your sales compensation plan.

With better forecasting comes more precise budgeting and more efficient utilization of resources, leading to better overall results.

So, by integrating AI into your sales compensation plan, you’re not just rewarding for current performance; you’re setting your team up for future success.

Ethical Considerations in AI-Driven Compensation

While AI-driven sales compensation has numerous benefits, it is crucial to consider its ethical implications.

• Transparency: Communicate how the AI assesses performance and determines compensation. This helps to maintain trust and fairness in the system.
• Data Privacy: Ensure that the data used by the AI system is managed responsibly and not used for ulterior motives. Be clear about what data is being collected and how it is used.
• Bias and Discrimination: AI systems are not immune to bias. It is crucial to regularly check and correct any biases in the AI algorithms to avoid unfair treatment or discrimination.
• Responsibility and Accountability: Ultimately, the responsibility for fair and ethical compensation lies with the organization. While AI can aid in objective decision-making, human judgment must be the final determinant in sensitive matters like compensation.

Implementation Challenges and Considerations

Transitioning to AI-driven sales compensation is no small venture, and it comes with its fair share of challenges. It’s important to tread carefully and consider these potential roadblocks:

• Technological Constraints: Does your organization have the necessary technological infrastructure and expertise to implement an AI-powered compensation system? If not, are you ready to make that investment?
• Resistance to Change: People are often wary of changes, especially when it involves something as critical as their compensation. Managing this change effectively is essential, communicating the benefits clearly and providing necessary training and support.
• Complexity of AI: AI algorithms can be complex and sometimes incomprehensible. It’s essential to understand how the AI system works to ensure it’s making fair decisions and to be able to explain it to your team.
• Legal and Regulatory Compliance: Depending on your industry and location, specific legal and regulatory requirements may be related to AI and data usage. Make sure your AI-driven sales compensation system meets these requirements.

Implementing AI in sales compensation requires careful planning and consideration. But the right approach can be a powerful tool to motivate your team, maximize profits, and drive your business forward.

Future Trends of AI in Sales Compensation Optimization

As we gaze into the crystal ball, specific trends in AI-enhanced sales compensation start to take shape.

First and foremost, we’re likely to see an ever-increasing adoption of AI across diverse industries. This technology isn’t just a flashy new tool; it’s a game-changer that can boost profitability and productivity like never before.

Secondly, we can expect AI systems to become more intricate and sophisticated; they’ll likely be able to analyze a broader spectrum of data and factors, providing even more precise, tailored compensation strategies.

Lastly, there’s a strong possibility we’ll see a shift towards more transparency in AI operations. As people become more AI-literate, they’ll want to understand how these systems make critical compensation decisions.

Embracing this trend will be vital to maintaining trust and engagement within your team. The future of sales compensation is undeniably tied to AI, and it’s a future that looks bright indeed.

FAQs

Can You Use AI to Set Sales Targets and Quotations?

Yes, AI can set sales targets and quotas by analyzing past sales data and current market trends to provide accurate predictions for future performance. This helps organizations set realistic goals and allocate resources effectively. 

Furthermore, AI can continuously analyze performance data to make adjustments in real time as needed.  Overall, this results in better forecasting accuracy and improved overall performance.

How Can You Ensure the Ethical Use of AI in Sales Compensation?

To ensure the ethical use of AI in sales compensation, organizations should prioritize transparency and communication about how the system works and its decision-making process. Additionally, responsible data management and regular checks for bias are crucial.

Does Implementing AI in Sales Compensation Require a Lot of Technological Expertise?

It depends on the specific AI system being implemented. Some may require more technological expertise than others, but organizations must have the infrastructure and support to implement and maintain an AI-powered compensation system effectively.

Takeaway

In conclusion, integrating AI in sales compensation holds untold potential to revolutionize your business’s performance and profitability.

It is more than a trend; it’s an actionable strategy that can deliver precise forecasting, efficient resource allocation, and an overall boost in your sales team’s performance.

With its ability to tailor compensation strategies, AI brings fairness, motivation, and transparency into your sales compensation plan.

But remember, this transformation requires careful planning, ethical considerations, and an aptitude for change management.

So, are you ready to redefine your sales compensation strategy with the power of AI? Take the decisive step today – embrace AI and witness a paradigm shift in your sales performance.

Author’s Bio

Paul Aroloye owns the #1 AI Review Blog and helps websites rank on Google. You can reach out to him here.

QuotaPath’s new integrations and field calculator provide even more flexibility within our sales compensation management app so that you automate commissions faster and on your terms. 

We understand the importance of meeting our users where they are today within their existing tech stacks.

Hence, we’ve broadened QuotaPath’s integration scope to include more applications and enabled data transformation through straightforward formulas with our new Calculated Fields feature. Moreover, we’ve created processes and UI that make both releases self-serve to remove the guesswork of setting up integrations and manipulating data once up and running.

Read on for the specifics, and look for more releases that help you test, model, and manage sales compensation more effectively and efficiently next month.

Integrations

Our new self-serve integrations allow you to add and edit the tech connections fundamental to your commission process, including data warehouses, spreadsheets, business analytics, and payment and ERP systems. 

New integration sources:

• Chargebee
• Excel
• Google BigQuery
• Google Looker
• JobAdder
• Keap
• Leaflink 
• Maxio (Chargity & SaaSOptics APIs)
• Netsuite
• Smartsheet 
• Snowflake
• Tableau

We continue to increase our customers’ ability to scale and manage their commissions and payouts by building connections to various systems where commission and payment information can live. 

Regarding future integrations, we will continue to look to our customers to prioritize our strategy and ensure we develop valuable integrations with tools that allow them to manage the connections themselves (or with our help as needed). 

Field Calculator

As a result of our integration upgrades, we can now offer Calculated Fields in QuotaPath, a request from our customers to manipulate data from their integrations directly in-app.

For context, the systems used to calculate compensation have been designed for other business needs, such as CRMs for managing customer relations during and after the sales process. Because of this, when it comes to calculating earnings, data from these original deal sources often needs adjusting. This leads to a manually intensive method or more fields to manage within the CRM when you go to automate commission payouts with a platform like QuotaPath. 

Let’s look at annual contract value for multi-year deals, for example.

Your CRM will reflect the total contract value and the term length fields. However, compensation for the deal is based on the annual contract value. So, to get that number, you must divide the contract value by the term length. 

Instead of adding a field to calculate it or running a spreadsheet external to our app, you can transform this data with our Field Calculator by entering a simple formula. This allows users to quickly divide, multiply, add, or subtract fields to get Monthly Recurring Revenue, Annual Contract Total, and more, saving your Ops team time and maintaining the integrity of your data in your deal record system. 

As part of this release, we also launched additional fields so that you can add more context per deal to speed up earnings approvals and payouts. Need to check term length or region when approving earnings? No problem. You can add up to 20 fields per integration source and customize your deals and payout view with these new fields. 

More from QuotaPath

In conclusion, our latest enhancements signify our ongoing commitment to empowering users with greater flexibility and efficiency in sales compensation management. With the introduction of new integrations, users now have the autonomy to seamlessly integrate essential tech connections, ranging from data warehouses to ERP systems, aligning with their unique commission processes.

