Your small, supportive sales team has great energy and performs well. In fact, the only issue is that there’s not enough of them. As a leader, you’re ready to grow your team, but how do you maintain a healthy sales culture while scaling?

There’s no one way to achieve a healthy sales culture, but there are some common attributes shared amongst healthy sales teams.

For instance, according to HubSpot, a sales team in good health has the ability to identify issues within their own sales process. Then, they fix them quickly. Other indicators of a healthy sales team amid scaling efforts include low attrition rate, high quota attainments, and a consistently full pipeline of sales opportunities. 

Reversely, a sales organization that doesn’t invest in new hire training or ongoing coaching reflects an unhealthy culture. This can lead to high turnover in addition to the loss of revenue for the company. Some leaders also make the mistake of just filling seats to boost headcount which contributes to toxic sales cultures. 

According to our CEO and Co-founder AJ Bruno, 10 percent of our customers have doubled their sales teams in 2021, including our own team. We expect this number to climb as we head into 2022.

To help, we asked our VP of Sales and Customer Success Caroline Tarpey to share her philosophies around sustaining a healthy sales culture amid scaling efforts.

Without further ado, here are seven best practices to follow to support the health of your sales team. 

1. Prioritize teamwork but don’t micromanage

This is a no-brainer, right? Not exactly. Sometimes in the early growth stages of a company, leaders forget to focus on prioritizing teamwork. Caroline says collaboration and competition mark key components of a healthy sales culture. 

However, that doesn’t mean that leaders need to micromanage their sales team. Micromanagement discourages teams and makes reps feel like they’re not trusted to do their work or even attain quota. Teamwork that’s promoted across the sales organization and supported across the entire company, fosters a healthy sales culture. Which goes right into my next point…

2. Instill trust amongst your reps 

Why hire people to be on your sales team if you don’t trust them? It causes an unhealthy balance in the relationship between the team and their leaders, which can ultimately, lead to a distrust of the leadership team. If you trust your team, they’ll trust you back, which creates a healthy sales culture. Additionally, consider building a sales mentorship program for both your reps and especially a sales mentorship program for your sales leaders.

3. Create transparency around company revenue and goals

Some of the most successful startups experience success because they’re transparent about company goals. This creates a culture of open communication across all departments in the company. This is even more important for your sales team since they’re always carrying the pressure of attaining a quota. Giving an opportunity to the sales team to feel valuable through transparency would happen by making sure they understand how their monthly and quarterly attainments help bring in revenue for the company. 

This is specifically true for startups.

For example, if a member of the sales team has equity in the company, help them understand how the revenue they bring in will make the equity more meaningful. That alone is going to inspire sales team members to attain quota because that helps them as a shareholder. 

4. Communicate commissions and quotas clearly

This also should be a no-brainer. No one wants to work in sales and not have a clear understanding of how much they will get paid. Additionally, if there is a 30-day or 90-day probationary period to test out a rep’s ability to sell the product, make that clear before hiring them! No one wants to get fired for not meeting quota in the first month or first quarter on the job. Be transparent with the sales team at all times. Transparency helps the sales team trust their leaders about anything, including their commission, which adds to a healthy sales culture.

A tool like QuotaPath, that everyone on the sales team is able to access and utilize will help with transparency. QuotaPath helps sales teams of all sizes track attainment and commission goals in real-time. Caroline mentioned that having QuotaPath empowers sales team members to not only attain their quotas but their personal goals, too. She’s witnessed people work hard to be able to pay off mortgages, buy a car, or purchase an engagement ring. 

5. Always be willing to learn and pivot

A true leader has the ability to pivot at any moment. Both the sales team and their leaders can benefit from pivoting when needing to. In the tech industry, things can change fast and you want to be able to adapt in order to meet company and industry needs. Everyone working on the same page to pivot will help create a healthy sales culture of always wanting to learn and evolve.

“You need a culture that is adaptable and nimble and able to thrive in ambiguity,” Caroline said. “Where people are energized by the fact that we may not have all the answers at any given moment in time. We get to have a voice in how those things come together. Adaptability plays well for all sales cultures but especially in growth-stage companies.” 

