QuotaPath collects monthly nominations from our customers to name a Quokka of the Month. We’re thrilled to announce our QuokkaPath July winner below. To nominate a teammate, see past winners, and learn more about this peer recognition initiative, check out our dedicated QuokkaPath page. 

When Leo Ratner searched for a new job in the fall of 2021, he wanted a place he could grow.

At Omnipresent, a remote employee management platform, Leo found that and more.

In less than 8 months, Omnipresent promoted Leo from sales development representative (SDR) to Senior SDR. His hustle and grit at in-person events, social media selling by highlighting the remote work experience, and mastering the ancient art of memes have played a huge hand in his success.

And, that’s why he is July’s QuotaPath Quokka of the Month!

“Leo has crushed our in-person event presence, setting up quality meetings in a face-to-face environment by perfecting his pitch and seeking out the best prospects to strike up a convo,” wrote Omnipresent Global Sales Development Manager Chad Harris in Leo’s nomination.

His SDR approach entails inserting his own voice and not adding too much jargon.

“I don’t use a bunch of fancy words and instead just stick to the point,” Leo said. “I’ve always been detail-oriented, so I try to focus on things that others might not be.”

Read on to learn more about our Jully QuokkaPath winner, Leo!

What’s it like to work for a fully remote company?  

I love it. We have team meetups in cool locations two times a year. That, plus working fully remote, brings the best of both worlds. I have the ability to work from anywhere, like Mallorca, where I am now!

We also have great leadership to learn and grow from, and, of course, the ability to move up in the organization.

There are a lot of “no’s” when it comes to the work of an SDR. How do you stay positive and motivated?

Every “no” brings me closer to the “yes” that I am looking for. I just don’t let them get to me. Someone who isn’t interested right now may eventually come back around. Sales is more about relationship building than getting that “yes” or “no.”

What advice would you offer first-time SDRs?

Focus on the people you will be working for and the product/service you will be selling. If you don’t have people to learn from, then it is not worth it. If you don’t believe in the product you are selling, they won’t be able to sell it with passion.

You were just promoted, congrats! What’s your next professional goal? 

I hope to move up to the account executive role at Omnipresent. 

Once again, congrats to our winner, Leo!

We are now accepting nominations for August’s Quokka of the Month. To recognize your teammate, answer six short questions and learn more about our QuokkaPath in the video below.

This article, which previously appeared on Close’s blog, covers sales commission structure design. Read on to learn various structures to consider, best practices, and three sales commission structures that QuotaPath’s Graham Collins has seen work most effectively for account executives (AE), sales development reps (SDR), and sales leaders.

The challenge with landing on a strong sales commission structure is getting one in place that aligns with the results you aim to achieve.

For instance, if a company plans to increase multi-year deals over the next quarter, the sales commission structure should reflect that. Meaning, that reps should earn a higher commission rate on multi-year contracts. In doing so, you’re encouraging and rewarding them for locking in an extended contract. Without that incentive, why would a rep even bother?

That’s just one example to keep in mind, but there’s plenty to consider. 

Below, we’ll outline various commission structure types and sales commission structure best practices. Our last section will include three sales commission structures examples for an AE, SDR, and sales leaders that have worked well with our customers in driving the right behaviors.

What is the difference between a compensation plan and a sales commission structure?

First, we’ll begin with the difference between a sales compensation plan and the commission structure itself. A compensation plan details a seller’s total compensation package, including base salary (or fixed pay), commission rates, incentive programs, and on-target earnings (OTE). Meanwhile, the sales commission structure sets the rules for the commission section of the compensation plan. The commission structure dictates the what, when, and how reps get paid from sales.

So, could you have a compensation plan without a sales commission structure? Yes, only if the comp plan didn’t include a commission or variable pay component. On the flip side, could you have a sales commission structure without a comp plan? Nope.  

Sales commission structure types

Now that we have differentiated comp plans from commission structures, let’s take a look at the 9 various structure types. 

1. 100% commission

Also referred to as “straight commission,” 100% commission structures pay teams entirely based on sales earnings. The plans do not include base salaries or guaranteed pay. 

Some people have tagged straight commission plans as controversial, citing high turnover and bad sales practices as side effects. But, when reps only receive payment based on the deals they sell, they are highly motivated to sell more. 

2. Base salary + commission

The most widely adopted commission structure type across SaaS pairs a base salary with a commission plan. We recommend a 50/50 split, where 50% of a rep’s pay comes from their base salary while the other half comes from sales earnings. We’ve also seen organizations adopt a 60/40 ratio. In this ratio, the base salary makes up 60% of the rep’s OTE, and the remaining 40% consists of variable pay.

To find an OTE ratio that works best with the amount of revenue your team generates and your average team attainment, use our free Quota:OTE Ratio Calculator.

3. Tiered sales commission

Meanwhile, a tiered sales commission structure works great for organizations looking to incentivize top performers. In this structure, reps unlock higher commission rates as they hit a designated amount of deals or revenue benchmarks. You may also hear this structure referred to as multiple rate, accelerators, escalators, or multipliers.

An example of a tiered sales commission structure example may include a 7% commission rate on deals up to $75K in bookings. Once surpassing $75K, the rep then starts earning 9% on all new deals within the same period. 

For more examples, check out our guide.

4. Single-rate sales commission

We define a single-rate sales commission as variable pay earned off a fixed percentage from every deal closed. This structure is the easiest to understand and widely adopted. You may have also heard the single-rate structure referred to as flat-rate commissions, fixed-rate commissions, or commissions. 

What’s the standard commission rate in SaaS, you ask? 10%.

5. Gross-margin commission

Next up is the gross-margin commission structure, which adopts a similar approach to the single-rate plans. Where gross margin differs, however, is that it considers the business’s profits from the deal. So, instead of accruing commissions based on the contract value or annual recurring revenue (ARR), the rep would earn commissions from the gross revenue collected.

As an example, if a rep sold a contract for $50K, but it cost the business $15K to secure the deal in associated expenses, the rep would earn commissions on $35K.

6. Commission Draw

A  draw against commission shows up sixth on our list. These allow reps to borrow against future commissions earned and have the most impact when ramping new hires.

If you offer commission draws, you’ll need to decide if the rep has to pay back the draw or not (recoverable vs. non-recoverable). We explain in detail when to consider commission draws and outline the pros and cons here.

7.  Residual commission model

For companies looking to reward reps for maintaining long-term business relationships with their accounts, the residual commission structure may be a good fit. 

The residual commission model pays the original rep on a continuous basis as long as the account continues to create revenue via renewals and upsells. According to mailshake, agencies and consulting firms most frequently adopt this commission structure.

8. Territory volume commission

Territory volume commission models involve a team approach to sales. Organized by territory, teams collaborate to sell across an entire region or vertical. Then, as deals come to fruition, the team earns a set commission rate on the deal and splits the commissions evenly. 

For example, three reps share a quota of $100K a month for deals in the state of Minnesota. If one rep closed $50K, the second closed $35K, and the third sold $15K, then the team hit its target. As such, the three reps will split 12% commission, collecting $4K in earnings each. 

9. Base-rate only

The ninth structure, base-rate only, doesn’t involve any commissions. Instead, sales reps earn a fixed salary or hourly rate. We’re critical of these plans because they don’t incentivize or motivate the rep to sell, which should be the goal in a sales job. 

Sales commission structure best practices 

After you choose a commission structure to follow, you’re now ready to tailor it to your business and build out a comp plan. When doing so, we suggest following these best practices. 

Don’t go at it alone.

The best commission structures and comp plans were the results of a group effort. Invite RevOps, Finance, and your senior reps to the conversation. This helps build alignment and ensures the plans reward reps and make sense with the business goals. 

Simplicity is the way.

