This blog explores the intricacies of offering startup equity compensation to employees. 

Startups offer equity as a way to attract and retain talented employees and to raise capital from investors. 

In doing so, startups gain an edge over some of the larger tech corporations by opening up stock option ownership. The idea is that employees who get in early take a salary cut in hopes of a healthy payout upon the startup’s exit. 

But it’s not so simple as offering up a percentage of options and calling it a day. 

“Startup compensation equity is a tricky thing,” QuotaPath CEO and Co-Founder AJ Bruno said. “There’s definitely been an evolution of options over the last decade.”

A lot of founders and venture capitalists have done a pretty good job of teaching their companies and their teams about it, AJ said. But usually, the topic lives internally — leaving those outside of the organization quite clueless. 

To help clarify, AJ offered some best practices around the challenges surrounding equity compensation plans. 

Before we explore those, let’s begin with the basics of startup equity. 

Basics of startup equity compensation

Startup equity refers to a percentage of ownership in a company offered to employees, founders, and investors in exchange for their contributions to the company. Equity represents a share of the company’s assets and profits, and its value fluctuates depending on the company’s performance and funding. 

Employees who accept equity typically receive stock options, which give them the right to purchase shares of the company’s stock at a fixed price (the “strike price”) at a later date. That later date, we refer to as the “vesting period,” which is the time an employee must work for an employer in order to own outright their shares of company stock.

“To understand options, you first have to understand how the company is organized,” AJ said. “C Corp, Delaware, B Corp, S Corp, Sole proprietorship, individual. They all have nuance.”

But they all tie back to what’s called a “charter.” The charter is what governs the organization and changes over time with more funding. 

Additionally, the amount of equity depends entirely on the stage of the company and the employee’s position and experience. 

Meaning, the younger the company and the more senior your role, then the more likely you are to get a bigger percentage of options. Whether you’re in a technical role or not also impacts your options.

“In my experience, if you’re in a business or sales role, you can expect equity to range anywhere from 0.1 to 0.9%,” wrote Belicia Tan, manager at Ladder. “For engineering or product roles you can expect 0.2 to 1.25%, and if you’re a designer, you can expect 0.2 to 1%. However, not all startups will follow these bands, and some are flexible to adjusting the weight between your base salary and equity based on your preference.”

Benefits of offering equity

By offering equity, early-stage startups can substitute or complement cash with ownership options. This comes in handy for young startups without a lot of cash available to pay for top talent. 

Other benefits include:

Alignment of interests: Employee equity aligns the interests of employees with those of the company, as they now have a financial stake in the success of the business.

Motivation: Ownership in the company can serve as a powerful motivator for employees, as they will be more invested in the company’s success and will work harder to make it happen.

Potential for long-term wealth creation: Employee equity can provide employees with the potential for long-term wealth creation, as the value of their equity may increase as the company grows and becomes more valuable.

Sense of belonging and pride: Equity also can give employees a sense of belonging and pride in the company, which can lead to higher employee retention and job satisfaction.

Of course, paying via equity brings a few challenges. 

The challenges

For starters, at this point in people’s tech careers, they’ve probably seen a friend “get rich” from getting in early at a startup with a successful exit. 

“They think it’s easy money,” AJ said. “And that’s just not true. The fact remains that 90% of startups fail.”

AJ turned to today’s market dip for a sobering lens. 

“The downstream effect from the economic downturn we’re in right now is that the ability for companies to raise capital will dry up,” AJ said. “Then comes the threat of layoffs or restructuring. It’s a tough position for the team and company to be in and the company’s chance of going under increases significantly.”

As a result, startups will have to offer competitive salaries and compensation if they want a shot at exceptional talent. Equity isn’t enough in today’s world. 

Another challenge stems from the volatility of the market. Stock information communicated by founders to employees grows quickly out of date due to the market and fundraising. This clouds transparency. 

“Further complicating this is the amount of venture capital that flowed into organizations and pumped up valuations,” AJ said. “Now, you have stock prices — even for private companies — that are underwater.”

Best practices for employees

To align employees and promote transparency around compensation and equity, AJ recommends putting an equity management solution in place, such as Carta. 

“Being able to zoom out and have the total picture is the first step to understanding what options exist in an organization,” AJ said. 

For employees considering equity compensation packages, AJ recommends taking a step back to understand your goals.

“Is the goal to learn, or is the goal to earn? If it’s to learn, you could join these companies that may or may not be overvalued, inherit a lot of responsibility and learn. You take the risk-reward because your options might be worth something,” AJ said. 

If it’s to earn, go to a bigger company and push for that cushy salary. 

Also, instead of focusing on the amount of options, learn the number of total outstanding shares relative to the number of your shares and the strike price. 

“If I were a new employee, I would want to understand how long it’s going to take for the company to grow into its valuation,” AJ said. “Because, yes, you usually get more equity as the company grows, but that equity gets more expensive.”

Startup equity compensation best practices for leaders

Be honest. Be open. And give people as much information as you can to help them make an informed decision.

“That way, when they get here, it doesn’t feel like a bait and switch like I’ve seen a lot of startups pull,” AJ said. 

As for another sound piece of advice, put a formal and transparent framework in place to level inequity equality. 

“Wherever you are in the process, or your stage in the company, start something formal,” AJ said. 

For additional resources around startup compensation equity, check out the following:

• Here’s How Startup Founders Should Offer Employee Equity (Gong)
• Startup equity: how much to give employees (SeedLegals)
• The Complete Guide to Employee Equity (acelr8)
• Startup employee equity: What founders should know (Carta)

Sales Compensation

Thanks, AJ, for sharing your thoughts on equity as compensation. 

For more information on QuotaPath, a sales compensation management platform and commission tracking software, chat with our team today. 

Creating an ideal customer profile (ICP) is essential to sales and marketing success. It enables marketing, sales, service, and leadership to focus on accounts with the greatest potential value to their organization.

According to Gartner, companies that invest in a well-defined ICP achieve compelling business results, including:

• Faster sales cycles
• Higher conversion rates
• Greater average annual contract values (ACV) and lifetime values (LTV)

The goal of developing an ICP is to identify the accounts with the greatest probability of becoming high-value customers.

Not sure how to develop your own ICP? No problem. We just went through this exercise ourselves and got you covered.

What is an ideal customer profile?

An ICP is a detailed description of a customer that can most benefit from your solution. It includes pertinent characteristics for focus accounts such as:

• Industry
•  Annual revenue
•  Geography
•  Employee headcount – in specific departments or company-wide
•  Software in tech-stack

Since it is common to include the presence of a key stakeholder at an account as an identifying characteristic of an ICP, ICPs, and buyer personas are sometimes confused.

To differentiate between the two, remember that ICPs focus on the account level, while buyer personas describe the decision makers, or buyers, at said account.  

Why is it beneficial to establish an ICP and how does it impact RevOps strategies?

ICPs provide a deeper understanding of your most successful customer implementations.

In turn, this information can inform where your GTM team should focus prospecting efforts by targetting organizations with the highest potential return on investment. Creating and aligning around ICPs help you streamline your efforts and improve sales efficiency.