6. Embrace the losses

It’s okay to lose a deal. In sales, it’s expected. However, being able to learn from the losses is what’s most important. Some prospects are not going to be good customers for your product.

Instead of harping on the fact that the deal is lost, focus on what could have been done better. Those losses can be made into a case study on how you can help move future deals down the pipeline. There are a lot of lessons that can come from a lost deal, so don’t dwell on the negatives. Learning from the deal will allow the sales team to feel like they’re still a valuable team player that’s a part of a healthy sales team.

7. Celebrate the wins, and often 

Everyone wants to be celebrated for their hard work. If you want to have a healthy sales culture then make sure to celebrate your teams’ wins. A win can vary, too. Instead of only celebrating your reps who attained 100 percent of the quota, consider celebrating the rep who hit 60 percent last month and increased it to 98 percent this month. 

Also, creating the mentality of abundance, or “there’s enough for everyone to eat,” will help filter out any jealousy and keep everyone focused on the goal to win. 

Caroline says in her previous roles, she saw success when sales team members wanted to be number one because they saw others winning around them. 

People are motivated by seeing other people win, and they want to take part in that success if possible! To do so, consider giving out quarterly awards and consistently recognizing team players! 

Maintain a healthy sales culture

Now, as your team continues to add new members, you should have a solid foundation on how to keep the health of your team intact. Transparency goes a long way, especially when it comes to company-wide goals and how reps get paid. Continue to celebrate your team, even the small stuff, and share failures so your reps can grow together. 

For additional support, we’ve also spoken with experts to overcome the five most common challenges while scaling and compiled a list of 10 steps to grow a team quickly without compromising the team. Take a look!

This is a guest post from Cody Short, a local government and communities reporter for WBHM. Interested in writing for us? Contact kelly@quotapath.com.

Byron Sierra-Mattos has worked in sales for nearly a decade. For the past five, he’s worked in tech. Simply put, he’s seen his fair share of scaling sales team challenges.

For instance, as a rep on Apollo.io’s sales team of two, Byron averaged nine to 14 demos a day.

This pace continued for several months and peaked after Byron completed 21 demos in a single day. That’s about 15 to 18 demos too many. 

No longer could Apollo’s mighty team of two handle the massive spikes in prospects. Time to scale their sales team. 

“We started hiring like crazy,” Byron said.

Apollo had two options at this point. The hiring teams could rush to fill the seats as fast as possible. Or, they could carefully curate a team and put systems in place to find the right people fast and help them flourish. 

Fortunately for Byron, leadership chose the latter. 

“They were really strategic about hiring,” said Byron, who now supports Apollo’s account management team as a lead. “It took about four to six months to scale, but we used that time to build a playbook, processes and invest heavily in training.” 

Byron’s experience marked a nice change-up from that at his previous employer, where he said the company “burned and churned” through new hire cycles.

Qualia’s VP of Sales Brandon Calley shared similar sentiments and stressed the importance of building out a new hire profile. This allows for leaders to quickly identify candidates who will add to the health of the team both culturally and performance-wise. 

“To overcome the challenges around scaling a sales team, dial in on the profile of people you’re looking to hire,” Brandon said. “Find people who have proven track records of success, who have certain intangible qualities like curiosity, drive, high aptitude to learn new things, and who are adaptable.”

We spoke with Byron and Brandon to learn what other scaling sales team challenges they’ve faced. To see how they’ve overcome potential risks from an executive lens and a senior individual contributor’s perspective, read on. 

Meet our guests

Prior to joining Apollo, a sales platform that streamlines prospecting efforts, Byron Sierra-Mattos worked at SnackNation, where he ranked as the No.2 top-selling rep for 22 months consecutively. His experience mentoring and supporting new reps runs deep. At SnackNation, he helped onboard new hires as his team doubled from 30 to 60 reps. Now at Apollo, he continues to play a role in the hiring and training processes. Since he started there, his team has scaled from two to 29, with more reps on the way. In November, Apollo promoted Byron to team lead and senior account manager.