Moreover, our revamped integrations and improved performance and data flexibility ensure enhanced control and reporting capabilities. Notable enhancements include reduced data load times, expanded syncing options, and the ability to pull commission data from up to three years back, enabling users to drive sales performance and model future compensation plans effectively.

The introduction of the Field Calculator addresses a longstanding need for manipulating data for commission calculations without compromising data integrity. By allowing users to build simple formulas within QuotaPath, operations teams can save time and maintain accurate records, transform their data in QuotaPath, and streamline the commission calculation process.

As we continue to innovate and evolve, QuotaPath remains dedicated to delivering solutions that empower users to test, model, and manage sales compensation more effectively and efficiently. 

Stay tuned for more updates next month as we strive to enhance your QuotaPath experience further.

Can’t wait? Schedule time with our team to learn how QuotaPath can improve your compensation strategy and process. 

Obviously, we talk about sales commission errors a lot because that’s why QuotaPath exists. 

Mistakes like incorrect payouts due to manual errors from a commission tracking spreadsheet or reps opening up their commission paystub, excited for a big bonus, only to find a check much smaller due to a misunderstanding of their compensation plan, are frequent.

In fact, our 2024 Compensation Trends report found that 22% of sales reps have at least one commission dispute yearly. What’s more, we learned that it takes reps an average of 3 to 6 months to understand how they earn variable pay, so of course, their commission checks will look wonky to them. 

What about instances where a company has to claw back commissions, but the compensation policy left too much room for interpretation? That’s a mismanagement of compensation at its worst.

We haven’t called attention to any significant commission horror stories recently.

Until now. 

We sourced LinkedIn and professional communities RevOps Co-Op and Pavilion for costly commissions-gone-wrong stories in the field.

Here are the top three.

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An Almost-Lost $36,000

Our first story comes from Dan Goodman, a name you might recognize from LinkedIn. Dan, a crusader for employee advocacy, is the Founder and CEO of Dan Goodman Employment Advisory, which supports individuals who have experienced unjust or illegal actions by their employers. 

Dan recently shared the story of his client, Josh. This seasoned sales representative faced commission discrepancies and intimidation from his employer but ultimately fought for transparency and fairness, resulting in a significant payout and recognition for his hard work.

Here’s what happened. 

• Josh joined a new company in the middle of 2023
• An all-star rep throughout his career, Josh earned the President’s Club trip 15 of the past 17 years.
• In his new role, his comp plan consisted of a 6-month, $600K margin quota, with a $25K bonus for meeting the quota.
  • On all margin sales, he earned a 12% commission rate
  • An accelerator of 18% kicked in for all deals after $600K

With 5 weeks remaining in 2023, Josh found himself $60K short of goal, which seeemed off.

So, he proactively contacted leadership and accounting for reports to look into it himself. 

But instead of simply sending him the data, he was met with some backlash, like “Don’t you trust us?” “Why is no one else asking for this information?”

In fact, he didn’t receive any reports until Josh escalated it multiple times to the C-suite. Then, when he finally got access to the report, he met a spreadsheet 4,000 rows deep with data. 

“It was a general ledger report where the expected revenue by line item was offset by a separate line item showing the cost from the vendor,” said Dan. “The difference had to be manually calculated to derive the gross profit that Josh was paid on. That was only half of it.”

To estimate how much Josh could expect to make on his remaining deal, he needed to create a bookings report, which required additional data. 

That’s when Dan stepped in to review the data.

“Eight deals out of 30 appeared to have not been paid properly,” Dan said.

Those 8 deals estimated more than $50K in gross profit that Josh wasn’t paid commissions on, plus $100K that didn’t count toward his attainment.

And they had evidence of it, thanks to Dan’s calculations.

As a result of Dan’s and Josh’s commission deep dive, Josh ended up exceeding his quota for the year, earning his $25K bonus,  another P-club trip, and $36K in commissions. 

“Check your commissions. Demand pay transparency,” said Dan. “It’s your right. It’s your money. You earned it.”

 The $2M Revenue Recognition Error

Our second commission horror story is the thing of RevOps nightmares.

Before this anonymous company went public a few years ago, an account executive sold the company’s largest contract in Asia.

Think: 3-year deal worth $5M in revenue.

“The AE made bank on it, was promoted to director, etc.,” our anonymous RevOps source said.

But, as the 3-year renewal approached, the Ops team uncovered that the only person assigned to the account post-sale was a man from professional services.

No AE. No customer success manager.

Suddenly, SalesOps noticed $2M in forecasted churn, and no one could figure out why —  except for our source and the VP of professional services. 

“Apparently, they had embedded deep down in the contract terms that they got 2 full-time professional services employees for the duration of their contract, valued at $2M,” our source said. “So when they renewed, they dropped that part because it would have had to be paid for.”

What’s more, the Ops team uncovered that at the time of the contract, the AE mistakenly listed the $2M as a “license” instead of correctly labeling it as professional services. This led to the professional services team missing revenue. It had to be reported to the auditors, and it still “churned.” 

The result?

They had to report the situation to auditors

The $2M still “churned”

That quarter’s earnings report caused the stock price to drop from $350 to $30 ahead of its IPO

The company fired the AE-turned-Director.

Inconsistent Clawback Policies

Our last story could trigger any sales rep and involves the dreaded clawback.

A clawback occurs when a company compensates a sales representative for a sale, and the customer terminates the contract within a specified timeframe. When this happens, a clawback issues the employee to return the earned commissions as stipulated in the sales compensation policy.

Download This Commission Agreement Template

“Many years ago, I worked for a tech company whose commission policies needed to be better documented,” said our source. “This led to two similar scenarios, resulting in two different outcomes.”

The first situation involved a considerable enterprise customer churning due to not paying their invoice. As a result, the company clawed back commissions from everyone who earned a piece from the deal, ie: SDR, AE, Manager, VP. 

Not fun, but it happens.

However, the second time this happened with a different customer, the company allowed the rep to keep their commission, causing a (rightful) uproar amongst those who felt the pain of the first clawback.

“It was really frustrating,” our source said. “This may have been about the Chief Customer Officer at the time and their decision-making process. But as someone impacted by the first scenario, the decision-making process and how they ended up in two places with the same scenario was lame and caused a lot of heartache.”

What did we learn here? 

Have a documented process to follow, and stick to it.

This creates consistency, and although your team might not love a clawback, they’ll at least understand that it’s policy. 

The Takeaways

These commission horror stories serve as a stark reminder that mistakes can happen. But with the right tools and a commitment to visibility and process, you can mitigate these errors and foster trust across your team.

QuotaPath exists to eliminate commission errors and confusion around compensation and give Finance, RevOps, and Sales leaders and reps visibility into deal, earnings, and attainment data. This makes it easier to identify issues long before they jeopardize team morale (or future stock prices). 

Learn more about QuotaPath by scheduling time with our team today. 

According to our 2024 Compensation Trends report, it takes reps an average of 3 to 6 months to fully understand how they’re paid. Two things are happening here. First, comp plans are overly complicated, making them difficult for reps to decipher—and second, compensation plan communication is poorly planned and executed.

So, it is no surprise that 30% of leaders don’t think their plan motivates their reps since there is a direct correlation. The more reps understand how they are compensated, the more likely they are to be incentivized by your plan.