Some of the benefits organizations typically see from developing ICPs include: 

• Saving time and money: Understanding the unique characteristics of your ideal customers allows you to focus your marketing campaigns and budget on prospects most likely to convert
• Improved content and campaign quality: Allows you to create more targeted, relevant, and personalized advertising and messaging
• Lead prioritization: ICPs make it easier to identify, rank, and prioritize quality leads to hand off to sales or to nurture
• Faster sales cycles: Improved content and campaign quality and lead prioritization helps reduce the length of sales cycles
• Reduced churn: As you sell to similar company profiles that have historically had the most successful implementations, you’ll notice churn decreases.  

Now that you see the benefits, let’s review how to create your ICP.

How to create an ideal customer profile

There is no shortcut to creating an ICP for your business. But, it’s worth the time and effort to create your business’ unique ICP.

Here’s how:

1. Create a list of your best customers.

Finding your ICP requires a greater understanding of which of your accounts is experiencing the most long-term success with your product. These aren’t necessarily the accounts that have purchased the most from you. Rather, it’s the accounts that receive the most value from your solution.

Build a list of these customers and look for key characteristics shared by these accounts.

2. Identify common characteristics.

Now, dig deeper into your data to learn more about these shared attributes and to reveal more commonalities. This will give you a clearer picture of what your ICP looks like.

Data points to start with include industry, vertical, the technology used, business model, and size. Additional data to investigate include purchase volume, long-term contract value, account growth and expansion, renewal rates, company age, and geography.

Then, review your findings from the data and select a handful of metrics to use in your actual ICP, such as customer lifetime value, cost per acquisition, and monthly revenue. What you choose will depend on your specific business.

3. Define challenges and use cases.

Identify the challenges each ICP faces and how your product solves these issues. This determines common use cases amongst the accounts.

Now you can shape your messaging to ICP prospects based on these shared challenges and wins. 

4. Create an ICP document.

Time to document your findings for easy reference.

Your documentation must clearly define each ICP and list all their defining characteristics.

A visual document in PowerPoint slides or a PDF is most effective. But, don’t use a spreadsheet as it can be too cumbersome.

Once you have that laid out, share it with your entire organization and especially your GTM team.  Use your ICP to build quality prospect lists, identify and prioritize quality leads, and finetune things like advertising, messaging, and onboarding processes.

Ideal customer profile example

To help see this in practice, here is an ICP example for a B2B service desk software:

• B2B SaaS company
• Located in the U.S. or Canada
• Customer service team of at least 15 people
• Annual recurring revenue (ARR) of at least $30M

Their customer base consists of small and medium-sized businesses that require significant hand-holding and ongoing training.”

This example shows you that an ideal customer profile doesn’t list every single characteristic we discussed above. You and your team must determine which factors that are most relevant to include in your ICP.

Inform your go-to-market strategy with your ICP

Your ICP is an essential element in preparing or revising your go-to-market strategy. Without an ICP you risk wasting valuable time and money by chasing the wrong prospects.

Invest the effort to create your ICP so you can easily identify, understand, and communicate with your best customers. This enables you to achieve stronger results by accelerating sales cycles, increasing conversion rates, and boosting ACVs and LTVs.

This is not a one-and-done process. Since ICPs are based on data you should reiterate this process yearly, quarterly, or after any major changes to your product or service to keep your profiles current.

We hope you find this ICP guide helpful. Stop back for additional free RevOps resources, and don’t forget to check out our library of tools including:

• Calculate Quota:OTE Ratio
• Compensation Hub
• Build a Sales Funnel
• Sales Compensation Calculator

To learn more about QuotaPath’s automated commission tracking and sales compensation management software, chat with our team today.

A new year often brings new sales compensation plans. 

And, the perfect time to share compensation changes is often during your sales kickoff (SKO). 

Sales kickoffs happen annually and provide organizations with an opportunity to communicate their business strategy and motivate their sales team. Most leaders also use this time to share the new year’s comp plan design and explain the changes and drivers behind it. 

By sharing the “why” behind what’s new and how it will help them and the organization make more money, you build rep buy-in, excitement, and understanding. Looking at it another way, a sales compensation plan is like a blueprint for building a sales pipeline. It shows budding salespeople exactly how they’ll make money.

Reversely, when communicated poorly, you risk confusing and frustrating reps — some of whom may actually quit. 

“Rolling out the sales comp plan is a big moment,” said Mark Roberge, Managing Director of Stage 2 Capital. “I’ve been on the recipient side of a mass exodus, where 10 amazing salespeople from a particular company came to me with job applications.”

The above can happen when companies fail to provide the math behind compensation design. 

Instead of educating reps and giving them space to ask questions, leaders announce the changes and immediately ask for rep signatures on their new commission agreements.

Below, we dive into commission agreements, why getting that rep signature is imperative, and how to do it more effectively and seamlessly. 

What are commission agreements? 

Sales commission agreements act as a contract between an employer and an employee for work paid on commission. They also define the details — or rules — of how and when reps earn commissions and payout periods. 

Download our free commission agreement template here.

One of the most important parts of communicating the new commission agreement requires a rep’s signature. This step solidifies that all parties are on the same page. (Also, in California and New York, this step is required by law.) 

But before you send a mass email with your commission agreement PDF attached for signature, you should first make sure your reps have a clear understanding of their comp plan.

Here are some best practices from an example compensation communication plan: 

1. Educate management 

Before rolling out a new plan to the sales team, start by introducing the plan to all of management. Explain the changes, how they will help the company and how they will affect the sales team. Be thorough. Also share any documents, calculations, and FAQs that help demonstrate and support these changes. 

2. Review the plan and begin the rollout process 

The VP of Sales or the senior sales manager should introduce the comp plan to the sales team as a high-level review. Use this time to energize and engage the sales team. After the meeting, send a follow-up email recapping the session with additional documents, calculations, and FAQs, that will help the team visualize the upcoming changes. 

3. Review the plan…again

After the VP of Sales or the senior sales manager sets the tone for this new plan, now it’s time for each manager to review the plan with their individual teams. Explain to the team how this new plan will impact them. And once again, send out documents. But this time, break down the calculations so that the team can see how they would perform under the current plan based on their current performance. 

4. Schedule one-on-ones with each rep

After sales managers meet with their individual teams, they should meet with each person on their team. This gives the reps a chance to ask questions or raise concerns in private. It also provides an opportunity for the manager to build transparency and trust in their relationship. Once the meeting is over, you can follow up or recap the conversations via email, phone, or private chat. 

5. Verify the plan

Now, you’re ready for rep signature. This step, a mandatory step in some states, confirms alignment and understanding between the rep and the organization. Even if your state doesn’t require it by law, you should introduce this practice. It protects the business and the rep should a discrepancy arise.

You can run this process manually, or you can use QuotaPath’s in-app feature, Plan Verification. 

Automated plan distribution

Check out how this Finance leader saved 2-3 hours by automating rep signature of comp plans using QuotaPath.

Read the full story

Automate sales comp plan rep signature

In QuotaPath’s Plan Verification tool, managers or admins can upload comp plan documents and distribute them to the reps via email.

As reps go into the platform, review and sign off on the new commission agreements, admins will see the verification completion statuses directly from the plans page view. 

Then, you can store and access all of the plans in QuotaPath for future reference. 

See below.

Making sure that you and the rep are on the same page and ultimately getting them to sign the new plan quickly is easier with QuotaPath. Our Plan Verification shows reps how to earn commissions and creates transparency across the comp planning process. 

See this feature, along with our full commission tracking software and integrations, in a custom demo with a member of our team. 