Brandon Calley’s experience scaling sales teams dates back to the early 2000s when he served as sales manager for an online marketing startup. Since then, Brandon has developed and led high-growth teams at Meltwater, Reputation.com, Upwork, MongoDB, Vacasa, and now Qualia. Since joining Qualia in 2019, Brandon has scaled his sales team from 30 reps to 70. 

Challenge No. 1: Hiring the right people

“Everyone has an idea of the profile for a successful seller, but that can vary from product to product,” Brandon said. 

This idea also varies between different sales motions, which are the methods an organization practices to deliver a product or service. 

“A complex platform with a longer sales cycle, for example, requires someone who is patient, detail-oriented, and adaptable,” Brandon said.

Whereas a shorter sales cycle with a higher velocity of sales often requires someone who can hold a strong position and is firm in communication. 

Solution: Draw up exactly who you need

Just like sales organizations hone in on their ideal customer personas, leaders should also create their ideal sales hire profile.

“This is particularly important right now because it’s hard to hire account executives,” Brandon said. “Dial in on who you are looking for.”

Once identified, sales leaders should then actively recruit them while personalizing their message.

“You cannot use templated messaging,” Brandon said. “You need a differentiator to attract candidates and show them why this opportunity is different from the other 15 they are being approached for.”

Challenge No. 2: Ramping new hires

You’ve got the offer letters signed. Now what? One of the biggest challenges scaling sales teams face — outside of hiring — is reducing the time it takes for a new hire to turn productive. Meaning, they can now hit a full quota on their own.

“At most companies, this is going to be a mix of effective industry training, product training, sales execution motion practice, and the effort they put in,” Brandon said. 

This industry training should evolve over time, but you have to start somewhere. Brandon suggests including real-life application of the job within a sales boot camp and having reps earn certifications along the way. Examples could entail certifications for executing a prospecting deal or running a full demo independently.

Solution: Establish a scoring system

“The best way to check this is to set a knowledge score on a matrix,” Brandon said. “What is the ideal knowledge score that demonstrates a requisite level of knowledge to be successful? What does the application look like?” 

He recommends tracking activities and measuring through a tool like Gong. Sales coaches, too, should conduct live observations to see if new reps can apply knowledge correctly.

Challenge No. 3: New sales leadership 

When sales teams scale, news leadership often follows. If someone comes into the organization externally as a manager, director, or VP, a disconnect between the existing team and new management can occur.

In this instance, Byron recommends looping in your senior reps for intel and assistance.

Solution: Leverage your senior reps

Your senior reps can be the gateway to understanding the existing team culture, performance, and coaching opportunities. 

“I’m shocked whenever new managers come in and don’t put in the effort to get to know their senior reps,” Byron said. “How are you supposed to teach someone something new that you’ve never done yourself? Or that you haven’t spent time with the people who really know it?”

Lean on those who have been there and want to help.

“We have pretty good ideas!” Byron said, who initiated and led team-wide training every two weeks for Apollo’s sales team.

Challenge No. 4: Process buy-in

The team has spent months piecing together an onboarding and training process. But is it being adopted?

“A challenge that comes up while scaling a sales team is in process execution,” Brandon said. “Are people following the process that they’ve been trained on? Are managers coaching to that process? Is everyone executing this at the same time?”

If you’ve answered “no” to any of these questions, your scaling efforts are at risk. 

Solution: Document, train, and add technology

“Make sure to document the entire sales process,” Brandon said. “People need to be trained on it and be able to go back and reference it.”

At Qualia, for instance, Bradon’s leadership team built out a clear document playbook that outlines the entire enterprise presale process and scripted sales motion.

“As a new hire, if you come in, go through our ramp training, and follow the script, you’ll be semi-successful here before even fully understanding the content,” Brandon said. 

Then, to ensure that the team keeps swimming together in the same direction, provide sales enablement resources that offer ongoing training for all levels of the sales team.

An elegant process design that includes sales technology that helps teams scale, goes a long way, too. 