Many leaders are rolling out their new plans at the start of the year. This blog explores ways to ensure your reps understand how they are paid by the time the plan goes live.

1. Transparency & Clarity

First, make the plan accessible by distributing clear, well-explained documentation such as FAQs, videos, and emails. These communications should outline commission calculations, performance metrics, and payout rules. Show the math and how it translates to overall revenue targets or the achievement of other North Star metrics.

Additionally, we recommend documenting your comp plan in a compensation policy or commission agreement for rep sign-off. Your commission agreement should avoid subjective interpretation. Clearly define payout terms, what defines a deal, how deal splitting is managed, clawbacks, accelerators, bonuses, and commission tiers. Make it as black and white as possible.

Collect reps’ signatures on your commission agreement to ensure understanding and make these documents accessible. You can complete plan verification with hard copy documents, e-signatures, or with QuotaPath.

As changes or updates occur, make sure to prepare your team ahead of them. Don’t wait for an annual review. Boost understanding by giving reps ample opportunities to discuss changes and get immediate answers to their questions by hosting open forums, team meetings, or one-on-ones.

2. Alignment & Connection

Another way to ensure understanding is to tie your teams’ comp plan to your company targets. This fosters connection and individual impact to company-wide outcomes.

However, despite these benefits, our research identified “alignment to business goals” as the most needed area of improvement in sales compensation management. Individual targets must align with team and company goals so everyone understands how their efforts contribute to collective success.

To help, consider implementing forecasting software so that reps can easily connect the dots between deals in their pipeline and forecasted earnings. In doing so, you’ll enable team members to run various scenarios to see how the plan works and what its implications are for their attainment and earnings progress when bringing in the next deal. These real-life examples show reps how they can achieve their goals and reap the rewards, boosting understanding by making it personal and bringing the plan to life.

3. Communication & Feedback

Just as important as the initial communication of new plans is the collection of ongoing feedback throughout the year.

A solid compensation communication plan is essential for reps to understand and embrace a new or modified compensation plan. Otherwise, you risk confusion, demotivation, and even potential sales rep churn.

Regular dialogue about the plan allows reps sufficient opportunities to get answers to their questions and gain clarity around how it works and how they earn commissions. So, offer group and individual opportunities where team members can raise concerns and seek clarification.

Feedback is a critical element of compensation plan communication that helps you assess rep understanding and identify areas for improvement in the plan’s design or communication. You can gather feedback through anonymous surveys, feedback sessions, a hosted Slack channel, or during one-on-ones.

“Sometimes RevOps leaders make the mistake of not asking the sales team what they need, what they see in the market, and how they think they should be measured,” said Ryan Milligan, VP of RevOps at QuotaPath.

These conversations will help you keep an end-user pulse on the success of your plans.

Ryan often uses the following questions when seeking feedback during a one-on-one:

• Do you feel this comp plan is fair? Why or why not.
• Are you incentivized? Why or why not.
• Do you understand how you’re paid? He follows this question by offering a scenario for them to explain.

Pro tip: “Sales reps tend to give their RevOps counterparts more honest feedback than they do with their sales managers,” according to Jessica Zangre, Head of RevOps with Syncari. “That loop is really important to keep that trust.”

So, create a feedback loop or iterative process because gathering feedback is not one-and-done.

4. Gamification & Engagement

Next, deepen your team’s compensation comprehension by making it fun through commission gamification. These tactics improve understanding of comp plans, drive desired sales behaviors, and boost rep performance.

Dashboards or trackers help reps visualize individual and team progress, motivate goal achievement, and add an element of competition. Celebrate individual and team wins, including plan targets and non-plan behaviors like collaboration, mentorship, or exceeding customer expectations.

Create up to five leaderboards with QuotaPath’s Team Attainment Leaderboards as an easy way to engage and motivate the sales team through gamification.

5. Ongoing Training & Support

Lastly, make sure to include sales enablement that supports team members in their efforts to achieve their plan goals. Provide training resources like webinars, online modules, or external consultants to help reps deepen their understanding of the intricacies of the compensation plan. This allows them to make more informed decisions about which deals to pursue and why.

Host workshops for your reps on topics like personal finance, saving strategies, and commission-related taxes to help them make educated financial decisions. Then give your reps access to commission tracking software so they can run what-if scenarios to help identify which deals to prioritize and track progress toward both personal and professional goals.

Ensure Your Team Understands Their Comp Plan

It takes reps an average of 3 to 6 months to understand their comp plan. When reps don’t understand how they earn commissions, they aren’t motivated by the plan. This lack of understanding often translates to demotivation, confusion, and frustration and may end in sales rep turnover.

Make sure your team understands their comp plan by clearly and transparently explaining the plan. Align it to business goals and help the team see the connection. Discuss the plan with your team and gather their feedback routinely. Leverage gamification to motivate and engage sales reps. Then enable them with ongoing training and support. See how QuotaPath helps you ensure your team understands their comp plan. Schedule time with our team to learn more.

Strategic compensation planning refers to the deliberate and thoughtful process of designing and managing an organization’s compensation structure and policies in alignment with its overall business strategy and objectives. 

This process involves creating an incentive structure that attracts, retains, motivates, and rewards employees while supporting the company’s growth, profitability, and competitiveness goals.

It’s essential to business goal achievement — and many agree.

According to a ZS and Reality Works study, 79% of tech companies and 90% of non-tech large companies use quota-driven sales compensation plans.

By carefully designing and implementing effective plans, companies can achieve their sales goals, attract and retain top talent, and gain a competitive edge in the market. Conversely, getting the strategy behind a comp plan wrong could lead to missing organizational targets.

Our 2024 Compensation Study found that 91% of organizations missed their targets in 2023. Of the 450+ revenue leaders surveyed, 35% cited their organization’s miss to misaligned sales activities. Another 30% admitted they set unrealistic goals. 

We want to help demystify the compensation planning process.  

In our guide below, you’ll learn:

• What strategic compensation planning is and why it’s more effective than traditional methods at driving organizational objectives.
• The role of automation in compensation planning and its benefits.
• The key elements of an effective compensation plan.
• How QuotaPath streamlines and facilitates the strategic compensation planning process.
• Compensation plan development challenges and why they occur.
• Best practices in compensation plan design for successfully navigating the planning process.
• How to leverage data to measure your compensation plan’s success, identify improvement opportunities, and make adjustments.

Let’s get started.

Understanding Strategic Compensation Planning

Strategic compensation planning is more than deciding how to reward your employees for their efforts. It involves intentionally tailoring compensation to business goals by incentivizing sales rep behaviors that support their achievement. 

“Compensation plans should be the caboose, not the engine,” said Pablo Dominguez, Operating Partner, Sales & Customer Success at Insight Partners.

That means focusing first on what you want the company to accomplish. Then, you can collaborate on the plans with Finance, RevOps, and Sales to model them based on those goals. 

This approach drives profitability, growth, and employee satisfaction while achieving organizational targets.

Traditional methods of compensation planning end up working against business goal achievement by rewarding the wrong behaviors. 

For example, a traditional single-rate compensation plan that pays a flat percentage for every single deal fails to provide reps with deal prioritization. 

However, strategic compensation planning may involve structuring a plan that rewards a higher rate for accounts that fall under an ideal customer profile because those customers are most likely to renew and realize total value.