If it’s hard for you to explain to a colleague or friend, then it’s too complicated. Your reps will likely struggle even more to understand it. Aim for simplicity. This enables leaders to easily reiterate what reps should be selling and for reps to understand what the outcome of their efforts will amount to.

Communicate well.

Outline your compensation program, make sure everyone has a copy, and review it with your team in a designated meeting. This is especially important amid mid-year changes to a commission structure or plan. Make sure reps know what the changes entail, the why behind the changes, and how the company will support them under the new changes.

Test it. Then test it again.

Pull up historical compensation data and run it through your proposed commission structure. No historical data? No problem. Use random or expected data, then run extreme scenarios, like what would happen if a rep achieved a 400% quota. Testing will help you prevent a wild card situation of having to pay a rep over 100% on ARR.

These may seem obvious as you’re reading it, but you’d be surprised how frequently we see teams skip all or some of these tips.

3 sales commission structure examples

As promised, we put together three solid commission structure examples below.   

Account Executive

We recommend a comp plan with a decelerator, an accelerator, and a multi-year kicker. This incentivizes AEs to overperform and decentivizes underperformance. 

The decelerator: For a rep who hits below 50% of the monthly quota, the rep earns a reduced commission rate of their standard commission rate. Meaning, that if I hit my monthly quota of $40K and my standard commission rate is 10%, then I would get paid $4K. But, if I only make 40% of my quota, or $16K in sales, then I am paid out 7% on that $16K. Or, $1,120. 

However, if I achieve between 50% and 100% of my quota, then I earn my standard commission rate of 10%. So, using the example above, if I book $35K in deals, then I would earn $3,500 in commission.

The accelerator: The accelerator kicks in for deals brought in after achieving 100% quota within the specific time frame. In the above example, the rep would earn 15%, a 5% bump, on any deal that comes in after crossing 100% quota.

Multi-year deal commission: Then, for multi-year deals, apply an extra 5% to the commission rate for any deal over one year. 

Sales Development Rep

For an SDR compensation plan, we recommend a structure that’s based on the number of qualified opportunities and the amount of revenue. 

So, if an SDR’s OTE is $80K, split between a $50K base salary and $30K target, half of the target OTE should consist of qualified opps and the other toward revenue.

Set a target of qualified opps: Let’s say 30 per quarter. Then give the SDR a percent of any revenue they generate as well, such as 3%. 

The idea here is to incentivize them to land a bunch of opportunities. But, by rewarding them with commissions from revenue generated, you’re motivating them to push for high-quality opportunities that are more likely to close.

Sales Leader

A good sales manager compensation plan should be attainment-based.

Attainment points: Hold your manager to 90% of their team’s quota sum and follow a point system.

In this example, let’s say I oversee a team of 5 people and each person has a $200K quarterly quota. The sum of my team’s quota is $1M. However, I’m held to 90% of the total sum, or $900K. Following a points-based bonus, I get $250 per attainment point. For instance, if my team accrues $900K in sales, that means I hit 100% of my goal and get a bonus of $25K. If the team hits 70% ($700K), then I would earn 70 attainment points, or a bonus of $17,500. 

This structure aligns sales leaders with their team target. It also allows for flexibility if someone on their team leaves and the quota sum goes down. Under this approach, leaders can focus on building their team up rather than trying to get as many people on their team as possible. 

Automating sales commissions with QuotaPath and Close

Still with us? Hi! We recognize that was a lot of information. But you can clearly see there are many factors to consider when building a commission structure.

We hope you have found this meaningful.

What’s even more helpful is integrating your CRM with QuotaPath. For growing, remote-based sales teams, we recommend the sales-first CRM Close. Launched in 2013, Close’s solution supports reps every step of the sale, including prospect and outreach efforts, lead scoring, and much more.

By integrating Close with QuotaPath, you can seamlessly feed deal information directly into QuotaPath. This allows sales reps, leadership, Finance, and RevOps to see real-time updates into existing and forecasted commissions and ARR.

Want to see the integration in action? Schedule time with a QuotaPath teammate today for a custom, live demo. 

PS: If you send us your comp plan ahead of time, we can show you how it’ll map out in QuotaPath. 

This is a guest blog from RevPartners. RevPartners offers businesses the “Ultimate HubSpot onboarding experience.” As a preferred partner, RevPartners allows you to focus on driving revenue with its team of experts so you don’t have to spend as much time on the HubSpot CRM onboarding process. Executed with excellence and care, RevPartners gives:

• Designated Resources. You will get a dedicated Strategist that will give you the attention you deserve.
• HubSpot Experts. Each team that you have averages 10 HubSpot certifications. 
• Overcommunication. Constant communication about your statuses and upcoming tasks.
• Responsibility. If something fails, it’s RevPartners’ fault. Period. 

As a company grows, silos naturally form, and it becomes progressively more difficult to maintain alignment across teams. This, of course, spills into sales and can detrimentally affect sales performances. 

But the technology exists to help. And, one system that immediately breaks down barriers and streamlines processes is the star of most sales tech stacks: the CRM. 

CRM, which stands for customer relationship management, provides a platform to manage customer and prospective customer relationships and interactions. Sales, support, customer success, and marketing departments leverage CRMs for real-time visibility into the status of their accounts and potential future accounts.

HubSpot, one of the leading CRMs, is often praised for its user-friendliness, affordability, and well-rounded marketing and sales tools.

In this blog, learn the key benefits of HubSpot and how QuotaPath can automate HubSpot commission tracking. 

HubSpot CRM offers multiple tools that can adapt to your needs. This gives your team the opportunity to create a workflow that is functioning at its highest level, with HubSpot as the main character of your tech stack.

And, there is no better time than the present for RevOps leaders to become HubSpot admins. 

This past spring, G2 recognized HubSpot as the No. 2 CRM, No. 1 MAP (marketing automation platform), and No. 1 CMS (content management system). This is essential for boosting your RevOps department.

Is HubSpot an Enterprise CRM? 

First things first, what is an enterprise CRM? An enterprise CRM is an all-inclusive system that is designed for the complexity of larger organizations. It collects accurate, real-time information which results in companies providing more informed and intelligent customer experiences. 

So, is HubSpot an Enterprise CRM? Absolutely. 

Unlike traditional CRMs that have been used over the past decade, HubSpot pushed the frontier of digital marketing by creating a user-centered system for centralized data. Customer interests sit at the forefront of the company’s strategy.

HubSpot’s G2 achievements did not come from any luck or coincidence. As stated by HubSpot, their “CRM platform offers enterprise software in marketing, sales, customer service, content management, and operations.” HubSpot’s CRM platform was built with your growth in mind by focusing on adaptability and alignment across its UX. 

Why HubSpot?

RevOps juggles a lot of responsibility, but one of its key focuses and metrics is widespread technology adoption. While most CRM software can be difficult to implement, HubSpot has earned the reputation of being an easy-to-use platform for every team. This leads to higher adoption rates.

Some of the popular tools accessible with HubSpot include pipeline management. Within this tool, sales have full visibility, email tracking and notifications, live chat support, and meeting scheduling available. HubSpot also offers a deeper toolkit that includes artificial intelligence, advanced automation, and custom reporting. 

Admins can map comp plans with HubSpot CRM data to automatically calculate earnings and attainment from HubSpot deals.

Additionally, QuotaPath’s integration with HubSpot (which is a HubSpot certified application) includes the ability to see QuotaPath commission data directly in HubSpot. 

This setup allows for a single source of truth for both attainment and earnings, which creates alignment, accuracy, and a better user experience.

Integration

With the proliferation of tools and app integrations, HubSpot helps you manage all of your tools from one place at the same time. Applications that work together allow you to organize and run your systems more efficiently. This leads to a smaller tech stack that can run multiple functions and decluttered processes. 

The integration of HubSpot and QuotaPath, for example, allows multiple functions to live in the same tool for Hubspot commission tracking. Let’s take a look. 