If you’re not ready yet to automate your sales commission reporting and payouts, no worries! You’re not the only one calculating commissions in Excel.

Despite rapidly rising numbers in business intelligence and analytics, it seems people still prefer spreadsheets. Specifically, 63 percent of businesses do. A recent International Data Corporation survey found that nearly two-thirds of companies run various payment processes, like commissions, via Excel.

For small businesses with simple commission structures, bulk spreadsheets can deliver exactly what you need. In this article, we will walk you through the steps and formulas to create a sales commission spreadsheet.

We love and respect a spreadsheet, but the disadvantages to running manual commission calculations can be an error-filled time suck. Any change to a compensation plan requires manual updates. Every new deal must be added, along with any bonuses or spiffs that impact commission payouts. These can take as little as a few minutes to make or two business days depending on their complexities. 

At QuotaPath, we’re big on transparency. It’s a theme woven throughout our team, our platform, and our relationships with our customers. Unfortunately, spreadsheets often fail in fostering transparency. Permission-based spreadsheets block sales reps and leaders from real-time insights into their earnings and forecasts. Anytime a commission question pops up on a specific deal or paycheck, a gatekeeper to the spreadsheet awaits. 

Beyond an Excel commission calculator

If your business is planning on scaling its sales organization this year or adding new compensation plans, please consider automating this process. Better yet, fancy a chat with QuotaPath as your sales performance management system. We can track, calculate, forecast, and prepare earnings payouts for all of your sales teams on variable compensation plans. 

By our estimates, QuotaPath can save your teams that are calculating commissions in Excel 17 hours a month. Some customers have even reported four business days of work freed up since implementing QuotaPath.

Depending upon how complex your compensation plans are, your spreadsheets should take you between two to eight hours to build. Then, for monthly upkeep, approvals, and finalizations for payroll, plan to spend between one to four days a month preparing and addressing discrepancies. 

Note: Bulk spreadsheets do not carry over month-per-month. Any exceptions or modifications to a rep’s commissions will have to be re-added each month.

Additional note: Individual rep commission statements will need to be manually created, with other rep info fully deleted from the spreadsheet. 

Now that we got that out of the way, we’re ready to begin calculating commissions in a spreadsheet! To help you get started, we’ve outlined the steps and definitions below. 

Free Sales Commission Calculator Template

A free spreadsheet to simplify the commission tracking process. Track what you or your team have earned in 4 inputs.

Download Now

Follow these steps to start calculating commissions in Excel

How to create a commission calculator in Excel: First, identify what you want to include in your spreadsheet. 

We recommend, if applicable:

• Date Closed
• Customer
• Order #
• Revenue 
• Sales Rep
• Commission Rate
• Commission Amount
• Bonus 
• Deductions
• Payout
• Date Paid

Next, will your bulk spreadsheet track multiple months? If so, you can either duplicate the spreadsheets for every month or, extend columns out to the right. Beware, the more columns you add, the trickier it’ll be to scroll through and find what you’re looking for later. 

Once you’ve built these fields out, review your commission structure and compensation plan. 

Ask yourself, what kind of compensation plan do I have?

If it’s a single-rate sales commission model, good news, this spreadsheet will work well. A single rate, or flat rate, pays a set percentage from the deals you close. 

Whatever your single rate is, you’ll apply this percentage to every revenue amount earned by you or your reps in your spreadsheet. 

Within your spreadsheet, single-rate commissions might look like this:

You’ll input this formula in the third column to calculate the commissions earned:

To apply to the fields below, grab the corner of the cell with the formula in it, and drag it through the applicable cells. This action will modify the same formula for the corresponding rows.

Pat yourself on the back; you’re doing great. Just remember that although all often understand single raters, they fall short in rewarding overperformance.

If you need help with compensation plan strategy, we’ve got free consultations available with our Chief of Staff Graham Collins. 

Need a Google Sheet Commission Template? Download Yours Below.

How to track multiple-rate commissions in Excel

Your spreadsheet grows more complex when you venture outside of simple-rate compensation plans.

Unlike single-rate, multiple-rate commissions factor in different percentage earnings on deals. The rate earned could vary based on quota attainment, deal size, or how much a rep sold already that month or quarter. 

You may have also heard multiple-rate commission plans referred to as accelerators, escalators, tiered commission, or multipliers. They all mean the same thing and act as a great way to motivate reps and reward performance. 

If your plan classifies as such, should you be calculating commissions in a spreadsheet? Not on our watch! 

We can make this process so much easier for you through our automated commission tracking software.

But can you? Absolutely. 

To account for the various rates, you will need to create a rate table. This can be built out on the same page of the spreadsheet.

A commission rate table in Excel might look like this:

Note: There are no formulas within this rate table.

After defining your rate ranges, build out the table within the spreadsheet. Then select all of the cells within the rate table, scroll up to the top left corner where the cell numbers usually appear, and name it “RateTable.” 

How to get my commissions spreadsheet to acknowledge my rate table

Now that your rate table is ready, it’s time to get your spreadsheet to recognize it and apply it to your commissions. 

Cue: Excel’s “LOOKUP” function!

To get your spreadsheet to recognize what rate a closed deal should be paid out on, you will add the LOOKUP command to your Commission Rate column.

In this example, the formula is citing cell D2, which is where the revenue amount for this deal lives. Then, it’s pulling in the appropriate rate based on the range we set previously. For $3,500, reps earn 4 percent commission.

Deep breath, you’re doing amazing, sweetie!

Add in your deals

From here, you’re now ready to add the won deals for your reps that fall within this compensation plan. For reps outside of this compensation model, such as a sales development rep or a sales leader, you’ll need to create a different spreadsheet. (Psst, in Quotapath, we can build and distribute your different plans for you.)

Congratulations, you just built a model for calculating sales commissions in a spreadsheet!

Additional variables to consider

As you thrive in your new spreadsheet utopia, here are a few more items to consider. Along with rate plans, make note of any single-rate bonuses, multiple-rate bonuses, and/or milestone bonuses. 

Bonuses represent something entirely different from rate plans. Commissions calculate from the revenue earned on a deal closing. Meanwhile, reps get bonuses, or set amounts of money, for completing a specific task. A single-rate bonus, for example, could be earning an extra $500 for hitting a monthly quota. 

You can add bonuses manually at the time a rep hits the conditions within your spreadsheet. Or, you can have individual spreadsheets for each rep and add a formula that inputs bonuses based on your conditions.

This might look like a bonus of $1,000 upon hitting $50,000 in total revenue. That bonus is in addition to the rep’s commission rate. When that rep closes a deal that pushes them to $75,000 in total revenue, they might earn another bonus of $2,000. That’s a multi-rate bonus.

To account for this, you’d have a cell in your spreadsheet dedicated to total revenue for the year, month, or quarter, depending on your bonus parameters. The formula, assuming your revenue totals are in the “A” column, looks like this:

Commissions spreadsheet checklist

Lastly, to ensure your spreadsheet remains accurate and secure, run through this checklist monthly.

• Use naming conventions that include time periods and rep names.
• Check that all formulas and multipliers are correct before sending and upon receiving.
• Password-protect each spreadsheet.
• Make a backup of each spreadsheet.
• Only send the spreadsheets to the designated recipients, and triple check the email address before sending. 
• If sending to reps, only include that rep’s commission information by deleting the cells related to other reps. 
• Always look for hidden rows upon receiving commission spreadsheets (tips)

Until next time

Thank you for making it this far! 