Although aligning incentives with company goals drives desired behaviors and organizational goals concurrently, 39% of leaders admit that their plans don’t align with business targets.

This is problematic as compensation impacts employee morale, engagement, and performance. Companies with clear and transparent compensation plans experience 54% higher employee morale. Studies also show that transparency increases employee retention, while unclear or unfair compensation can decrease employee morale and productivity.

Why is Strategic Compensation Planning Important?

Without a deliberate approach to compensation, companies risk creating plans that don’t align with core business objectives, leading to unintended and often counterproductive outcomes. When incentives don’t match up with company goals, sales teams may focus on activities that don’t drive growth, retention, or profitability. For example, without strategic planning, a flat-rate commission structure could encourage reps to prioritize quick, one-time deals instead of building long-term, high-value customer relationships. This misalignment can ultimately hurt customer loyalty and business stability.

Additionally, compensation plans that lack clarity or transparency can harm employee morale.

When reps don’t fully understand how their efforts translate into earnings—or worse, if they feel the plan is inconsistent or unfair—they are more likely to disengage. This disconnect affects individual motivation and can lead to high turnover, with top performers seeking companies that offer clearer and more meaningful rewards.

Another downside is the loss of competitive edge.

Top talent has options today, and organizations without well-aligned, motivating compensation plans will struggle to attract and retain high-performing salespeople. Over time, this talent gap can impact everything from team productivity to market share.

Finally, the lack of strategic compensation planning often leads to missed organizational targets.

When compensation plans fail to drive the behaviors necessary for achieving business goals, it becomes much harder to meet revenue, retention, or profitability targets. This misalignment can create a cycle of underperformance, where leadership must constantly revise goals and sales strategies to compensate for the shortcomings of an ineffective incentive structure.

In short, without strategic compensation planning, companies face the risks of misaligned priorities, reduced morale, high turnover, weakened competitive standing, and the potential to miss critical business goals.

The Role of Automation in Compensation Planning

Automation tools can streamline planning, reduce errors, and increase efficiency. Unlike commission spreadsheets, automation eliminates time-consuming, faulty manual input, formulas, and calculations.

These platforms facilitate data analysis, scenario modeling, and plan simulation, enabling you to estimate annual incentive earnings, calculate revenue potential and commission costs, and quickly run attainment scenarios.

This frees up time for strategic decision-making and boosts confidence that your new plan structure is fair, logical, and effective.

Key Elements of an Effective Compensation Plan

The fundamentals of a strategic compensation framework include:

Market Competitiveness

Benchmarking against industry standards is essential to creating a market-competitive compensation plan. This enables you to attract top talent as well as motivate and retain current team members. We recommend Betts Compensation Guide for industry standards. 

Goal Alignment

Individual and team goals must be linked to broader company objectives through metrics and KPIs. For instance, if a business’s priority is to increase gross revenue retention, then incentives need to reward behaviors that support the achievement of this outcome.

Pay Mix Structure

People are motivated by various means. So, it’s essential to use a balanced pax mix of base salary, bonuses, and incentives so the compensation plan motivates the desired behaviors and performance while inspiring team members to go the extra mile.

Transparency & Communication

Clearly and simply communicating the new sales compensation plan is essential to its success. Explain the details in simple language and various formats, including commission calculations, performance metrics, and payout rules. When employees understand the plan and any changes, you’re more likely to get their buy-in and active participation. This ultimately drives desired behaviors and business outcomes.

Compensation Plan Templates

Discover, compare, build, and customize plans using one of our 20 adjustable compensation plan templates.

Explore Templates

Strategic Compensation Plan Examples

For inspiration, check out a few examples of strategic compensation plans below.

Each one is designed to align rep incentives with specific company objectives, from growth and customer retention to successful new product launches. By choosing the right plan, companies can effectively guide their sales teams to focus on what matters most, achieving results that support individual and organizational success.

1. Tiered Commission Plan for High-Value Accounts

• Objective: Drive focus on high-value or ideal customer profiles (ICPs) that are more likely to convert into long-term, profitable customers.
• Structure: In a tiered commission plan, reps earn higher commission rates for deals that match specific ICP criteria, such as industry, company size, or geographic location. Lower-tier deals, such as those outside of these criteria, yield a smaller commission.
• Benefits: This plan encourages reps to prioritize deals with high-value potential, resulting in more valuable accounts and greater customer lifetime value for the company. It’s especially useful for businesses aiming to build a loyal customer base that aligns with long-term growth objectives.

2. Accelerated Rate for Over-Quota Performance

• Objective: Motivate sales reps to consistently exceed their targets and boost overall sales productivity.
• Structure: Once a rep reaches their quota, they move into an accelerated commission tier where they earn a higher percentage on each additional sale. This tiered accelerator can increase further as reps exceed specific benchmarks, such as 125% or 150% of quota.
• Benefits: This structure incentivizes reps not just to meet their goals, but to push beyond them. It’s ideal for companies looking to increase sales velocity and reward top-performing reps, while ensuring that the most productive salespeople see substantial financial rewards.

3. Milestone-Based Bonuses for New Product Sales

• Objective: Promote adoption and success of a new product or service.
• Structure: Reps receive milestone bonuses when they reach specified sales targets for a newly launched product, which could include bonuses at the first sale, after reaching ten sales, or achieving a set revenue goal.
• Benefits: This approach encourages reps to prioritize the new offering, giving it early traction in the market. It also helps the company capture valuable data and market feedback, which is often crucial during a product’s initial rollout phase.

4. Annual Retention Bonus for High Customer Retention Rates

• Objective: Drive customer retention and increase revenue from renewals or upsells.
• Structure: Reps earn a bonus at the end of the year if a significant percentage of their accounts renew or if they maintain a low churn rate within their portfolio.
• Benefits: This plan is ideal for companies that want to reduce churn and improve customer relationships. By incentivizing retention, reps are encouraged to focus on client satisfaction and upsell opportunities, directly supporting long-term revenue goals.

5. Cross-Selling and Upselling Incentives

• Objective: Increase revenue per customer by expanding product penetration across existing accounts.
• Structure: Reps receive additional commissions or bonuses for each successful cross-sell or upsell to current customers. This can be structured as a flat bonus per additional product sold or as a percentage increase in their total commission rate.
• Benefits: By rewarding cross-selling and upselling, this plan maximizes the potential value of each customer account and deepens customer relationships. It’s highly effective for SaaS or subscription-based companies that benefit from a broader product adoption within their existing customer base.

QuotaPath’s Approach to Compensation Planning

QuotaPath is a powerful software solution for designing high-performing comp plans, managing sales compensation, and providing insights into plan and team performance. This platform supports the entire compensation planning process and streamlines payouts of commissions.

Ensure you’re offering market competitive compensation with our free Quota:OTE ratio calculator. This tool verifies your on-target earnings and quotas align with industry averages.

Confirm goal alignment by running plan scenarios with QuotaPath’s compensation modeling features. This allows you to perform a compensation plan analysis before implementation and adjust it proactively.

Automate commission calculations for error-free paychecks so you can confidently include a mix of performance-based incentives to motivate behaviors that drive company objectives.

Increase transparency and communication of new or revised comp plans by providing your sales team with QuotaPath’s free commission calculators, allowing them to run what-if scenarios for deals in their funnel. Then, streamline the plan verification process to confirm employee understanding and buy-in.