QuotaPath’s automated commission tracking and sales compensation management software allows reps to easily see their deals, forecast potential earnings, and bring in real-time updates during their sales and commission process.

Admins can map comp plans with HubSpot CRM data to automatically calculate earnings and attainment from HubSpot deals.

Additionally, QuotaPath’s integration with HubSpot (which is a HubSpot certified application) includes the ability to see QuotaPath commission data directly in HubSpot. 

This setup allows for a single source of truth for both attainment and earnings, which creates alignment, accuracy, and a better user experience.

How QuotaPath’s native HubSpot Integration works:

• Import HubSpot Deals in 4 clicks
• Identify which records count toward earnings
• Map comp plans with HubSpot CRM data from designated fields
• Import custom HubSpot fields
• Define Deal stages to pull from HubSpot
• Preview mapping and input additional filters
• View QuotaPath Earnings directly in HubSpot

Adaptability

The adaptability of technology plays an important role in RevOps. That’s why HubSpot allows users to build multiple data sets inside HubSpot so that you have the flexibility to organize your CRM based on your business needs. This provides a greater level of control and accuracy with how you want to use your data. 

According to HubSpot, you have the ability to “embrace flexibility to name the object, determine what properties it has, and decide what other objects it can be associated with. Custom object data looks, feels, and acts like other objects in HubSpot, so there’s no adjustment period for your team or new apps to figure out — just better data.” 

Organizing complexity

The complexity of your teams and the structures within them will increase as your company grows. For example, marketing teams work on many projects using data from both customers and prospects. Meanwhile, sales teams work to actively fill a pipeline of opportunities and leads. This means different departments require different access to the information within a CRM. 

HubSpot allows you to grant relevant permission to each team to simplify and boost the workflow of each team. 

When creating records, users can set properties to enforce validation rules and requirement gates. The use of data validation is the practice and enforcement of keeping the integrity, structure, and accuracy of data before it is used.

Game changer

HubSpot CRM allows you to authorize individuals to interact with data even if they don’t have a paid seat. Per HubSpot, here are three reasons your team needs access to free seats:

• The democratization of data gives you improved collaboration and transparency for leadership.
• Powerful tools with no extra cost.
• Deliver a more cohesive customer experience.

So, then, why isn’t everyone already using HubSpot? 

Great question! 

After decades of Salesforce and Microsoft leading the way, people struggle with shaking off the common fear of change. As more people continue to recognize the value of HubSpot, this hesitation to switch platforms will change. More companies will experience HubSpot’s uniquely positioned CRM that’s built in-house on one code base. This means you get a unified experience that’s easier for your team to adopt and use than the competitors’ systems.

About RevPartners

RevPartners designs and executes revenue engines to supercharge its customers’ growth. The company orchestrates, optimizes, and reports on its clients’ marketing, sales, and operations processes through automation and tools. RevPartners’ mission is to democratize Revenue Operations as a Service empowering the 99% to experience the benefit of RevOps. What makes RevPartners different from the rest is how their values translate into the excellence of how they operate. One of the most important values they uphold is taking 100% ownership of everything that they do. As stated on their website, they only win, when you win. 

About QuotaPath

Launched in 2018, QuotaPath automates the sales compensation process for scaling revenue teams. Our passionate team of sales leaders and technology experts partner with organizations to develop sales compensation plans that drive the right behaviors. Then, we help your team map these out in our platform to automate the entire process. With QuotaPath, give your reps a tool to forecast commissions and attainment and see real-time commission progress and calculations. Free your Finance team from having to build out formulas and offer them a seamless pay approval experience for sales commissions. Learn more today. 

The sales forecasting struggle is real. Fewer than 25% of sales organizations have forecast accuracy of 75% or greater according to a Korn Ferry study. The same study found that the rewards of getting sales forecasting right are significant. By establishing a structured process, win rates of forecasted deals increased by 17% compared to businesses using a less formal approach. And that’s only one of many benefits of accurate sales forecasting.

Another study revealed that removing human bias, errors, and other issues relating to manual efforts increases forecast accuracy by 76%. This is significant when you consider the many ways that businesses leverage sales forecasting. 

So to help, we took a closer look at what you need to do to nail sales forecasting and reap the benefits.

Below, check out 8 sales forecasting tips, free sales forecasting templates, and resources that you can begin using immediately.

What is sales forecasting?

First, let’s review what sales forecasting actually entails. 

Sales forecasting predicts sales for individual reps, sales teams, or the entire organization on a weekly, monthly, quarterly, or annual basis. 

Leaders use this information to guide and inform strategic decisions across the business including budgeting, hiring, and manufacturing.

Benefits of sales forecasting

The benefits of sales forecasting include:

• Facilitating financial, staffing, and inventory decision-making and planning, including around future sales compensation strategy
• Improving pipeline management by helping determine when and where additional prospecting is needed
• Aligning and adjusting sales quotas with revenue projections
• Reducing time needed for territory design and setting quotas
• Benchmarking to gauge and recognize trends more easily
• Improving win rates by inspiring sales reps to focus on high-revenue, high-profit opportunities in the sales pipeline
• Enabling the business to more accurately project costs and revenue

Challenges

Producing a consistent and accurate sales forecast can be difficult. Some of the most common sales forecasting challenges encountered by businesses include:

Data quality or quantity

Incomplete or inconsistent data is often caused by poor adoption of a customer relationship management platform (CRM), where data isn’t being entered in a timely matter or at all. This reduces the accuracy of historic information for generating predictive patterns for sales forecasting accuracy. For organizations that don’t use a CRM (think: HubSpot, Close, Salesforce), manual forecasting spreadsheets also lead to greater risks of human error.

Subjectivity

Relying too heavily on sales reps’ gut feelings about opportunities and their probability of closing, versus objective data, leads to inaccuracies. Subjectivity on the part of the seller can stem from a lack of pipeline and increasingly limited selling time resulting in forecasting deals to close that aren’t quite ready.

Lack of integration

Although sales organizations now use an increasing number of sales technology tools, a lack of planning and integration within the sales tech stack results in forecasting inaccuracies. When the CRM is integrated with other software like quota tracking and forecasting solutions, these inefficiencies and errors reduce in favor of more reliable forecasting.

Sales forecasting tips

To ensure accurate forecasts, it’s important to set yourself up for success. Get started with the following steps:

1. Create a sales process

Establishing a consistent process and sales methodology with well-defined stages and steps facilitates more accurately predicting when an opportunity will close. Plus, a standardized sales process includes clear definitions of each stage, avoiding confusion about deal status. This will enhance your teams sales techniques.

Resources:
What is the MEDDIC sales training?
How a discovery call can help you win more deal

2. Establish individual and team quotas

Quotas provide a financial baseline and help gauge rep and team performance. To set an appropriate quota that’s fair and reflective of your company’s historical performance, use our free Quota:OTE Ratio Calculator.

3. Use a customer relationship management (CRM) tool

CRMs serve as a database for sales reps, simplify tracking opportunities, and increase the accuracy of deal closing projections and forecasting. Learn more about CRMs and other sales tech stack must-haves. 

4. Select a sales forecasting method

How you choose to approach sales forecasting depends on factors like the age of your business, the size of your sales team and pipelines, the quality of your sales data, and the consistency of your data tracking habits. It’s common for forecasting methods to evolve with your organization.

For instance, your business might forecast based on the length of the sales cycle, while others measure from the opportunity stage.

5. Include other departments within your organization

Dig deeper to gain additional insights from other departments within the business to understand how teams like marketing, product, finance, and HR may impact or be influenced by the sales forecast. For example, you’ll want to consider upcoming marketing plans or product launches, how well the forecast aligns with company financial goals, and potential hiring strategy adjustments based on the forecast.