This may seem a bit overwhelming, and honestly, it is. 

That’s why QuotaPath launched in 2018 to remove this burden from sales, RevOps, and finance teams. If it’s not the right time to chat, and you need additional spreadsheet tips, check out this lengthy list.

For free commission calculators, quota attainment calculators, and commission tools, check out ours here:

• Sales Compensation Calculator
• Sales Quota Planner
• Quota:OTE Ratio vs. Sales:Earnings Ratio Calculator
• Commission calculator Excel template
• Comp Plan Builder

FAQs

Can I calculate different commission rates based on different sales tiers?

Yes, you can calculate different commission rates based on different sales tiers. Here are two methods:

Method 1: Using the IF function

The IF function is a logical function that allows you to test a condition and return a value if the condition is true, or another value if the condition is false.

To calculate different commission rates based on different sales tiers using the IF function, you would need to create a table with the different sales tiers and their corresponding commission rates. Then, you would use the IF function to calculate the commission rate for each sale.

Method 2: Using the VLOOKUP function

The VLOOKUP function is a lookup function that allows you to search for a value in a table and return the corresponding value from another column in the table.

To calculate different commission rates based on different sales tiers using the VLOOKUP function, you would need to create a table with the different sales tiers and their corresponding commission rates. Then, you would use the VLOOKUP function to look up the sales tier for a given sale and return the corresponding commission rate.

Can I automate commission calculations for multiple salespeople?

You can automate commission calculators for multiple salespeople using commission tracking software such as QuotaPath. Build your compensation plans using QuotaPath’s plan builder, assign plans to your reps, then sync your CRM to automatically pull data from your sales pipeline and calculate commissions accordingly.

What if I need to calculate commissions regularly?

If you need to calculate commissions regularly, the easiest and most accurate solution is to invest in a sales compensation management platform like QuotaPath. In doing so you can shave down the time it takes to run commissions from days to minutes. Try it out for yourself in a free 30-day trial.

Hiring sales reps can be a tricky endeavor. After all, they are salespeople selling themselves. You’re looking for successful sales rep hires that will ramp up quickly to qualifying leads, crush their quotas, and build lasting relationships with clients for your company. So how do you make sure you’re getting the right information out of interviews? Ask these interview questions for sales reps when hiring to build a successful, profitable sales team.

Tips to keep in mind when interviewing potential sales hires:

1. Dig at least three levels deeper than the answer they give by asking what, how, tell me more. This will get you to the real, juicy answers.
2. Take note of their communication and enthusiasm every step: over email, on the phone, and in person.
3. Interrupt the candidate at some point, and listen to how they respond.
4. Test how they take feedback. Offer constructive criticism to something they said or did, and see how they respond.
5. One of the most effective activities for hiring sales reps is having them run through role-playing exercises and putting their skills to the test, on the spot.

Interview format for hiring sales reps

Step 1: 30-minute phone screen

Don’t waste your time with unqualified people.

Being a personable communicator over the phone is a basic qualification for a career in sales.

If they shine on the call, you might consider sending a brief testing exercise before scheduling them for in-person interviews with your sales team like drafting a cold outreach email or coming up with a cold call script. This will help gauge their interest and enthusiasm for the role and your company.

Step 2: Onsite interview with sales team members

Have them meet with a peer, senior peer, and potential direct sales manager. If they are interviewing for a role requiring more experience, meeting with a senior executive might also be necessary.

When you meet in person, have them demonstrate their skills through exercises like a mock call or a mock demo.

Best interview questions for sales reps

Ask an entry-level sales hire:

1. Why are you interested in sales?
2. What scares you about being a sales rep?
3. What keeps you going when you’re having a bad day?
4. How do you keep a smile on your face when you’re having a tough day?
5. What motivates you more, money or praise?
6. What do you need to be successful?
7. Tell me about a time you persuaded someone to change their mind.
8. Tell me about a time you were persuaded to change your mind.
9. What’s something you’ve taught yourself recently?
10. Teach me something.
11. Sell me something.
12. Tell me about a person or event that has impacted you.
13. What’s your proudest achievement?
14. Tell me about a time you were disappointed with yourself.
15. What are your career goals?
16. What are you really, really good at?
17. What do you struggle with?
18. What are you not interested in?
19. Tell me about someone who’s had a positive influence on you.
20. Tell me about someone who’s had a negative influence on you.

Ask an experienced sales hire:

1. What were you hired to do?
2. What accomplishments are you most proud of?
3. What results were achieved in terms of successes and accomplishments?
4. What were some of your mistakes at your previous job?
5. Why did you leave your previous job?
6. What would your former boss say were your biggest strengths and weaknesses?
7. What would your team say were your biggest strengths and weaknesses?
8. Tell me about the team you inherited.
9. Tell me about a time you refused to sell to someone.
10. What traits did your best sales manager have?
11. How have you stacked up to your peers in past performance?
12. What was your most painful sale lost?
13. What was your greatest sales win?
14. What’s the most creative way you’ve closed a deal?
15. Who’s your favorite client?
16. What is your favorite part of the sales process?
17. What is your objection handling philosophy?
18. How does your sales performance this year compare to last year?
19. How did your sales performance compare to your plan?
20. Are you familiar with sales software (i.e., CRMs, sales engagement platforms, etc.)?

To answer that last one, for QuotaPath it’s always happy customers! We’re here to help you and your team crush sales goals. Use QuotaPath to assist in ramping up your sales hires, align your team to their quota, and clarifying goals, and sales compensation plans. It’s a win-win-win situation and it’s free to get started.

Whether you are launching a product or entering a new market, you need a go-to-market (GTM) strategy to help you achieve your goals. 

Without one, you risk wasting valuable time and resources on what eventually becomes a fruitless effort. 

By formulating your approach, you can avoid pursuing the wrong prospects, miscommunicating your message to potential customers, or expanding into a market saturated with too many competitors.

Do you need to prepare a new GTM strategy and aren’t sure where to start? We’ve got you covered.

What is a go-to-market strategy?

A go-to-market strategy details the launch of a new product or entrance into a new market.  

Even if you have an existing (successful) GTM strategy that you used previously for a current product, you should create a new GTM strategy as the marketplace and buyers change. 

Plus, every market has its differences, which requires nuanced GTM plans. 

Below, we go through the basics of what every GTM strategy should include. 

Every GTM strategy features the following key elements:

Product-Market Fit: What problem your product solves and how.

Target audience: Who your ideal customer is, how much they are willing to pay to solve their problem, and what pain points and challenges your product can address.

Market research: Identification of potential competitors in the market and the amount of demand for your product or level of saturation in the market

Marketing plan: Which marketing methods and content types to use to generate demand for your product

Sales strategy: The type of sales plan and related process you are using

Now that you know what a GTM strategy looks like, let’s review the steps you can take to prepare one.

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How to build a go-to-market strategy

To build a new GTM strategy, understand that it will take an investment of time and effort. Although your process may look slightly different, the following 10 steps give you a good starting point.

1. Answer these questions

Before you dive into building a new GTM strategy you should answer some preliminary questions. This information helps you work through the additional steps of creating your new strategy.