EverView is an excellent example of how these tools simplify the employee compensation management process. 

Before partnering with QuotaPath, EverView had 35 compensation plans for a sales team of 80. Fifty percent of their sellers reported not understanding their comp plan and had no idea how much they had earned until they received their paychecks.

After implementing QuotaPath, EverView consolidated their 35 plans into eight and then to 1 in QuotaPath. Sellers could measure plan attainment and current or future earnings at any time. This led to EverView having its highest sales year, with 70% of the team hitting quota and 20% achieving 90%.

Challenges in Compensation Plan Development

We surveyed over 450 Finance, RevOps, and Sales leaders across SaaS to identify the top pain points regarding sales compensation. Surprisingly, 97% of these executives reported challenges.

Unrealistic expectations were cited as a top challenge by 19% of leaders. Setting excessively high quotas and on-target earnings (OTEs) that are unattainable sets your team up for failure and often results in sales rep churn.

Failure to motivate reps was reported by 19% of surveyed executives. Although using the wrong mix of incentives is one reason a compensation plan falls short, a lack of understanding is often the problem. That’s why leveraging an effective compensation communication plan so reps understand how they earn commissions helps prevent reps from getting demotivated or frustrated.

Too complex to execute well was a challenge specified by 18% of participants. Overly complex comp plans contain too many compensation elements. These plans are labor-intensive to execute well and maintain.

Too complicated to understand was identified as a top compensation challenge by 17% of those surveyed. Plans that are overly elaborate leave reps overwhelmed and confused, making it unclear where to focus their efforts.

Failure to drive customer acquisition cost efficiency (CAC) was cited as a compensation challenge by 14% of leaders. Plans that aren’t optimized to drive CAC affect the efficiency of your growth engine like marketing spend, sales capacity, and management overlay.

Best Practices in Compensation Plan Design

These compensation planning process best practices will help prevent significant mistakes while increasing plan success.

Regular Reviews & Updates: Compensation planning is not a set-it-and-forget-it sort of process. Routinely revisit and adjust the plan based on performance and market changes.

Employee Feedback & Involvement: Incorporate employee input during the planning process by surveying reps, engaging them on a Slack channel, or during 1-on-1 meetings. Ask what motivates them, how well they understand the plan, and how they’d change or add to it. Then, incorporate employee suggestions or explain why something isn’t feasible.

Data-Driven Decision Making: Base compensation decisions on data and objective metrics rather than gut feeling or emotion. Using historical performance data, industry insights, and modeling projections is best to make educated compensation decisions.

Measuring the Success of Your Compensation Plan

An essential element of the strategic compensation planning process is measuring the success of your plan through the lens of employee retention, performance, and compensation-related costs, also known as effective rate.

Track these metrics with compensation reporting tools like dashboards, integrated software like QuotaPath, or manually gather data from various systems into spreadsheets for analysis.

There are various ways to analyze the data to evaluate the plan’s effectiveness. For example, start with quota attainment. 80% of your team should hit their quotas. If you’re considerably below 80%, getting to the root cause, such as closing skills, leads, or motivation, is essential.

Verify that the quotas and OTEs are realistic and in line with industry trends. You can measure this with our free Quota: OTE Ratio Calculator.

Unrealistic goals, especially in the current economic environment, set your team up to fail. This leads to frustration and discouragement and could ultimately cause reps to quit.

Resolve unrealistic quotas and OTEs by decreasing quotas and better aligning them with OTEs so reps don’t get discouraged. You can also increase motivation and yield quick wins by adding logo commissions and other SPIFs.

If you find a significant difference between commissions and goal achievement for your weakest and best-performing team members, figure out why. This often stems from unbalanced comp plans or territories. Adjust them to ensure they are fair and proportionate for all employees.

Are you paying high commissions to a team falling short of their targets? It may be time to establish minimum performance requirements before reps can earn commissions. A commission floor accomplishes this and motivates quota-carrying employees to hit goals while preventing the business from rewarding underperformance.

Complete this process periodically to identify areas for improvement and refine the plan over time.

Approach Compensation Planning Strategically

Strategic compensation planning is essential to business success. It affects employee motivation, retention, and the company’s ability to achieve organizational goals.

Strategic planning involves intentionally tailoring compensation to business goals and incentivizing sales rep behaviors that drive their achievement. This approach is significantly more effective than traditional methods that often work against hitting business goals.

Automation tools streamline the planning process, increase efficiency, and reduce errors. They facilitate data analysis, plan simulations, and modeling, enabling data-driven, strategic decision-making while boosting confidence in new plans.

An effective strategic compensation planning process considers market competitiveness, goal alignment, pay mix structure, and leverage clear and effective communication. Leverage these elements to increase plan success.

QuotaPath is a powerful software solution for designing high-performing comp plans, managing sales compensation, and providing insights into plan and team performance. Providing support throughout the planning process, including employee compensation management, our platform includes many useful tools to calculate the Quota:OTE ratio, model compensation, commission calculators, and plan verification automation.

Our recent survey revealed the top sales compensation challenges of leaders across SaaS include unrealistic expectations, failure to motivate reps, overly complex plans, plans too complicated to understand, and failure to drive CAC. You can avoid these challenges by leveraging a strategic compensation planning process.

Conduct regular reviews and updates, gather employee feedback and involve them in the process, and leverage data for more informed decision-making as you build compensation plans to increase the success of your compensation planning process.

Strategic compensation planning is cyclical. It involves creating a plan, measuring its effectiveness, and refining it. During reviews, identify weaknesses and areas for improvement so you can adjust and improve your plan over time.

You can start developing effective compensation plans by:

• Identifying organizational goals
• Selecting business targets that specific behaviors can directly impact.
• Tailoring compensation and incentives to these business goals
• Testing the plan to ensure it is financially sound.
• Using an effective compensation communication plan to increase understanding and buy-in across the organization.
• Measure compensation plan success, leveraging data to identify areas for improvement.

Whether you are designing compensation plans with a strategic mindset or need performance metrics and insights to assess team output or your plan’s success, QuotaPath is your partner for strategic compensation planning success.

Artificial intelligence remains in.

Adoption rates for companies using AI more than doubled from 2017 to 2022, according to McKinsey. Moreover, amongst individual users, 71% reported they had at least some exposure to generative AI following its entrance into the mainstream over the past two years.

Various functions of organizations are leveraging AI to streamline operations, boost efficiency, and improve accuracy. Use cases range from AI-powered customer service chatbots, automated manual sales tasks, and lead scoring automation to automated candidate screening by HR and security monitoring for cybersecurity departments. And, in finance, we see this emerging technology used for data analysis, fraud detection, forecasting, and compliance monitoring.

But there’s so much more that finance can do with AI to grow more efficient in their roles.

In this blog, we will share how AI in finance teams helps to improve accuracy and security, and more.

10 Ways Teams are Using AI in Finance

Teams are using AI in finance in a multitude of ways.

As the technology evolves, financial professionals continue to find innovative applications for artificial intelligence that enhance decision-making, streamline operations, and drive efficiency across the industry. Below, we’ll explore 10 compelling use cases demonstrating how AI transforms the finance sector.