Challenge No. 5: Meaningful mentorship

As your team grows, you may start pairing new hires with more tenured reps for support. One thing to keep in mind, however, is that mentorship programs are most effective when both the mentee and the mentor benefit. We often package the opportunity to mentor someone as a great opportunity, but give them more than lip service. Design them in a way that directly benefits mentees and mentors.

“As an individual contributor, I’ve always been willing to help without getting paid, but I will give my mentee a lot more attention if I can get something out of it as well,” Byron said. 

Solution: Incentivize mentors

“At Apollo we have a buddy system,” Byron said. “I’ll shadow sales calls with my buddy and provide feedback and coaching opportunities.”

Then, as his buddies hit their ramp quota, Byron might earn a percentage of their total deals or a one-time bonus.

Goodbye scaling sales team challenges

We hope you’ve learned some practices to overcome common challenges sales teams face as they scale. We certainly did. Thank you to Brandon and Byron for sharing their insights with us.

If your sales team has hiring plans next year, please continue to lean on us as a resource for intel and technology. Our compensation management platform makes it easy to add new teams and comp plans while tracking and forecasting quota attainments. We’ll even automate commission payouts for you. Plus, our leaders regularly host webinars and appear as guest speakers within the industry that we share on LinkedIn and Twitter. 

When calculating on-target earnings (OTEs), there’s often a bit of a guessing game.

So, we developed a free tool to make it easier to set OTEs while removing the guesswork! Introducing our Quota:OTE Ratio Calculator.

With this tool, we aim to help leaders from RevOps, sales, and finance set realistic quotas and OTEs based on past performance. To access the Quota:OTE Ratio Calculator, fill out this page to receive it via email. As a heads up, you’ll need Excel to fully utilize it.

Read on for context and tips to understand the tool.

On-target earnings 101

Let’s start with the basics. 

What does OTE mean and why are sales leaders always bringing it up? 

On-target earnings (OTEs) represent the total amount of money a sales rep or account executive (AE) can earn if they hit 100 percent of their quota. Sales leaders usually set OTEs for a 12-month period and lean on this number to set quotas. 

To calculate OTEs, take the base salary and add the total commissions a rep would earn if they hit 100% of their quota.

For example, Amy’s base salary is $60,000, and her total commissions at 100 percent quota is $65,000 on the year. Therefore, Amy’s OTE equals $125,000.

Base + Commission = OTE

Amid the ongoing “War on Talent,” rising OTEs have become especially prevalent.  Trends suggest AEs continue to shop for the most lucrative opportunity. As you can expect, the bigger the OTE, the greater the chance a recruit accepts that offer over another.

But, one thing to keep in mind is that OTEs are not guaranteed. If a company lists OTEs of $200,000 and only 40 percent of the sales team hits that number, that’s a red flag. Some would even say that’s false advertising. More to come on this later.

Glad we have an understanding of OTEs. Now, let’s throw a wrench in it. A wrench that we in the biz call multipliers.

Quota multipliers

A multiplier is the number of times more a quota is than an AE’s OTE. To find it, divide the overall quota goal by the OTE. 

Here’s an example. Ian is an AE with an OTE of $160,000. His quota is $1 million in annual recurring revenue (ARR). In this instance, Ian’s quota is 6.3x larger than his OTE. The multiplier, or quota to OTE ratio, for Ian’s compensation plan is 6.3. 

Now, determining the multiplier for your compensation plans can be tricky. (That’s why we created the Quota:OTE Ratio vs. Sales:Earnings Ratio Calculator.)

We’ve found that most of the companies we speak with set multipliers 5x larger than their OTEs.

“The 5x range is what most people would consider good,” our Chief of Staff Graham Collins said. 

But, because there’s always a but!

“There is a range of ‘good,’ and so much of this depends on your company’s revenue,” Graham said.

Next, we’ll look into the range and why it varies. 

Factoring ARR with quota multipliers

A smaller multiplier, say 3x, often benefits the sales rep and the company when it’s a smaller organization. 