According to Jen Lyttle, a go-to-market and sales consultant, some of the best questions to ask when developing a new GTM plan are:

1. Who is our ideal customer profile (ICP) and how are we marketing to them today?
2. How do our sales reps currently receive leads? What is the split between inbound versus outbound?
3. What is our total addressable market (TAM) after identifying the ICP?
4. Where are we currently getting stuck in the sales process?
5. Is it that our sales reps don’t have the tools to move quickly?
6. Is it that our sales reps have the tools to move quickly but they just don’t know how?
7. Does our demo process work?

2. Identify the problem

Next, determine the problem your product or service solves for your ICP. This helps you understand product-market fit and is critical to ensure you launch the correct product to the right audience.

3. Define the target audience

Identify your target market with an ICP and buyer personas. This helps you create a clear picture of your prospects and how to communicate with them.

4. Research competition and demand

Once you know who your prospects are and what solution you offer them, you need to ensure there is sufficient demand in your target market and review the competitive landscape.

5. Decide on key messaging

Create a matrix tying messaging to each buyer persona based on pain points and product value.

6. Map the buyer’s journey

This is often visualized as a funnel or a flywheel.

7. Choose marketing channels

Select which types of content you will use to create demand for your product to move potential customers down the marketing funnel, and thereby drive growth. Some options include social media, paid search ads, blogs, SEO content, and emails based on your target audience and where your potential customers can be found along their buyer’s journey.

8. Create a sales plan

Decide how to sell to your target audience and convert them to paying customers. Popular options include self-service, inside sales, field sales, and channel sales.

9. Establish clear goals and ways to measure progress

This is an essential step so you can recognize success and the need to adjust your strategy. Create rules of how often to track goals and course correct so it becomes routine.

10. Create clear processes

Determine how to communicate and execute your strategy with your team. Include rules of engagement (RoE) for your sales team to prevent issues as leads start rolling in. 

Lily Youn, Head of Growth at Gradient Works, offers a toolkit that includes a best practices RoE guide, along with a productivity calculator for metrics to hit targets next year.

QuotaPath supports RevOps professionals

We hope you find this GTM market guide helpful. Stop back for additional RevOps resources, and don’t forget to check out our library of tools including:

For early-stage companies, companies looking to ice out the competition, and those in search of predictable revenue models, sales comp plans that promote multi-year deals can be your biggest asset.

“Multi-year deals tend to be better for the company,” said Andrew de Geofroy, SVP, of Global Revenue Platform for Gtmhub. “With current economic conditions, predictable revenue growth is more important toward profitability.”

But first, what is a multi-year deal compensation plan example?

A multi-year comp plan rewards a higher commission rate, such as an accelerator or bonus, on deals with contracts that exceed 12 months. 

In Compensation Hub, for example, we have two multi-year commission plan templates available to adjust and customize. These include Single Rate Commission with Contract Term Multiplier and the Commission with Multi-Year Accelerators plans. The gist of both is that by offering higher payouts on contracts over a year, your reps will feel more inclined to ask for longer terms versus settling for one year. That translates to improved revenue predictability year-over-year. 

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Why you should implement a multi-year deal sales compensation plan

The benefits of longer contracts far outshine any negatives. 

For starters, multi-year deals mean your competition can’t swoop in as easily until your customer’s contract expires. Plus, the more multi-year deals your team secures, the larger the impact on your targeted market — and the fewer chances your competition has to sign your clients.

Multi-year contracts also signal healthy, quality deals. 

“If somebody is willing to sign a contract and really not be able to get out of it for two, three or four years, they are buying into what that rep is selling and positioning from a value standpoint,” said Insight Partners EVP, Sales & Customer Success Hilary Headlee.

Another argument in favor of multi-year accelerator commission plans ties to customer acquisition cost (CAC). If your customer acquisition costs exceed one year, then multi-year deals can help ensure your business has lifetime value.

CRO Kevin McKeown, for instance, works for Beekeeper, an early-stage workflow and communications system. As such, his team is focused on getting CAC under one year. 

“Until we can get our top-of-funnel more efficient and CAC in line, these multi-years are what makes the unit economics really healthy,” said Kevin. 

Added complexity

With that said, adding in multipliers for longer contracts will add complexity to your comp plan. 

For starters, the plan gains an additional tier in its commission structure. The more tiers you add, the more challenging it becomes to track accurately. 

What’s more, most companies will pay a commission rate on the first year of the deal and the multiplier or accelerated rate for every year after. However, they usually will not retire quota for the full amount and instead only count the first 12 months (annual recurring revenue, or ARR) of the deal toward attainment progress. That’s to encourage reps to close a higher volume of deals instead of trying to reach quota by securing a couple of large, multi-year deals. 

In doing so, this makes it even trickier to keep up with and often requires manual inputs and formulas to keep it accurate and updated.

Fortunately, we can automate that for you.

Automate sales commission tracking in QuotaPath

For teams that measure quota based on one number and pay earnings on another, like multi-year comp plans, QuotaPath built plan-building enhancements to simplify this process in our system.

Now, with our new guided experience, any QuotaPath admin can set up complex plans with more than one quota and earnings variable through a step-by-step wizard. No formula building, just a seamless experience to get up and automated. 

In addition to multi-year deals, other comp plan examples made easier by these updates include: when a company pays on commission rates and other bonuses, such as MBOs and meetings booked; when quotas are based on ARR but earnings apply to monthly recurring revenue; or when quotas follow bookings but commissions tie to what’s on the invoice. 

To see your comp plan automated in QuotaPath, or to learn more about our CRM integrations, commission tracking, and sales compensation best practices, book time with our team today.

For years, sending a touching base email has been part of proper sales etiquette. You don’t want to be too pushy, but you can’t risk falling off the radar, either. The solution? You send a follow-up email and hope for the best. While this “follow-up” technique isn’t necessarily a bad one, there are alternatives that could garner much more exciting results.

What is a touching base email?

“Touching base” is a popular idiom primarily used in business circles. It means to reach out and check in with someone following a meeting, interview, or another form of communication. Most experts think America’s favorite pastime inspired the phrase. In baseball, runners and fielders both have to “touch base” to ensure they’re safe or effectively getting the opponent out.

When you send a touching base email, you’re making contact to achieve a specific purpose, such as:

• Reminding the recipient that you’re waiting on a response or other promised communication
• Seeing how the other party is progressing with their part of a shared project
• Checking in with a colleague, client, or acquaintance you haven’t spoken with recently
• Asking for an opinion on an ongoing project
• Saying hi and keeping the lines of communication open, even if there isn’t something specific to discuss

An example might look something like this:

Benefits of sending a follow-up email

Touching base via email is popular because it’s easy, it’s fast, and requires relatively little effort. Just sign in to your email account, dash off a few lines of friendly text and your work is done.

These brief follow-up emails can work well in scenarios where there might not be a need for more extensive dialogue. It can be awkward to schedule a conference call when you just want to see whether a collaborator’s trial is on schedule. The other party may not be able to give an immediate answer, creating an awkward situation. An email gives them time to consider your question, do any necessary info gathering, and then send an equally fast but measured response.

When not to send a touching base email

Touching base emails can seem like an easy way to reach out and connect with clients. The problem is that easy and effective don’t always go hand in hand. The big problem with these emails is that they tend to lack value. They’re usually devoid of meaningful content and are largely skippable. The open-ended “just touching base” line is overdone, underwhelming, and easily forgettable. What is the recipient supposed to do next?