These examples range from automating routine tasks to predicting market trends with remarkable accuracy, showcasing the versatility and potential of AI-driven solutions in the financial world.

Whether you’re a financial analyst, investor, or simply intrigued by the intersection of finance and technology, these real-world applications of AI will stimulate your imagination and inspire new possibilities.

10. Risk assessment

Banks and loan apps are already turning to AI for smarter financing. Machine learning algorithms crunch the numbers, assess risk, and personalize offerings faster and potentially fairer than traditional methods.

9. Automated reporting 

Software powered by AI eliminates manual data compilation and reconciliation by automating financial reports and statement generation as well as distribution on a scheduled basis.

8. Fraud detection, management, and prevention

Humans are inefficient and error-prone when discerning between normal versus abnormal or suspicious behavior for fraud detection. AI tools efficiently analyze real-time data to accurately detect potentially fraudulent behavior and notify relevant parties for further review.

7. Improving financial workflows 

Automate approval workflows for purchase orders or expense reports with AI-powered software. This reduces delays, increases collaboration, and ensures timely processing.

6. Intelligent data entry

AI-driven automation reduces error-prone, time-consuming manual data input, minimizing the risk of entry mistakes and miscalculations.

5. Forecasting future trends

AI tools process large volumes of historical, industry, and company-specific data to generate predictive models. Finance departments minimize risks by using this capability for forecasting, budgeting, and resource allocation decisions.

Model Your Compensation Strategy

QuotaPath’s new Plan Performance Modeling tool gives Finance and Revenue leaders insights they to analyze and predict the cost and performance of comp plans.

Learn More

4. Compliance monitoring

Finance has many regulations to adhere to. AI reduces the risk of regulatory violations and penalties by automatically recording designated financial transactions and activities and performing compliance checks.

3. Cost optimization

AI is used to analyze historical expenditures, market conditions, and expense data to identify cost containment opportunities.

2. Generating real-time insights

Real-time financial performance insights from enhanced reporting are displayed on AI-powered dashboards for easy reference and decision-making.

1. Data analysis

Finance teams and financial services organizations leverage AI tools to process the significant amount of data they manage. These platforms identify patterns, trends, and insights for better data-driven decision-making to manage credit, calculate risk, and select investments.

Best AI Tools for Finance Teams

Ready to start implementing AI in fiance?

Figuring out which apps to consider first can feel overwhelming. Therefore, in this section, we’ve identified a selection of popular and highly effective tools designed specifically for finance teams looking to harness the power of AI.

These tools have been handpicked for their ability to streamline financial processes, enhance data analysis, and improve decision-making. Whether you’re a financial analyst, a CFO, or part of a finance team, these AI tools can provide valuable support in your daily operations.

Booke.AI

Booke employs AI automation to help finance teams with bookkeeping and accounting tasks. This tool corrects coding errors and uncategorized transactions while improving client communication and streamlining month-end close.

Domo

Domo seamlessly integrates diverse data sources to merge them into user-friendly dashboards designed for business decision-makers. This use of AI in finance enables teams to create a single dashboard that incorporates information from sources like Excel, Salesforce, Workday, and numerous others.

Nanonets

Nanonets Flow is a solution that uses AI in finance to streamline processes, increase efficiency, and improve results. This tool extracts data from documents like invoices and receipts, automates processes, manages workflows, and integrates with your current financial and accounting platforms.

How to Start Using AI in Finance

The shift to AI in finance has begun. It’s time to jump in so you can start enjoying greater efficiency and insights.

This may seem intimidating, so break it down into manageable steps to facilitate the process. Follow these best practices for beginning to implement AI in your finance practice.

1. Educate yourself

Expand your understanding of AI and its potential use cases and limitations in finance to help hone in on how to get the greatest benefit for your department. You can take a course, contact knowledgeable colleagues, attend industry conferences and seminars, or hire a consultant.

2. Identify use cases

Determine which aspects of your finance practice will benefit from AI. Then prioritize them based on importance and set clear, measurable goals for your initiative.

3. Assess your systems and resources

Before you start using AI in finance, evaluate your data infrastructure, quality, and completeness to avoid issues. Then determine if your staff is equipped to use AI tools, if they’ll require training, if you’ll need to hire additional employees, or if you should use an outside vendor.

Once you’ve completed these preliminary steps, you can select your AI tools and work toward implementation.

Start using AI in finance

The use of AI in finance is on the rise. Its benefits include increased efficiency and accuracy, reduced risks, cost containment, and more informed decision-making.

Don’t be left behind by the competition. It’s time to start using AI in finance. This doesn’t need to be difficult. Educate yourself, identify use cases that best suit your requirements, assess your systems and resources, and select your first AI tools.

See how QuotaPath can help Finance teams model compensation plans and draw insights to predict and measure the performance of their plans—schedule time with our team to learn more.

We recently conducted a LinkedIn poll to get a pulse on the current business climate, asking leaders to identify their North Star metrics for 2024. 

The results were resounding: revenue growth and customer retention emerged as the top two priorities. This unsurprising outcome underscores the fundamental need for businesses to attract new customers and cultivate lasting relationships with existing ones.

This laser focus makes sense, as attracting new customers while nurturing existing relationships forms the bedrock of sustainable success. But achieving these goals requires more than just wishful thinking – it demands a strategic approach to talent management, and that starts with sales compensation.

More specifically, this calls for sales compensation strategies that align go-to-market teams with key business plays so that the company reaches its goals when the team hits their performance metrics. 

In this blog, we’ll explore five standard North Star metrics and share compensation levers that can help drive these. 

• Revenue Growth: We’ll review how incentivizing new customer acquisition, deal size, and sales velocity can fuel top-line expansion.
• Customer Retention: Discover how rewarding repeat business, reducing churn, and fostering customer loyalty drives sustainable growth.
• Product Adoption or Usage: Learn how incentivizing feature exploration, active engagement, and product mastery can unlock the full potential of your offerings.
• Upsell and Cross-Sell: We’ll examine how encouraging reps to identify additional customer needs and recommend complementary products or services can boost average order value and overall revenue.
• Cost Management: Explore how aligning compensation with resource efficiency, cost optimization, and responsible spending can contribute to a healthy financial bottom line.

By meticulously aligning your compensation plan with these critical objectives, you can equip your team with the necessary tools and incentives to navigate the path toward success. So, prepare to set your sights on the horizon, calibrate your internal compass, and embark on a journey of growth fueled by a strategic and motivating compensation plan.

Join us as we dissect each objective, offering actionable insights and practical strategies to ensure your compensation plan drives a prosperous 2024.

Revenue Growth

Revenue growth refers to a company’s income increase over a specific period. In the SaaS context, it translates to acquiring new customers, expanding existing subscriptions, and, ultimately, an upward trajectory of recurring revenue.

Why It’s the North Star: For SaaS companies, and many years before 2023, revenue growth was the ultimate indicator of sustainability and success. 

Here’s why:

• Recurring Revenue Stream: SaaS thrives on subscriptions, generating predictable income. Each new customer or expanded subscription adds to this stream, fueling the company’s financial engine.
• Investor Magnetism: Investors heavily prioritize revenue growth potential when evaluating SaaS companies. Demonstrating steady and consistent growth attracts investment, fueling further expansion and innovation.
• Market Validation: Growth signifies customer satisfaction and validates your product’s value proposition. As your customer base expands, it signals market acceptance and product-market fit.
• Internal Alignment: Growth goals drive decision-making across departments, from marketing and sales to product development and customer support. Everyone works towards the shared objective of acquiring and retaining customers.