6. Note year-over-year variances

It’s also important to compare the current sales forecast with the prior year to identify variances, discrepancies, and trends. Documentation never hurt anyone, so be sure to make note of your observations to improve the accuracy of future sales forecasting efforts.

7. Hold reps accountable

Communicate the importance of up-to-date data and accurate forecasts to your sales team. Then hold them accountable for their performance against forecasted deals.

8. Gather feedback

Determine which forecasting approach is most effective for your business and make any necessary adjustments to increase accuracy.

After following these steps, consider changes to the following factors when referring to your sales forecasting:

• Staffing – increasing or reducing the number of sales reps on the team affects future outcomes with either less reps or more that aren’t fully ramped.
• Sales compensation plan – implementing changes to the comp plan, like clawbacks, may reduce sales revenue and reduce churn that boosts renewals.
• Territory – realigning rep territories often creates a temporary drop in sales while team members adjust to their new assignments.
• Competitive – what competitors are doing can influence sales outcomes by either increasing pressure or driving greater results.
• Economic – stronger economies often accelerate sales cycles, while economic downturns may lengthen the process.
• Market – tracking market impacts on your customers to know which ones are being negatively impacted by their market conditions. For example, the travel industry took a serious downturn during the COVID-19 pandemic.
• Industry – your industry’s trends influence sales, so keep track of what is happening to anticipate the impact of these trends on your business.
• Legislative – be aware of any legislative changes that may impact your market or industry.
• Product – any changes, new feature launches or new product launches your product team is rolling out will influence sales during the upcoming period.
• Seasonal – if your sales tend to be seasonal, keep this in mind when making sales forecasting adjustments.

Simplify the process

Accurate sales forecasting is essential for guiding business planning and decision-making. Challenges like subjectivity, inaccurate data, and manual processes greatly impact your ability to get forecasting right. Forecasting software, like QuotaPath, can improve the process by using commission projections to create accurate budgets and forecasts faster. To see QuotaPath’s forecasting functionalities and to see your commission agreement mapped out in our system, schedule a custom demo with our team. 

The following post discusses inside sales vs. outside sales and highlights the similarities and differences between the two roles.

Inside and outside sales share the same goal — to generate revenue for the company. How the two relate to each other is governed by whether they are actually making money for the company. No company can afford to neglect inside or outside sales. Both are important lead generation tools that businesses should work on constantly improving.

Since the pandemic (COVID-19), outside sales have become nearly impossible, with numerous countries enacting lockdowns. Outside sales agents rely on face-to-face meetings to make sales. But the pandemic put this sales approach on pause. So, outside agents had to get familiar with inside sales tools and approaches. Inside sales tools leverage remote tools like social media marketing and email marketing.

However, now that most COVID-19 lockdowns have been lifted, things have slowly started returning to normal, with outside sales jobs increasing once again.

Inside sales and outside sales industries

Most industries utilize both inside and outside sales teams for maximum returns. Most notable is the Software as a Service (SaaS) industry, which relies on an inside sales team to run the back end of marketing software. Meanwhile, the outside sales team manually markets the product and drives sales through the front end.

A study conducted in 2017 revealed that large organizations felt the biggest ROI from their outside sales teams. These companies made an annual return on investment worth over $500 million. Inside sales were not completely abandoned but practiced on a much smaller scale. After the pandemic hit, sales leaders changed tactics and adopted hybrid sales models that leveraged remote selling.

Smaller organizations most frequently invest in a sizable inside sales team. These organizations make an average of $50 million or less annually. Because of the nature of their selling approaches, smaller organizations with inside sales teams adapted more quickly to remote environments than larger companies.

Sales cycles

Inside sales teams have shorter sales cycles compared to outside sales teams. A sales cycle describes the time it takes for a sales agent to turn a potential client into a paying consumer. Inside sales teams usually average much smaller deal sizes than outside teams, which leads to shorter sales cycles. Outside sales teams often track down larger deals, some of which may require former RFP (request for proposal) processes, which lengthens the time-to-close. But, the latter typically brings in more revenue to the company.

Deal Sizes

Inside sales teams have a smaller deal size compared to outside sales teams. This is because inside sales reps do more outbound work to convert prospects to customers. On the other hand, outside reps work less deals and do less prospecting to pursue larger returns.

Large deal sizes are the trick behind high investment returns generated by outside sales teams. Thanks to their large returns, outside sales teams can earn back the money they spend wooing clients and traveling. Good training and job experience make an outside sales agent excellent at their job.

Inside sales vs. outside sales: Tools

Sales tools for both inside and outside sales have become similar during the pandemic. For example, both teams will likely use the same CRM (customer relationship management) to hold vital client information and track progress. Inside sales teams interact with their computers, spending most of the day at their desk making appointments and running demos virtually.

On the other hand, outside sales reps will spend a lot of time booking in-person meetings and coordinating travel accommodations to make those appointments. These employees are expected to go above and beyond to get in front of the target client and key decision-makers. As such, companies usually allow flexibility for outside sales reps to improvise when interacting with the client to increase the likelihood of securing the deal. Navigating this requires understanding the ins and outs of mileage reimbursement policy, as well as the accommodation policy, ensuring accurate expense tracking and reimbursement for travel-related expenses

For must-have sales tools suggestions for inside and outside reps, check out our blog.

Experience requirements and responsibilities

Inside sales roles may require prior experience but can count as entry-level jobs.

In an inside sales job for an Austin tech company, the prerequisites in the job requirements include:

• Thorough understanding of related technology or willingness to learn, i.e., websites, CRMs, lead capture, lead followup
• Demonstrated sales record of consistently meeting and exceeding quota
• Skilled in virtual presentations, online web demos, and remote sales processes

For an outside role, companies usually require previous sales experience. This section of a job post for an outside rep in Austin, for example, includes the following:

• Minimum of two or more years of Outside Sales experience
• Experience meeting or exceeding sales quotas
• Must be willing to work a minimum of 40 hours per week
• Should have access to a computer on a daily basis
• Exceptional interpersonal skills, communication skills and ability to build strong relationships
• Excellent time-management skills – (including the ability to work independently and manage your own schedule)

Inside sales and outside sales rep salaries

An outside sales representative earns an average salary of $82,000, according to recent numbers from Indeed. That’s not including their commissions, which puts their average on-target earnings (OTE) well north of $100,000. For more senior outside reps, and enterprise account reps, you’ll see OTEs in the $200,000 to $300,000 range. These roles require more experience and a detailed history of demonstrated success.

Average salaries for inside sales representatives come in just under $60,000, according to Indeed. When factoring in average sales commissions of $12,000 for this role, inside sales rep OTEs range between $70,000 and $80,000.

Commission pay structure

While many reps come to their role with innate motivation, commission structures for sales can motivate even more and steer certain selling behaviors. Plus, a strong sales compensation plan model can attract top-performing recruits and retain your team.

When it comes to designing compensation plans, you’ll want to identify structures that align with your business goals. For example, if you want your team to increase their deal size, you might want to extend your quota term from one month to quarterly to accommodate for longer sales cycles. Or, if a goal of the business is to secure multi-year deals, then the comp plan should reflect that by paying out higher rates on deals longer than one year.

For more sales comp plan best practices, check out these helpful guides:

• 7 compensation planning best practices to implement ASAP
• What is sales compensation? Here are the basics
• How to pick your sales commission structure
• How to set up a successful sales SPIF
• After 350+ strategy sessions, Graham shares 5 key comp management tactics

Characteristics and soft skills: Inside vs. outside reps

We’ve covered responsibilities, tools, and salaries. What about skills? Leaders expect outside sales reps to be outgoing, disciplined, and autonomous. The representatives must quickly pick up on non-verbal cues, display good communication skills, and have exceptional relationship- and trust-building abilities.