The lack of a call to action can stall the conversation rather than propel it forward — the exact opposite of your intent.

Alternatives to a touching base email

Next time you want to check in with a prospect, try swapping out the overused “touching base” email with more substance.

Deliver value

If you’re sending your email in an effort to remind the recipient that you exist, it’s best to include something of value. One example might be sending a link to an article, e-book, One example might be sending a link to an article, e-book, digital brochure, or podcast your prospect might fight interesting.

Tie into a previous conversation or shared interest

Have you noticed if your prospect has just shared a new article on LinkedIn? Spied a story that reminds you of a previous conversation? That could be the opening you’ve been anticipating. The trick here is to forward the link with a quick yet insightful comment. You don’t want to be too generic, but neither do you want to come across as overeager. Aim for sincerity and be complimentary without gushing.

Say congratulations

A new product launch or big acquisition deserves a bit of celebration. Even a successful sales promotion can leave prospects in great spirits and primed to take on another venture. Make sure you’re top of mind by dropping a line to applaud their accomplishment and let them know you’re paying attention.

Close with a call to action

If you really want to move the deal along, it’s time to stop being vague and start asking for something concrete. It’s probably too pushy to try to snag a sale via email. Instead, you can suggest a specific action that might get you a lot closer to hearing that all-important yes.

• Ask for a meeting on a specific day or within a specific time period (e.g., “How does a meet-and-greet with Sally on Thursday sound?”)
• Request a follow-up with a few suggestions for a product title, pricing structure, or other key detail
• Provide a calendar link and ask them to book a slot at their convenience. Or even better, send them some specific times.

Examples of touching base email alternatives

There are countless ways to customize the suggestions above. You may decide to use a single technique or combine several approaches for a more dynamic, interesting message.

Here are a few examples to get you started:

The average businessperson’s inbox sees more than 120 emails every day. How will you make your next message stand out?

This is a guest blog from Dialpad.

Once you’ve made that magic 10th sale, you’re ready to start scaling, right? As a CEO, you’ll want to grow your brand, but encouraging sales takes a lot of preparation, care, and planning. 

We’re going to set out everything you need to develop a sales scaling mindset and delve into marketing strategies, hiring processes, and forecasts for successful sales scaling.

Building the dream team

Building a sales scaling mindset starts with the right team. 

When it comes to hiring, most people tend to think from the top down, hiring a Sales Manager straight after the CEO. However, it’s important to save these executive roles and focus on building a strong foundation for your business to allow for sustainable scaling. Instead, prioritize tactical staff such as sales representatives to establish sales upon which you can build your clientele. 

Tactical hiring should begin with Sales Development Representatives (SDRs). Their job is to investigate prospects, generate leads, and fine-tune the sales process. By working through early sales objections and weaknesses in your processes, SDRs will learn the best sales protocol which they can pass on to new staff to ensure sales scaling and increased profits. 

Meanwhile, the CEO can concentrate on the overall brand strategy. They’ll only deal with crucial deals and important client relationships. This is important for sales scaling as it means the CEO isn’t spread too thin but can support important deals when necessary. 

Once the SDR(s) has built the network and a smooth-sailing sales protocol, it’s time to hire an Account Executive. The role of an Account Executive is to conduct market research and build client relationships. They’re important in keeping up to date with the market and creating new, relevant ways to market your products and scale sales. 

Next, you can consider hiring a Customer Success Manager (CSM). They will help clients with their products whilst upselling to increase profits. With customers regularly saying customer service is a key factor when deciding whether to do business with a brand, it’s clear that a CSM is a worthwhile investment. 

Finally, consider hiring a Revenue Operations Manager. Their job is to facilitate communication between departments using systems like an enterprise VoIP solution. They also forecast sales and put in place tools so that you can identify areas to improve. If you’re ready to take your business to the next level, hiring in Revenue Ops is a great idea. 

Overall, gradually hiring staff as your business grows is a great way to sustainably scale sales. Not only will your staff stay motivated by seeing the brand grow, but they’ll also have lots of support along the way. 

Who to hire?

It’s important to remember that scaling sales is all about motivation, for you and your staff. So, it’s important to look out for enthusiastic, motivated people when making new hires. 

This doesn’t always mean experience, so prioritize enthusiasm and motivation. 

Another key factor to consider is their values. If someone shares your company values, they’re more likely to stay motivated and genuinely want to work towards your company mission; making them an enthusiastic and loyal member of your team. 

The statistics show that hiring a motivated member of staff is a great investment and can lead to improved profits. According to Gallup, Businesses with highly engaged employees make 23% more profit than those with high levels of disengagement. 

Another great tip is to hire two-by-two. That way, employees always have a supportive and understanding colleague to work with. This helps build confidence and create better employees in the long run. 

Overall, confident, motivated employees are more likely to make sales. Therefore, making smart hiring choices could be the key to scaling up your sales. 

How to make sure your staff stays motivated

So you’ve got the motivated staff, but you have to make sure you keep them enthusiastic in order to build a sales scaling mindset. If you don’t keep your employees happy and motivated, they’ll be less likely to make those ever-important sales to build your brand. 

One of the ways you can maintain motivation is by prioritizing employee well-being. Everyone knows that sales can have high burnout rates when staff prioritizes sales targets over their health and well-being. So, create a strong company culture in which employees work hard but take rest when needed. 

Taking care of your employees also means great communication. Integrating phone systems like a hosted PBX can ensure quick and easy calls, so employees can chat at any time. Connectivity also means you can mentor and encourage your employees directly, leading to a stronger, better team all around. 

Another great way of motivating your team to scale their sales is to offer rewards. Track employee progress using software like QuotaPath and offer rewards accordingly. 

Be creative with your incentives and make sure they reflect your brand values. For instance, if you’re a remote business, why not offer a home office stipend? This not only motivates employees but attracts and retains talent that meets your company values. 

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How to train your team for sales scaling 

Training and onboarding are also essential for scaling sales. Make sure it includes information about the company but goes further too. Other areas to consider for training and education include key sales data, market information, customer knowledge, and product specifications. 

All staff should be involved and training should be an ongoing process to encourage continual growth. 

You can use incidents in the company as a learning exercise for all staff. For example, if a sales representative has had to deal with a difficult client, deliver a seminar on how to spot bad clients and how to handle similar situations for all sales staff. 

Evaluate and invest in sales scaling   

Track your progress

In order to build a sales scaling mindset, it’s important to be aware of your progress and track your goals.

Establish Key Performance Indicators based on your industry, company, and progress to date. How much profit should you expect to make? How many leads should you generate? It’s important to have goals when it comes to sales scaling. Providing goals for your employees motivates and encourages them to work hard, encouraging sales scaling. 

Invest in tools for growth

Many tools can help you to track your progress and increase productivity as your business grows. 

Customer Relationship Management software or CRMs can help automate and analyze your data, making them great tools to rate your progress and identify areas for improvement. 

For example, you might notice you need to improve in a specific region or customer segment. Using automated tools for this analysis will save you time and money. Meanwhile, you can optimize your staff and scale your sales. 

You can also use CRMs to help with your marketing. For example, in the case of budget email marketing. With all your customer details in your CRM, it becomes much easier to integrate email marketing tools, send out company messages easily, and track campaign performance.