Beyond Just a Number:

While revenue growth is undeniably crucial, it shouldn’t exist in a vacuum. Sustainable growth hinges on balancing with other key metrics like customer churn, customer lifetime value (CLTV), and product adoption. 

Focusing solely on acquiring new customers without nurturing existing ones can lead to a leaky bucket, where churn cancels out gains.

Optimizing for Growth via Comp Plans

New Logo Bonus: One way to drive new revenue is by motivating your reps to capture new business via a new logo bonus. ​​This refers to acquiring new customers who haven’t previously purchased from your company and is often offered when entering a new market or customer segment or launching a new product.

We recommend a fixed, single-rate bonus for every new logo (ex: $500). 

You could also consider upping the amount for high-value logos, larger accounts, or accounts that are your ideal customer profile (ICP).

Ideal customer profile: Speaking of ICP, your ICP accounts often have the shortest sales cycles because they meet all the criteria of your “perfect customer.” You could offer a higher commission rate on a new biz that classifies as ICP or a bonus. 

Accelerators: We love an accelerator. Motivate your high-performing reps to go after more new business after achieving their targets by offering an accelerated commission rate (1.5x).

Customer Retention

A cornerstone metric, customer retention is often considered the north star for business success. It is defined as the ability of a company to keep its existing customers subscribed to its services. We measure it by the churn rate, representing the percentage of customers who cancel their subscriptions within a specific period. 

Why It’s the North Star: Customer retention plays a crucial role in multiple ways:

• Predictable Revenue Stream: Unlike one-time sales models, retaining existing customers ensures a stable and predictable income stream. This financial stability fosters growth and investment opportunities.
• Reduced Customer Acquisition Costs: Acquiring new customers is often more expensive than retaining existing ones. High retention translates to lower overall customer acquisition costs, improving profitability.
• Increased Customer Lifetime Value (CLTV): Loyal customers become long-term subscribers, generating more revenue over their lifetime. Focusing on retention increases the average CLTV, boosting overall profitability.
• Advocacy and Network Effects: Satisfied customers become brand advocates, recommending your service to others. This organic growth through referrals further amplifies the benefits of retention.
• Improved Product Development: Feedback from retained customers provides valuable insights to guide product development and ensure your offerings continue to meet their evolving needs.

Optimizing for Customer Retention using Compensation

Reward High NPS Scores: A good indicator of how likely a customer is to renew is the net promoter score they leave you. The more high scores you receive, the greater the chances your customer renews. 

You can encourage your team to deliver exceptional onboarding experiences by offering bonuses or SPIFs to reps who earn the highest NPS scores tied to onboarding. 

Early Renewal Bonus: You can also impact retention and forecast retention more accurately by incentivizing your reps to sign early renewals. Consider a 30-day, 60-day, and 90-day early renewal bonus. Your 90-day renewal should reward your reps the most. 

Multi-year Conversions: We talk a lot about offering multi-year accelerators on new biz that sign for more than one year, and the same can apply for renewals. Offer a multi-year commission rate higher than your standard renewal to incentivize your customer team to convert single-year renewals to multiple years. 

Product Adoption Or Usage

Production adoption represents the percentage of users actively engaging with your product’s core features and functionalities. It reflects how many users have moved beyond initial onboarding and derive real value from your offering. Similarly, product usage measures the frequency and depth of interaction with your product. This includes metrics like active users, feature utilization, average session duration, and completed tasks.

Why It’s the North Star: For SaaS companies, product adoption and usage hold immense significance in several ways:

• Predictable Revenue: High adoption and usage make engaged users more likely to renew their subscriptions, contributing to a stable and predictable revenue stream.
• Reduced Churn: Users who actively engage with your product experience more value and satisfaction, reducing the likelihood of churn and boosting customer retention.
• Increased Customer Lifetime Value (CLTV): Engaged users typically become long-term subscribers, utilizing more features and generating higher revenue over their lifetime.
• Valuable User Feedback: Usage data provides insights into user behavior, preferences, and pain points, informing product development and ensuring alignment with user needs.
• Stronger Product-Market Fit: High adoption and usage suggest a strong product-market fit, indicating you’re addressing a genuine need and delivering value to your target audience.

Optimizing for Adoption and Usage via Compensation

Promote Individual Performance: Set targets for key usage metrics like active users, feature adoption, or completed tasks within the platform. Then, reward exceeding these targets with milestone bonuses for hitting goal. 

Team-Based Incentives: Foster collaboration and healthy competition by setting team-based goals for platform usage metrics. Reward achieving these goals with team outings, incentives, or additional paid time off.

Upsell And Cross-Sell

Upselling involves convincing customers to upgrade to a more expensive version of your product. At the same time, cross-selling means locking in your customer to additional products or services that complement their current subscription.

Why It’s the North Star: Upselling and cross-selling can hold immense value, including: 

• Increased Revenue: Expanding the value customers derive from your platform translates directly to higher revenue per customer, accelerating growth and profitability.
• Reduced Customer Acquisition Costs: Retaining existing customers and increasing their value is often more cost-effective than acquiring new ones.
• Enhanced Customer Lifetime Value (CLTV): Upsold and cross-sold customers become more valuable over time, generating higher revenue throughout their subscription lifecycle.
• Stronger Customer Relationships: By helping customers discover additional solutions to their needs within your platform, you foster trust and loyalty, strengthening relationships.
• Improved Product Adoption: Upselling and cross-selling opportunities often arise from understanding customer needs and usage patterns, leading to improved product adoption and satisfaction.

Optimizing for Upsell and Cross-Sell

Upsell component in comp plan: To encourage upsells and cross-selling, set a net revenue retention component in your customer team’s comp plans. We recommend one that splits with gross revenue retention so that you don’t hide customer churn in made-up revenue in upsells.

Upsell/Cross-Sell Contests: Run short-term contests with attractive prizes or rewards for individuals or teams who achieve the highest upsell/cross-sell rates or revenue within a specific timeframe.

Accelerated Commissions: Pay out commissions for upsells and cross-sells earlier than for initial deals, providing faster financial rewards and boosting motivation.

Cost Management 

The strategic cost management approach involves optimizing resource allocation, minimizing unnecessary spending, and ensuring financial sustainability. Defined, cost management can encompass various aspects like cloud infrastructure costs, employee expenses, marketing spend, and ongoing operational costs. Cost management aims to maximize the value of every dollar spent, align expenses with strategic priorities, and ensure resources are effectively used to hit business objectives. 

The metrics to measure cost management include burn rate, customer acquisition cost (CAC), customer lifetime value (CLTV), and gross margin. And tracking these metrics helps identify areas for optimization and measure the effectiveness of cost management strategies.