Inside sales reps should be competitive, excellent communicators, and have a hustle that doesn’t get sidelined by rejection. Prospecting plays a huge role in inside sales, which involves a lot of “no’s.”

Is inside sales a good job? Is outside sales a good job?

Both inside and outside sales jobs are good jobs as long as you choose the one that suits your skillset. Most outside reps started their sales careers as inside reps, which gave them the groundwork to build and strengthen their sales confidence.

About QuotaPath

QuotPath supports sales incentive compensation for inside and outside teams by automating commission tracking and sales commission payouts. To learn more, find a time here to chat with our team.

Financial Analyst Rimi Dhillon didn’t know the role of a sales compensation analyst existed. That is, until she had the opportunity to become one in 2014.

Eight years have passed since Rimi found her finance specialty. And now,  she won’t do anything outside of sales compensation.

“Sales compensation analysts have a very large impact on the business,” said Rimi, a senior sales compensation analyst at Route. “If the sales compensation plans are not set correctly, your sales team will lose motivation.”

As such, the responsibility to design competitive sales compensation models that align to business goals and motivate reps falls to this niche arm of finance.

What does a sales compensation analyst do? 

Typical job duties include staying on top of industry trends, predicting salary increases, adjusting quotas to mirror go-to-market strategies, developing the sales commission structure, sales compensation planning, and more. Analysts must also factor regional differences, experience levels, and job titles to evaluate and implement effective sales compensation strategies. Although they usually work within finance functions, depending on the organization, you might see a comp analyst report under SalesOps or RevOps. 

The role is in high demand, especially at mid- to large-sized companies. More than 2,000 sales compensation analyst jobs appear on Indeed right now, including roles at Zoom, Cloudflare, and Adobe.

Meet Rimi

Upon earning her degree in Business Administration and Finance, Rimi started her career as a
Financial Analyst and Accountant at San Joaquin Valley Pulmonary Medical Group. In 2014, she took a compensation analyst opportunity with Carrington Holding Company, where she stayed for four years. Since then, Rimi has worked at Medtronic and Core Logic as a comp analyst, before joining Route in April 2021 as a senior sales compensation analyst.

When she’s not working, you can find Rimi enjoying quality time with her husband and two boys.

Q&A

When did you realize you wanted to get into Finance?

I have been in Finance since the beginning of my career. I love numbers and got my degree in Finance, as well.

As a senior sales compensation analyst, what’s your day-to-day look like? 

My days are different based on what time of the month, quarter, or year it is. Normally, I am strategically thinking on what makes sense to motivate the sales team through our compensation plan. To do this, I run a lot of different analyses. For example, I’ll look at the percentage of sales hitting quota and making on-target-earings (OTE). I’ll also calculate return on investment analyses, and evaluate the comp plans to ensure they align with company objectives. 

What are some of the biggest challenges you solve for?

In this role, there is not one straight answer. That’s what I love about it. You have to think about different scenarios to come up with a solution. Plus, you have to keep improving with time and experience due to not having a straight answer.

What trends have you noticed in the sales compensation space that you’re paying close attention to?

We aim to be competitive in the market when it comes to our comp plans. We try to ensure our sales team feels motivated to bring in more revenue and that when we do, we reward them accordingly.

With the signs of a recession, what’s your advice on how to approach sales compensation?

In my opinion, a recession doesn’t affect sales compensation. Regardless of what’s happening with the market, you always have to reward your sales team for doing a great job. If a company pauses hiring more sales reps, you still have to continue to reward the ones you have. 

Thanks so much for offering a peek into life as a compensation analyst, Rimi!

About QuotaPath

QuotaPath provides automated commission management solutions and sales compensation software to provide Reps, Leadership, and Finance teams with real-time tracking and forecasting. We’re the only commission payment software built with a UX design as awesome as our backend technology to take on commissions.  

Curious to see how your Salesforce commissions translate into QuotaPath? Book a time to chat with our team here, then send over a comp plan ahead of the call. We’ll build it out and show it to you over the demo.

In May, members of our product and engineering teams collaborated on 10-plus different projects over 2.5 days for an internal hackathon!

Was it a success? We’ll let our CTO and Co-Founder Eric Heydenberk weigh in.

“I’ve been a part of a lot of hackathons, but this was by far the best — our engineers are smart, creative and able to get scrappy in a way that exceeded my already-high expectations,” said Eric. 

Director of Product Andy Keil added, “This hackathon highlighted the technical chops across our teams. Almost half of the projects we worked on are likely to make it into production and several are already live.”

Read on to learn more about our hackathon, the winners, and what made it into production!

First, what is a hackathon?

A hackathon invites employees to work on products adjacently related to or outside of their regular work projects and roadmap priorities. 

For our most recent one, we solicited ideas from the entire QuotaPath team, including sales, marketing, and customer support before putting them in front of participants.

“Some of the best hackathon ideas would never make it onto the roadmap in official planning sessions,” said Andy. “But, the dedicated time to explore and prove out a concept can show what’s possible and why a particular feature is compelling in a short period of time.”

Once we closed submissions for project ideas, participants self-organized into teams and selected 11 projects to work on. 

And, despite a healthy dose of competition among participants (with prizes up for grabs), as the event unfolded, Andy said members from different hackathon teams hopped in to lend a helping hand or skillset.

“Our camaraderie and ‘one team’ mindset was on full display,” Andy said.  

So, what were the hackathon projects?

For starters,  log in or sign up for a free QuotaPath account. Watch carefully.

Did you see it?

The little buddy you saw hopping about as your page loaded is the direct result of the hackathon!

Our Senior Product Designer Ryan Weaver and Lead Engineer James Truty teamed up to deliver and delight our users with an animated quokka. To learn about our connection to the quokka and our customer-nominated peer awards, visit our QuokkaPath page.

Another project that included our Co-Founder Cole Evetts, Lead Engineer Zoe Wolfe, Maeve Anand, David Cortinas, and Venu Kunche focused on in-app Team Contests. They built out the ability for teams within QuotaPath’s commissions software to set and run contests around deal sizes, quantity, and commissions.

The Geographic Analysis engineering duo of Kyle Cook and Kevin Denny developed a deal visualization tool pulling in key metrics of a deal. 

Meanwhile, a team of five appropriately named the Confetti Team, created in-app celebratory animations. And, of course, they added a customization element.

Other hackathon projects included: adding performance regression testing and in-app smoke tests, a sales job board, QuotaBot workflow improvements, a Slack integration, a command palette, a dark mode version of QuotaPath, calculated fields, and improved onboarding and bulk efforts within the app.

Obviously, the quokka has lived beyond the hackathon, but what else is in production?

“The final results from 2.5 days of work are going to make a material impact on the product and delight our users,” Andy said.

For example, the team has already shipped the QuotaBot development workflow improvements.

Also near completion? In-app onboarding upgrades thanks to the efforts of our Workspace Onboarding hackathon team. 

“The team worked on a ton of bulk action improvements that will make administering the workspace so much easier!” said Customer Success Manager Patty Williams. “My favorite that we’re already using is a bulk invite feature from the members modal. Inviting large groups to a workspace used to take 10-15 minutes, now it takes less than 30 seconds!”  

Plus, the Command Palette is well underway, and the design team has kicked off development on Team Contests. 

“Working on the Command Palette team was some of the most fun I’ve had programming in ages,” said Lead Engineer Mike Bagwell. “We built something that we’re all immensely proud of and that all of us are itching to get into the app so we can use our familiar shortcuts again. I’m still hitting command+K just out of muscle memory. Every team member contributed meaningful ideas and built quality code in a tight-knit communal process. Couldn’t have asked for a better experience.“

Who won?

After a companywide vote, the Team Contests group, led by Zoe, earned the coveted “Overall Winner” title along with the “Sales and Marketing Award.”