Sales scaling isn’t just about the numbers but your brand identity, too, so investing in software that makes you look professional and organized could be crucial to brand growth. Try a virtual switchboard to get your customers the help they need quickly and easily or create a professional look with a great monogram. 

Prepare for the future 

Another important part of a sales scaling mindset is future planning. Create forecasts and marketing strategies to improve your brand. This will not only motivate your staff by giving them clear targets to work towards, but also provide clear financial goals for your company to survive and thrive. 

Forecasts should be a transparent balance of growth and costs. If you’re not realistic when it comes to planning, your business is doomed to fail. So, use forecasting tips from industry leaders to create the perfect forecast. 

As a general rule of thumb, you must figure out how much acquiring a customer will cost. Then, overshoot your profits by two to three times that cost. This will give you lots of cushioning if you need it. 

Sales scaling = Motivation and patience 

Scaling sales might seem like a scary task, but with these few simple steps and a little bit of patience, growth is sure to come. 

Key to ensuring growth is creating a motivated sales team. Hire people who match your company’s values and goals. Make sure to motivate employees with rewards. It’s also important to prioritize employee well-being.

First, keep things simple, that means your staff and your approach. Hire core members of staff to carry out sales objectives in key areas. This will encourage focused and effective sales strategies which will promote company growth. 

Planning is also integral to scaling your sales. Create plans and infrastructure using systems like CRMs and forecasts to ensure your company is on the right track.  

Overall, scaling your sales comes down to preparation, motivation, and focus. Add a little patience and you will see your company grow soon enough. 

About the author: Jenna Bunnell, Senior Manager, Content Marketing, Dialpad

Jenna Bunnell is the Senior Manager for Content Marketing at Dialpad, an IVR system and AI-incorporated cloud-hosted unified communications platform that provides valuable call details for business owners and sales representatives. She is driven and passionate about communicating a brand’s design sensibility and visualizing how content can be presented in creative and comprehensive ways. Check out her LinkedIn profile.

Commissions floors, or “cliffs” require an individual to meet a certain performance threshold before gaining commission payout eligibility as defined by the sales compensation plan.

Usually, a certain amount of sales or revenue determines the floor or threshold.

The benefit? It can incentivize salespeople to focus on hitting key performance milestones while safeguarding the company from having to pay commissions for underperformance.

However, unintended consequences often appear with cliffs. 

Rather than motivate reps to hit the threshold, commission floors can actually demotivate and frustrate reps. Instead of aiming for a high velocity, albeit smaller deals, cliffs may encourage reps to go after less, larger deals. Or, it can promote sandbagging. 

Sandbagging occurs when a rep intentionally stalls a deal to game their compensation plan. If there’s a cliff, and the rep knows they can’t pass the threshold in the current month or quarter, they may hold it to have a better shot at passing the cliff in the next quota cycle. 

Now, with that context, are you for or against commission floors?

This topic can be a heated one, so we reached out to a few experts in the space to hear their thoughts.

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Graham Collins: Against commission floors

We first asked Graham Collins, our Chief of Staff, Compensation Plan Expert, and Sales Nerd.

“Commission floors tend to encourage sandbagging,” said Graham. “If I have to hit 50% of my quota this quarter to start earning commission but I know my next deal only gets me to 40%, then I’ll kick it to next quarter.”

Plus, set the floor too high, and you’ll upset your reps. But if you set it too low, and everyone hits it, then why even have a cliff?

“Cliffs can discourage new salespeople and even applicants,” said Graham. “It’s a red flag that indicates a lot of the team missed quota so they had to add a floor.”

As an alternative, Graham suggests adding a commission rate to a different tier. For example, once a rep hits 50% of their quota target, their commissions retroactively apply to everything they’ve sold. 

For compensation plan strategy support and templates, visit Compensation Hub.

Rhys Williams: Against

Rhys Wiliams, Domestique Consulting Founder & Managing Partner and former VP of RevOps at Convercent, shared four reasons against commission floors.

1. If you design the comp plan correctly, you shouldn’t need a floor.
2. They lead to sandbagging.
3. Cliffs can be a cultural drag and make it more difficult to recruit the best AEs.
4. There’s likely a larger systematic issue.

Regarding his last point, Rhys suggested the following as a potentially larger issue: “Do you have an effective demand generation forecasting meeting that is contributing to a consistent pipeline where AEs have enough coverage to hit their number?”

If yes, a floor won’t fix that. 

Cassandra Anderson: Depends on the ramp period

We also asked Optimove VP of Global Revenue Operations & Enablement Cassandra Anderson for her take on cliffs. 

“I see both sides,” Cassandra said, who has set floors at 50% and 70% until recently removing the floor because they have no ramp. 

“A floor can ensure the company isn’t taking a bath on commissions paid before the rep is really ramped,” Cassandra said. “But does a rep lose motivation by not being paid from $1? I think the use case depends on the ramp period and the time-to-value. I’m sure there are other factors too and those are my quick thoughts.” 

Final thoughts on commission floors

If you do move forward with a commission floor, one thing to remember is to set an appropriate level and align the cliff with overall business goals. For instance, having a commission floor that is too low might discourage salespeople to achieve higher goals. Reversely, having a commission floor that is too high might lead to an increase in the cost of sales and negatively impact the overall performance of the business.

To find a cliff appropriate to your business model, check out our Commission with Accelerators & Cliff comp plan example and modeler. To discover and build other comp plan designs, visit our free compensation planning resource, Compensation Hub.

About QuotaPath

Want to see a custom demo of QuotaPath’s automated commission tracking? Book time with our team today, and see how our customers save nearly 20 hours of work every month by automating their commission tracking and payments processes. 

What is OTE?

OTE stands for On-Target Earnings. Your OTE is the amount of money you can expect to earn if you hit 100% of your quota. This number is usually given in an annual figure. For example, a sales job posting might say “$90,000 OTE”. This number is sometimes rounded to an even earnings number for convenience. For example, your true OTE might be $90,240 but you might be told that it is $90k for simplicity.

How do you calculate OTE?

The equation for OTE is very simple:

Do you need help calculating OTE, setting a sales quota, or determining a commission rate? At QuotaPath we built an entirely free sales compensation calculator, no sign up required.

Also, if you want to automate calculating commissions and quota attainment, QuotaPath is here for you. We take the spreadsheets and human error out of calculating commissions with automated commission software. Get started for free or sign up for a demo.

OTE is not guaranteed

If you’re interviewing for a sales job, make sure you also ask the hiring manager about average attainment. The OTE for the role might be $120k, but if average attainment is 50% of quota, the average earnings will be substantially lower. OTE shouldn’t be impossible for even top talent to attain. It should be possible for most salespeople on your team to see success.

Other OTE terms to know

Fully-ramped OTE: most sales roles require some ramp time. Because of this, OTE usually doesn’t consider ramp quotas and payouts. However, good sales organizations will either give you a draw or increase your commission rate to make up for the lower quotas.

Pay mix: this refers to what % of your OTE is base salary and % is commission. The industry norm for SaaS sales is 50% base and 50% commission/bonus, but there are industries where the pay mix is different.

On-target commissions (OTC): the second half of that equation above. Some organizations refer to on-target commissions to mean how much a rep earns if they hit 100% of their quota.

Average rep earnings: remember the fact that OTE isn’t guaranteed. Some hiring managers will provide what an average rep earns in a year. If the average rep hits 100% of quota, they’re going to brag about this! However, if their reps are hitting 40% of quota and therefore drastically under-earning, expect to have to quiz them on this.