Why It’s the North Star Metric: 

• Financial Sustainability: Efficient cost management ensures a healthy bottom line, providing the financial foundation for future investments, growth initiatives, and product development.
• Improved Profitability: Minimizing unnecessary spending directly translates to higher profitability, allowing you to reinvest in strategic areas and fuel sustainable growth.
• Data-Driven Decision Making: Cost management involves analyzing data to understand spending patterns, identify inefficiencies, and make informed decisions about resource allocation.
• Competitive Advantage: In a competitive market, controlling costs effectively gives you a pricing advantage and helps you attract and retain customers.
• Investor Confidence: Demonstrating responsible financial management and efficient cost optimization attracts investors and builds confidence in your long-term success.

Optimizing for Cost Management in Your Comp Plan

This one requires you to get a bit more crafty with your comp plans.

Reward Full Price Deals: You can impact cost management by paying higher commissions or offering full-price bonuses anytime a member of your GTM team avoids discounts.

Implement Decelerators on low gross-margin deals: Motivate your reps to focus on deals with more efficient onboarding by paying a decelerated commission rate on deal types that require significant technical assistance. 

Pay Commissions On Invoice Payment: For early-stage companies or startups looking to impact their cash flow, consider switching your commission payments from the time of the deal to the time of invoice payment. 

Conclusion

How you feeling after reviewing those business objectives? 

Revenue, adoption, upselling, and cost management drive the business machine. Remember, amidst the whirring pistons of growth and optimization, it’s easy to overlook the crucial fuel that keeps it all running. Customer retention.

While acquiring new customers is vital, retaining existing ones is a gold mine. Loyal customers spend more, refer others, and provide invaluable feedback. Neglecting them is like pouring gasoline on your profit margin and setting it alight.

The most successful businesses in 2024 will prioritize retention alongside their other objectives. 

So, how do we translate this into action? 

Money. Use your compensation plans as a lever to drive those business objectives. 

If you’d like to draft, test, and model any of these compensation changes to your existing plans, we invite you to connect with our sales team for a guided tour of how to do so before signing up for a free trial.  

In today’s economic climate, organizations are tightening their budgets and spending money on software that impacts the business by creating value and operational efficiencies. Choosing the right sales compensation management solution is no different and should be treated as a strategic investment. 

Especially since this is your people and their money. 

“Money is emotional,” said Hilary Headlee, EVP, Sales + Customer Success Center of Excellence at Insight Partners. “You’re playing with people’s money and their livelihood.” 

But with so many options in the commission space (a market expected to triple its value by 2028), the noise has made it increasingly difficult to choose a trusted partner and platform. According to our 2024 Compensation Report, 15% of revenue leaders identified “automation” as their most needed improvement improvement in their sales compensation management process.

Businesses today, however, need more than just an automated commission management tool. 

They need a solution that evolves and grows with their expanding needs. That pulls insights to inform your compensation strategy, motivates your revenue teams, and drives (and measures) performance at the team and plan levels. 

Your sales compensation management software should be an innovative, forward-thinking investment that addresses what your sales and RevOps teams need today, with the ability to model performance and meet anticipated growth according to your revenue and finance teams.  

Plus, with key business metrics changing amid the market’s volatility, organizations merit a partner that knows sales compensation and how to adjust your compensation strategy accordingly.  

This buyer’s guide will help you identify and prioritize the essential criteria for commission management software. Read on to feel confident that your choice will propel your business forward.

Sales Compensation Management Software Core Considerations

Before you begin evaluating sales incentive compensation management software platforms, start here.

First, Identify the specific needs and goals of your Finance & Go-to-Market (GTM) team. Some goals might include:

• Identify your team’s North Star metric (annual recurring revenue, gross revenue retention, customer acquisition cost, etc.).
• Building and aligning competitive compensation structures and sales objectives according to the North Star metric
• Partnering with a compensation strategy consultant to address the above
• Establishing practices that motivate sales performance
• Retaining top reps
• Increasing sales compensation equity and fairness
• Leveraging data-driven insights through a source of truth to measure the performance of incentive strategies
• Simplifying administrative processes through more efficient methods of tracking and payment

Then, address the complexity and health of your commission structures.
Take our 1-minute quiz to evaluate the health (and complexities) of your existing or future compensation plan proposals.

• How do your on-target earnings (OTE) compare to those of similar regional and industry roles? 
• What are the pay mix ratios across your variable-pay-earning teams? 
• Do your quota periods match your sales cycles?
• What’s your North Star or key business metric?
  • How do your compensation plans drive those?
• Would you consider your comp plans simple, logical, and fair?
• Do your reps understand how they are paid?
  

Can your reps explain their comp plans?

Our 2024 Compensation Report found that it takes reps 3 to 6 months to understand how they earn commissions.

View Report

The above questions will help set the stage for evaluating sales incentive compensation management tools. This way, you can know how to describe your comp plan designs to providers and approximate the amount of plan design support you’ll require. Additionally, it will help you determine if you need guidance revamping your sales compensation strategy.

Below are a few other practices to think about and put into place before you begin your evaluation.  

Create a Comp Committee

Build a compensation commitmentee consisting of sales, RevOps, and finance. This will promote cross collaboration between departments and foster alignment early on in your process.

Keep in mind what is most important to a sales manager differs greatly from what matters to a finance leader.  

Understand the Volume and Structure of Your Deal Data

Remember that your commission tracking will only be as accurate as your deal data.

Do you use multiple sources to track deals?  Do you pay reps on contract closing or invoice sent,  or payment received?  Who manages each one of these tools?  Do you aggregate all your data in a warehouse?

What’s the average volume of deals per quarter?  Do you have cumulative quotas? 
Having a deep understanding of how deal information is captured, how it relates to your commissions, and who manages each tool is essential in understanding if a compensation platform will work for you. 

Most comp software tools will allow to integrate from one source, but will they allow for multiple fields from that source?  Will they allow for multiple deal sources?  Can you join fields to calculate a certain criteria?  

What Will Your Sellers Care About Most?

Keep in mind your end users: the reps.

Are you using teams and leaderboards? Contests? Is your sales team remote or in the field?  Will they rely on a mobile version?

Do you review attainment and earnings once a week? A month?  A quarter? 

Lastly, Don’t Forget Budget

Consider how much value you want to place on saving time, gaining team alignment, forecasting earnings, and modeling total costs of compensation and performance. Think about how many users and the number of admins your team will require. You’ll also want to consider your growth plans over the next year. 

Some solutions have minimum contract values and users, while others, like QuotaPath, do not. 

What about pricing? How easy is it to independently find how much incentive management solutions cost? The less you can find yourself, the more likely you will face higher and hidden costs later in your research. 

Sales Incentive Compensation Management Checklist

Great! With those initial considerations in place, you’re now ready for the evaluation checklist. 

Conclusion: Guiding Your Strategic Investment in Sales Compensation Management

In closing, the significance of choosing the proper sales compensation management solution cannot be overstated. 

As you’re evaluating, consider the level and access of support you’ll have to your vendor’s team. Think about your existing compensation plans and future proposals. Could they be better aligned to your business targets? Are they driving the behaviors you aim to see? Can the team you work with offer guidance? 

Look into customization options, ease of getting started, and how much you can run the platform autonomously when you need to make changes. 

We created our buyer’s guide to empower you to navigate the complexities and considerations that go into sales incentive compensation management solutions. As you embark on this journey, envision your choice as a tool and a cornerstone of growth, maximizing impact, and positioning your organization for sustained success.

Learn more about QuotaPath by scheduling time with our team, or explore our solution by signing up for a trial.