“Venu, Maeve and myself had so much fun working on this,” Zoe said. “We were in a Zoom call for all work hours during the hackathon. At one point, Venu Door-Dashed me a cotton candy milkshake. There was so much collaboration, iteration, and friendly jests.”

Other teams picked up some honors, too!

Command Palette earned the “Product & Engineering Award.” Workspace Onboarding won, you guessed it, the “CS & AM Award.” And, last but not least, our “CEO Award” went predictably to our Confetti Team. (Our CEO has a long-standing thing for confetti.) 

When’s the next one?

Due to the success, we aim to host these a couple of times throughout the year.

“People across the company submitted almost 100 project ideas, proof that people from all parts of QuotaPath understand our product, and proof that we have so many exciting opportunities to improve QuotaPath in the months and years to come,” said Eric.

The participants would agree. Here’s what a few said during their hackathon retro.

“I learned that we can build stuff extremely quickly when we really want to. I would love to see how we can keep this scrappy mentality and utilize it for bigger feature development.”

“Something about the informality of prototyping was very freeing, ended up encouraging more teamwork and we got more done faster. Could carry over into actual project execution.”

“Tons of excellent cross-team collaboration. I was so proud of the project my team was able to see through in such a short period of time.”

“There was extremely thoughtful, ingenious, thorough work that came out of this hackathon. It felt like a breath of fresh air to work in such a quick, scrappy fashion with members across the entire org.  It was very cross-departmental and felt like a celebration!”

Interested to learn more about working at QuotaPath? Check out our career page to read about our values, life at QuotaPath, and see current openings.

The MEDDIC sales methodology is a highly popular qualification method and sales training for complex sales that flourished in the 90s. This approach was developed by John McMahon, Richard Dunkel, and Jack Napoli to train their new sales hires at PTC. They gathered all the best practices of their over-quota reps on consistently closing high-value deals to create the MEDDIC method.

The approach attracted attention when the PTC sales team grew its sales from $300 million to $1 billion in four years. It works by focusing reps on continuously qualifying prospects so they can filter out the unwinnable ones and spend time on those most likely to close. We like to refer to these as the “ideal customer profile.”

In doing so, sales reps avoid wasting 50% of sales time on unqualified leads and losing approximately 67% of their deals because they aren’t properly qualified.

The MEDDIC framework helps reps identify and better qualify prospects for higher close rates and retention. If your business sells solutions that are technical, complex, expensive, or require a significant user behavioral shift, MEDDIC is a valuable process to adopt. By using MEDDIC to thoroughly evaluate and qualify potential customers early in the sales process, your sales team can focus their time on prospects who are most likely to close.

Deep dive of MEDDIC

MEDDIC is an acronym for Metrics, Economic buyer, Decision criteria, Decision process, Identify pain, and Champion. Below, we listed the details of each of the six qualification steps included in this sales methodology.

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1. Metrics

Determine the prospect’s quantifiable goals so you can explain how your product will help them attain their goals. Then, go a step further to understand how the prospect will measure success, enabling you to speak in their terms.

2. Economic buyer

Identify the person who makes the financial decisions for your solution type. Although the person may not be your regular contact, it’s important to know who they are. Then it’s time to contact the economic buyer. If this isn’t possible, ask your primary contact about the economic buyer’s mindset, expectations, decision-making process, and priorities so you can speak to their motivations when presenting your solution.

3. Decision criteria

It’s important to discern what factors the prospect’s company is prioritizing as they compare various solutions. For example, if your solution is software, these criteria might include things like ease of use, onboarding, integration, price versus budget, and potential ROI. Identifying these key factors enables reps to tailor their pitch to emphasize these areas of interest.

4. Decision process

Beyond the decision criteria, it’s essential to understand the prospect’s decision-making process. These are the internal steps required for them to finalize a purchasing decision. Knowing the steps in their buying process enables reps to track their progress toward closing the deal from the prospect’s perspective. Your sales managers will thank you. 

5. Identify pain

It’s essential to know the prospect’s problems and pain. This enables sales reps to show the prospect how your solution confronts and addresses their needs. A deeper understanding of the magnitude of the potential customer’s pain allows reps to quantify the value your solution will deliver.

6. Champion

A champion is an advocate or someone within the prospect’s company who stands to benefit the most from your solution. Developing this level of relationship with a contact facilitates keeping your solution top of mind throughout the buying process until the deal is closed. The longer your typical sales cycle or the more costly your solution, the more important it is to identify a champion to influence the decision-making process on your behalf. The sooner you can identify and foster your relationship with the champion, the better.

How it’s evolved over time and its current state

The MEDDIC sales training has evolved since its creation in the 90s. The original six MEDDIC qualification factors remain with additional criteria added over the years. The two most commonly implemented variations of MEDDIC include MEDDICC and MEDDPICC.

MEDDICC

The seventh qualification factor, represented by the additional C, is competition. This is for businesses selling high-dollar, large projects in a highly competitive market. In this case, salespeople need to have an understanding of the suppliers they typically compete against and be able to differentiate their solution against their opponents.

MEDDPICC

The eighth qualification criteria, represented by a P, is the customer’s “paper process.” This is where sales reps need to understand customer prerequisites. These include contractual, approval, legal, and vendor onboarding procedures. Also known as things that could slow down or block your deal.

And, a more recent refinement to the MEDDIC sales methodology is:

MEDDPICC+RR

As with the other two variations of MEDDIC, this latest iteration was created to accommodate the most complex B2B sales opportunities. The two Rs stand for:

• Relative Priority: This refers to the prioritization of internal projects in terms of budget and time allocations since not all goals can actively be addressed at the same time. So, internal prioritization can become a deterrent to closing the deal.
• Risk Factors: These factors have the potential to impact the customer’s decision process and include both internal and external factors. An example of an internal factor is a personnel change on the buying committee. Whereas an example of an external factor might be unforeseen factors like COVID-19.

Businesses usually don’t need all 10 criteria in the MEDDPICC+RR. So, you may choose to start with the original MEDDIC sales methodology and expand from there as needed.

• Prepare your coaching approach to reinforce initial MEDDIC training and promote continuous improvement in applying what they learn.
• Train sales and marketing management on the MEDDIC method so they’re equipped to effectively support the sales team.
• Initiate the creation of sales enablement resources to support continuous improvement and updates. Cold calling scripts instruct reps on how to incorporate the right questions into their sales conversations. This also helps them get started and facilitates role-playing.

Once you have completed these initial steps, it’s time to train your sales team on the revised resources and the steps in the MEDDIC sales methodology. Then have them start applying it in their day-to-day prospect conversations.

MEDDIC best practices

Implementing any new sales methodology can involve some trial and error. To facilitate your launch of the MEDDIC sales methodology, we’ve assembled some sales tips.

Review sales objections to help reps with talk tracks in overcoming objections.

Review lost deals to determine if you need to adjust qualifying questions to prevent reps from spending time on the wrong prospects.

Continuously finetune customer personas. This will ensure they are up to date and reflect the evolving characteristics of your ideal customers.

Update sales qualification questions as needed based on new insights, changing market conditions, and changing customer priorities.

Customize CRM fields with MEDDIC acronym. (Measurable goals, Metrics of success, Economic buyer, Decision criteria, Decision process, Pain points, and Champion.) Having these in place reinforces this sales training, keeps reps focused on the process, and makes it easier for them to record these valuable insights as they discover them.

Enable automated alerts to your internal chat platform whenever there is a change in the status of an opportunity in your CRM. This helps sales leadership inspect the change, determine whether it should be happening, and coach reinforcement or course correction.

Other sales methodologies to consider

Effective lead qualification filters out prospects that are unlikely to buy. This shortens sales cycles, improves sales forecasting, boosts deal value, and improves win rates. 