OTE examples

Account Executive

An Account Executive has an OTE of $100,000. Their base salary is $52,000 per year. They have a monthly quota of $40,000 and earn a 10% commission off every deal they sell. Therefore, if they close 100% of their quota every month, they would earn $4,000 every month. This means $48,000 in commission every year. Add that $48k to the $52k base salary, and you get the $100k on-target earnngs.

Sales Development Representative (SDR)

A Sales Development Representative (SDR) has an OTE of $70,000. Their base salary is $42,000 per year. They have a qualified meeting quota of 35 per quarter, and they get paid a $100 bonus per qualified meeting. They also have a sourced revenue quota of $210k per quarter, and they get paid 3.33% commission on deals they source. If they hit 100% of their quota every quarter, they earn $7,000 every quarter. This means $28,000 in commission every year. Add that $28k to the $42k base salary, and you get the $70k on-target earnings.

Director of Marketing

A Director of Marketing is responsible for overseeing the entire marketing department. Their annual quota is centered around revenue generated by the marketing team. Even though some disagree with holding marketing’s compensation to a metric! They have a base salary of $130k and their quota is $2.4 million. Once they hit 50% of their quota, they earn a $5,000 bonus. They earn another $5,000 bonus once they hit 75%. Finally, they earn a $10,000 bonus if they hit 100%. Adding their $20k possible bonus to their $130k base salary, their OTE is $150k.

If this all sounds like it’s too complex for you to solve on your own, don’t worry, we’re here to help! I’m happy to sit down with you for a free compensation plan strategy session. I promise we can cut some complexity out of your compensation plans and give you an understanding of how to build a great plan.

Report: Solving the biggest sales compensation challenges

Find out what 450+ Finance, RevOps and Sales Leaders identified as their biggest challenges when it comes to comp plan design and management.

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What is the average OTE for a sales rep role?

The average OTE for sales reps in the U.S. varies per industry, region, and company. However, according to Glassdoor, the average OTE for a sales representative in the United States is around $60,000 per year and ranges from $30,000 to $100,000 or more depending on the above mentioned factors.

This number increases for enterprise reps, who generally deal with larger, more complex sales and under longer sales cycles. Glassdoor’s data also reported that an average OTE for an enterprise sales representative in the U.S. is around $125,000 per year, but it can range from $75,000 to $300,000.

According to the U.S. Bureau of Labor Statistics, about 60,000 individuals held the role of “sales engineer” in 2021.

This role most frequently appeared in the computer systems design and related services industry, more commonly known as SaaS.

But what does a sales engineer do and how do you compensate them?

Below we detail the role, and compensation structures, and learn more about the support and services they provide. And we do so via the experience of our own sales engineer. 

First, what does a sales engineer do? 

A sales engineer brings technical skills, business knowledge, and customer service to support growth teams during the selling and implementation process of a customer’s journey.

They serve as specialists and technical experts during sales calls to establish trust within the technical frameworks of the product and show benefits in a way that go deeper than the rep’s pitch. 

At QuotaPath, we introduced a solutions consultant role last summer. 

After flooding our reps with proof of concepts and over-scheduling our CTO and Head of Product with sales calls, we knew it was time for a dedicated resource to support Sales.

Our very own Michael Davenport earned the promotion to solutions consultant after two years as an Account Executive. His sales background combined with his history of shining in deals that required intensive product technical know-how made him the perfect candidate.

Sales engineer responsibilities at QuotaPath

As a solutions consultant, Michael acts as a sales engineer and is introduced mid-way into the sales cycle after the rep has identified complexities that go beyond the usual requests. He also works in conjunction with Coleman O’Phelan, our solutions engineer, who reports to our Director of Product and does more of the coding work required for system integrations. 

Here, technical issues might arise when it comes to integrations or comp plan design. 

For instance, our commission tracker and sales compensation software ingest thousands of different comp plans. During the sales process, we ask our prospects to send us their plans, or comp plan descriptions and spreadsheets.

At that point, the sales team must interpret and validate how we’ll build the plan framework within QuotaPath. 

“From there, we must also validate how we’re going to integrate into the prospect’s system to get the data to flow into QuotaPath,” Michael said. 

That’s when Michael lends a hand to accelerate the sales cycle. 

“I take the technical work of validating comp plans and integrations off of the rep’s plate so they can focus on the sales cycle and quickly close the deal,” Michael added. 

His presence in the deal also helps ensure a smooth transition from sales to onboarding to ensure that everything will work accordingly when our customer success team takes over. 

And while the position is still relatively new, Michael said the key metric he’s established for himself is the annual recurring revenue generated from deals that include his involvement. He also looks into the closed/won rates for deals he’s in versus those he’s not.

“Ultimately, my main goal is to help our sales team close deals however I can,” Michael said.

Sales engineer metrics

QuotaPath remains in the early stages of this role, but as time progresses, Michael said he plans to implement the following metrics to gauge his success:

• Closed/Won rates of deal involvement
• Sales engineers’ time spent on deals and effectiveness on outcomes
• Categorizing the types of sales he’s brought into
  

“The last two will help me report at the end of a month or quarter that I spent, for example, 70% of my time on sales calls and 30% on customer calls with our CSMs,” Michael said. That information will then help inform him where he should spend more time. 

Sales engineer compensation

Michael’s seen a lot of sales comp plans in his work at QuotaPath, and that includes sales engineer compensation structures.

“I most often see team-based structures for small solutions consulting or engineering teams,” Michael said. “So, if the team achieves 80% of their number collectively, then my commission as a solutions consultant kicks in.”

For larger teams, Michael said sometimes you’ll see sales engineers assigned to a small group of reps who earn commissions only from the group’s total earnings. For example, if an engineer supports a pod of three or four reps, the engineer earns a percentage or bonus off every deal that pod closes, or any deal they play a role in. 

“These plans can start at the high level with the engineer earning a bonus from any deal regardless of the involvement. Or, they can go deeper by only compensating on deals the engineer supports,” Michael said. 

As for base-to-variable pay ratios, Michael said he most frequently sees 80:20 splits, with 20% attributed to variable pay. 

“The most important thing to remember is to incentivize what you want the person’s role to do,” Michael said. “If they support an entire team, then their compensation should be broad.”

However, if they’re used for a specific use case, such as writing code for one part of the platform, then consider paying them on only the deals they’re writing code for.

Who does a sales engineer report to

Most frequently, you’ll see sales engineers report to the head of customer success. That’s the case here at QuotaPath, too. 

This proximity to customer success helps instill a seamless handoff once the prospect upgrades to customer. This also helps ensure that the product will work accordingly as reviewed during the sales process when the sales engineer joined the conversation.

When is it time to add a sales engineer?

How do you know when it’s time to add a sales engineer to your salesforce?

“Salespeople will look for answers somewhere, so why not devote a dedicated resource, such as a sales engineer, to help them sooner?” Michael said.

If you’re noticing an uptick in complicated sales calls that require large time commitments from your reps and none sales leaders, it might be time to consider a sales engineer.

Thank you for the chat, Michael! To learn more about compensation plan design and commission structures, visit Compensation Hub. This resource includes 20 customizable comp plan templates. To see your comp plans automated in QuotaPath, book time with their team today.