If you’re not sure MEDDIC is right for your organization, you may want to consider its predecessor or one of its variations such as BANT, ANUM, CHAMP, and FAINT.

BANT marks one of the earliest efforts to formalize opportunity qualification in the B2B sales environment. IBM developed it and the acronym stands for Budget, Authority, Need, and Timeframe.

ANUM, developed by Ken Krogue at InsideSales. It redefined BANT and stands for Authority, Need, Urgency, and Money.

CHAMP focuses on prospect challenges. This acronym represents Challenges, Authority, Money, and Prioritization.

FAINT, developed by the Rain Group, stands for Funds, Authority, Interest, Need, and Timing.

These simplified lead qualification methods tend to be more effective in shorter sales cycles and lower cost, less complex sales.

Conclusion

Having an effective lead qualification process in place makes a significant difference in sales outcomes. The MEDDIC sales methodology focuses on qualifying prospects throughout the sales process to filter out prospects unlikely to buy. This boosts close rates and sales productivity. Try this method if you have a complex sale and want to improve your team’s results.

QuotaPath’s technology maps your commission plan by automating sales compensation and commissions calculations. We also support the sales community with free sources, like our Quota:OTE Ratio Calculator and Sales Funnel. 

To see how QuotaPath can support your compensation plan, schedule a demo with our team. 

QuotaPath and Pavilion recently partnered for the ebook: Navigating Compensation Planning in a Volatile Job Market. Get a preview of the ebook below followed by three key takeaways. Download the full ebook here. 

This year has been a year of extremes in the tech world. From talent shortages to recent lay-offs, it has been a precarious time for many in the labor market. Despite all of this volatility, something remains constant — the need for comprehensive compensation packages that exceed employee expectations. 

Employees today still want remote work, flexibility, and higher wages, which have not been increasing at the same rate as inflation. In fact, according to Hubspot, voluntary turnover at for-profit businesses hovers around 25%. Further, 25% of respondents to a PayScale study said they left their jobs for higher pay. While this is likely to slow down due to the aforementioned lay-offs and significant decreases in funding, hiring remains a challenge and a good overall compensation package is as important as ever. 

Moreover, competitive compensation packages are a strong way to motivate your team and retain your best talent. As Deloitte says, “Sales compensation is an integral part of salesforce effectiveness and involves aligning all aspects of plan design, from pay mix to target setting to the product and market strategy.” 

Competitive compensation packages

Is your comp package competitive enough to retain the best of the best? Even if it is, has the process been systematized to allow reps visibility into their monthly or quarterly earnings? How can you make your comp structure competitive, while still being flexible enough to meet market demand?

In this ebook, and in partnership with Pavilion, we interviewed four sales and finance executives from the Pavilion community.

Upon reading, you’ll gain insights into the following:

• 4 different approaches to compensation and sales commissions
• Challenges in the sales comp space and how they adapted
• Tips on how to leverage comp plans to impact retention
• Why complex plans are worth it

3 key takeaways

First, offering the choice between commissions and equity is becoming more prevalent.

“I want to be generous with sales commissions, but for me, it’s a little bit of picking and choosing – equity or commission,” says Akash Bhatia, Co-founder at Epoch AI. “To incentivize salespeople, I show them what they can pick from and they can decide what makes them most happy with their compensation package.”

Second, your top sales talent and recruits crave compensation clarity.

“Good [account executives] really want to understand their commission plans,” said 

 Sam Seigle, VP of Finance at Zoomin.

This is where compensation management software, like QuotaPath, comes in to provide transparency and the ability to accurately forecast earnings. 

And third, you can’t scale without alignment around compensation.

 “It is important that sales leadership, RevOps, and finance are all in alignment with the sales commission structure and processes,” said Conor O’Donoghue, CFO at Ocrolus. Without alignment across leadership and departments, it will be difficult to scale comp effectively.

To learn more about QuotaPath’s commissions software and commission management services, schedule a demo with the team today. 

Every month, QuotaPath collects nominations from our customers to name a Quokka of the Month. We’re thrilled to announce our QuokkaPath June winner below. To nominate a teammate, see past winners, and learn more about this initiative, check out our dedicated QuokkaPath page.

We’re traveling worldwide for our June QuokkaPath winner! 

June’s Quokka of the Month, Kerttu Jaus, lives in Estonia and has been with the on-demand software testing and QA platform Testlio for 4 years!

Congratulations, Kerttu!

Kerttu first signed on with Testlio as a Community Test Lead. But, in June 2019, she pivoted into the finance world when she began a finance internship that summer.

To no one’s surprise on her team, this hard-working, Estonian folk dancer, and travel lover seamlessly moved into her new role as Finance Operations Specialist the following fall.

“She is a delight to work with and always goes above and beyond to make my life easy as a VP of Sales,” said Michael Loiacono, Testlio VP of Sales and Kerttu’s QuokkaPath Nominator. “She relies heavily on QuotaPath to stay on top of all deals, commission payments, invoicing of customers, tracking down late payments and even helping us sort out the weird deals so people get paid properly.

And, most importantly, she always does it with a kind and positive attitude, added Michael.

“I once heard that F.A.I.L. stands for ‘First Attempt In Learning,’ Kerttu said about embracing positivity. “In a constantly changing startup environment, the only thing that’s really constant is change. Oftentimes you do things for the first time — and inevitably sometimes fail.”

“I’ve said it a hundred times and will say it a hundred more. I absolutely adore and admire the people I get to work with!” Kerttu said.

Still, her job doesn’t come without its challenges. 

Running point on Testlio’s Accounts Payable system, managing monthly close activities, handling and analyzing collections, and overseeing sales commissions can create a daunting stream of tasks. (Fortunately, she’s got some help from QuotaPath with the last one!)

“It’s easy to get lost in the sea of never-ending tasks, especially if you’re feeling like you’re in the ‘flow,’” Kerttu said. “But, at the end of the day, you have to remind yourself that you should try to live for yourself first and then for everyone else.”

Advice to live by, Kerttu! Thank you for sharing your story and for your excellent work at Testlio! 

Enjoy your summer travels to Croatia!

Nominations are now open for July’s Quokka of the Month. To recognize your teammate, answer six short questions and learn more about our QuokkaPath in the video below.

Reps don’t love them, but clawbacks play an integral role in the sales compensation space. Below, we define clawbacks, how companies present them in comp agreements, example clause copy, and why leaders should protect their businesses with detailed policies.

First, what does clawback mean?

In the case that a customer is mis-sold and needs refunded or fails to pay for their services, management may issue a chargeback of commission.

As an example, let’s say I’m a sales rep that closed a $20K deal last month and earn a 10% standard commission rate. Per my sales commission payments schedule, and using QuotaPath, I can see that I’ll receive my commissions from the deal in the next check. Hello, $2K! 

Fast forward to a month after receiving my sales commissions. I learn that my customer has to cancel their contract after I’ve already received my commissions.

In this instance, not all, but most companies will issue a clawback. 

A clawback occurs in sales when a company has paid rep commissions on a sale and then the customer abruptly ends the contract within a certain period of time. The clawback itself is when the employee pays back the commissions per the sales commission plan. 

HubSpot, for instance, has a clawback policy in effect for the first four months of the customer’s contract.

“If a customer cancels their plan one to four months after signing up, the salesperson who sold it to them is forced to give back their commission payment. This ensures reps focus their time and attention on businesses that can really benefit from the product.” That’s from HubSpot’s The Ultimate Guide to Sales Compensation.

Clawbacks outside of sales

Now, people view and define clawbacks a bit differently outside of sales.

Per the Corporate Finance Institute, it is “a contractual obligation to return money under special circumstances or events.” In finance, a clawback provision protects the company from employee fraud and misconduct, like inflated performance reports or when an employee fails to deliver on promises made.

What further differentiates clawbacks outside of sales commissions is that these ones can come with additional penalties beyond a refund.

Regardless of what industry you’re in, however, in order for companies to actually enforce a clawback, they need a contract. Then all employees subject to a clawback should sign it. In sales, for instance, this clause lives in an employee’s sales compensation plan.

What is a clawback provision/clawback clause?

When talking about clawbacks, you might also hear the term “clawback provision” or “clawback clause.”

In sales, this provision or clause refers to the specific section in the comp plan that outlines scenarios in which it’s okay for an employer to take back commissions and bonuses from a rep.

In our HubSpot example above, the clawback clause is both specific and easy to understand. If the customer cancels within the first four months, the rep returns commissions. If they cancel in the fifth month, the rep keeps commissions, and the company eats the churn. The end. 

Clawback clause example for a sales compensation plan

Below, we listed sample copy of a clawback clause within a sales compensation plan. We borrowed this sample from Commission Clawback Sample Clauses and tailored it to the HubSpot example. 

The importance of clawbacks and provisions

Of course, reps don’t love a clawback. Plus, in some cases, a deal imploding after signing may fall entirely out of their control. 

Still, clawback policies encourage reps to vet the best opportunities and build long-term relationships with their customers. Reps comp’ed on renewals and add-ons are likely already doing the latter. However, for reps that hand off customers to account management and success teams after the deal finalizes, clawbacks give them another reason to invest in solid opportunities and relationships from the onset. 

“[A clawback] ensures that you are truly compensating your sales team for building the company. It also encourages your sales reps to consider whether a customer is truly staying for the long-haul, instead of only short-term gains,” wrote JT Rimbey in his piece about sales commission rates by industry.

Our recommendation for approaching clawbacks

In sales specifically, clawbacks can affect attainment, compensation, or both.

As an example, say I had a $10K deal fall through after signing and earning commissions. Will your clause mandate that I return the commissions ($1K), forfeit the total contract value as it pertains to my quota, or both?

We think the easiest — and least painful — strategy is to only collect the commissions back when a clawback takes effect.

If it does impact my quota, that means that I either have a $10K quota hole to crawl back from last month, or I’m entering the new month down $10K. This can be incredibly discouraging for reps.

That’s why we lean heavily toward commission-only clawbacks.

Sales commission clawback help

A commission calculation software tool can help teams better manage clawbacks by ensuring accuracy and providing visibility.

Using QuotaPath’s commission tracker, commission recoveries automatically populate when deal values change in your synced CRM. Additionally, in instances when chargeback provisions dissolve after a pre-determined time period, such as four months, we can set up filters to accommodate clawback cycles. 

To learn how QuotaPath can automatically track your sales clawbacks and commissions, schedule a live, custom demo with our team.  

A usage-based comp plan is all the rage right now. But will it work for your team? Read on.

Consumption-based pricing or usage-based pricing is a model that has gained tremendous popularity in the recent past. And, it’s not expected to slow down any time soon. The pricing model is particularly common in SaaS companies. But the challenge that companies face in implementing this model is formulating procedures that help them succeed in Usage-Based Pricing (UBP).

Revamping and aligning sales commission plans to this new, flexible, and consumer-friendly approach can be daunting. 

On the consumers’ part, the pros of conducting business with vendors who embrace a usage-based pricing model are clear. They understand the benefits of the new model. They know that it allows them to use the product or service they need the way they want and then be billed for what they have spent.

But for sales reps paid in commission, the company experimenting with the process will require them to entice the consumers to spend as much as possible. Using UBP to incentivize the workforce and motivate them to make more sales can create bad work relations with the customers as they may use unorthodox practices to achieve the end. It may also misalign their incentives for the products and services sold.

Even more, a usage-based sales commission structure can complicate the commission tracking process because it often involves tiered, over-time payouts, and clawbacks. That is unless you use sales compensation software that can handle it. 

So, let’s take an in-depth dive into how an organization can effectively apply usage-based comp plans.

What is a comp plan? (usage-based)

In Usage-Based Pricing, a comp plan covers the process of compensating sales reps for their services in the acquisition of new consumers. The plan also integrates revenue generated from the actual usage time of the software and is usually paid as sales rep commission. However, the biggest challenge associated with consumption-based pricing is coming up with a typical sales commission structure. With different compensation models available, settling on one can be a daunting undertaking.

How to structure a comp plan fit for usage-based models

In UBP, finding a viable comp plan that serves both the sales reps and the business is not easy. 

Sometimes fixating on sales incentives corrodes customer relations. For example, to earn higher commissions, the sales team may convince customers to make selections that aren’t the best fit. Then, when they close the deal, the once-friendly sales team ghost the consumers.

Reversely, leaders need to be mindful of how a usage-based comp plan can impact reps. If it’s set up poorly, where the rep is consistently paying back on clawbacks or having to wait a full year to earn anything, they’ll be less likely to stick around. 

So, before settling for a particular sales incentivizing structure, you should conduct sufficient research.

Here are some examples of comp plan structures that avoid these issues:

Total consumption vs. incremental consumption

In total consumption structure, the software company evaluates the gross consumption of services amongst customers. The business takes into account the projected final consumption when compensating sales reps. They then examine the services procured by a household or consumer and the total services provided during a particular timeframe before paying sales commissions.

Incremental consumption structure assumes services and products are homogenous and considers choice as an outcome derived from an intuitive process of information search. The strategy outlines how services or products are incrementally traded with time, and the company utilizing a UBP model uses the criteria to incentivize its sales rep. A comp plan that embraces incremental consumption considers future consumption patterns to carve the reps’ commission.

Actual billed consumption vs. consumption run rate

In actual billed consumption, customers pay for what they have used. For example, a consumer may be charged less by the power company during summer as they consume less energy. By analyzing the payments made, a company using a consumption-based pricing structure then pays the reps a percent of the gross.

In consumption run rate, businesses use their current financial status to forecast future performance. In this structure, an organization assumes the existing condition will stay the same and uses the extrapolated data when charging consumers to incentivize the sales rep with a percent of the payment.

If forecasted usage doesn’t match actual usage, the company may issue a clawback on the rep’s commissions for the difference if it’s substantial.

Hybrid consumption vs. a pure focus on consumption

Hybrid consumption is a new emerging trend among customers, potentially making conventional consumer stereotypes obsolete. The structure considers budget and premium alternatives across a wide range of services and product categories. In the process, it carves out a typical sales commission structure.

At QuotaPath, we have several customers run their commissions through a hybrid consumption model.

An example of this approach entails paying upfront half of the rep’s earnings based on estimated consumption. Then, the other half pays out on actual customer use or as the customer passes usage thresholds.

On the other hand, a pure focus on consumption explores consumer choices that lead to varying alternatives such as utility, satisfaction, and happiness.

The structure yields optimal choice, where consumers can rank different services and goods as per the levels of utility.

Pros of using consumer-based pricing for business

• Increases flexibility when responding to changing consumer needs
• Raises profits as sales reps strive for more quality customers to earn higher commissions
• Improves rep retention
• Strengthens budget management
• Enables a business to experiment quickly on a variety of recurring finances
• Minimizes revenue leakages
• Allows the creation of bundles and packages which gives organizations a competitive edge

To consumers

• Improves customer satisfaction as they pay for only what they use
• Empowers consumers

• Grants consumers control over their spending

How QuotaPath maps out usage-based comp plans

Does QuotaPath support usage-based comp plans? Yes! 

At this time, we have several customers on usage-based comp plans. How our incentive compensation software ingests and automates it will depend on how a team sets it up and what they want to accomplish. 

Like all comp plans, if your team moves toward a usage-based model, make sure it’s clear,  understood, and visible across your team. 

What are your thoughts on usage-based comp plans? Is it the future of SaaS sales compensation? 

To learn more about QuotaPath’s commission management software, find a time here to chat with our team.