Consider a company that generates $1 million in ARR. A quota that’s set with a 3x multiplier works great in this instance for both the company and the rep. Meaning, the company compensates the rep well for their efforts. Reversely, the rep’s output is worth the company’s investment in the rep. 

For companies pulling $100 million in revenue, however, the 3x multiplier works against the company. 

That’s because a company with $100M ARR likely dedicates substantially more resources to support their reps. Resources could include heavy investments such as a sales development team, sales enablement, marketing, and management. When factoring in these resources, the cost per sale at a larger company climbs significantly than the cost at a smaller one.

Since the cost per sale is larger at a bigger company, the company can’t afford to pay 16 percent of the sale to the AE who closed it. Instead, that 16 percent gets split to the different areas of the biz that helped support the deal, including the rep. Whereas, at a smaller company, the sales rep collects a greater percentage of the deal with often smaller deal sizes.

To recap, a quota with a multiplier of 5x the OTE is what we’ve observed as the SaaS standard. This ratio, or multiplier, usually changes based on a company’s total ARR. Companies with larger ARR invest more in marketing and sales enablement and often have higher multipliers.

So, how can you tell if your ratio serves both the reps and your business revenue model? This is where our Quota:OTE Ratio vs. Sales:Earning Ratio Calculator comes in. 

Introducing the Quota:OTE Ratio Calculator

This is for you — and for free. 

You can use it while building your next compensation plan and setting quotas. Plug in your organization’s numbers into the editable fields, including your ARR at the top. Then, watch our engine determine the ratios, or multipliers, for Quota:OTE and Sales:Earnings. 

Change the numbers and see if you can get both dials into the green. 

The left dial, Quota:OTE Ratio, takes into account your base salary, on-target commissions, OTE, and annual quota. It’s, as Graham calls it, “more pie in the sky.”

The right dial, Sales:Earnings Ratio, is what’s actually happening with your business. 

This ratio factors in the average percentage of your team that reaches their annual quota. Upon filling in the “Average Quota Attainment” field, our engine will break down the total average sales per rep, average commissions earned per rep, and the average total annual earnings per rep. 

“The left side is hypothetical,” Graham said. “The right is the real world.”

When both are in green, this means you’re compensating your team well and they in turn are performing well. 

Behind the colors

You should strive for green on both sides of the Quota:OTE Ratio Calculator. 

However, when your numbers land outside of the green, here are a few scenarios that could indicate. 

If one or both dials are in yellow, this could mean you’re underpaying your reps compared to the revenue they are generating. It could also indicate that quotas are too high or perhaps too low. Or, maybe the business spend per rep outweighs their actual performance. In any case, this is an opportunity to dig deeper and identify the problem. 

Two red dials warn that quotas are too low, OTEs are too high, or your team’s quota attainment is off. If the latter is the case, time to prioritize sales coaching. 

As for when the Quota:OTE side is green and the Sales:Earnings side is yellow or red, this throws up our biggest red flag. In this scenario, you’re advertising unrealistic OTEs. Your OTE has become a false promise because not enough of your reps are actually hitting those numbers. And, when that happens, expect high turnover. 

Questions?

If you have additional questions, check out our FAQs page. Or, for additional resources, check out our Sales Compensation Calculator that includes tips and other support. 

Lastly, to learn how QuotaPath can automate commission tracking, reporting, and payouts, schedule a team to meet our team!

A wonderful challenge shared by startup leaders is that moment of growth when product demand outweighs a sales team’s bandwidth. The demos pile on, and a lean team works diligently to fulfill the requests. Guess what? It’s time to scale your sales team fast.

But for many leaders, ensuring that you have the right people in your seats takes time, as do new hire ramp-ups. And, as we all know, in Startup Land, time is of the essence.

Not sure how to scale a sales team fast? The following tips will help you accelerate your success. Let’s jump in.

Conclusion

To scale a sales team fast, put processes in place, don’t lose sight of coaching and existing customers, and embrace technologies that can make sales easier.

For more on how QuotaPath can help track and automate commissions as you scale your team, schedule a chat with one of our team members.

Look out, world! There’s a new Maxio and QuotaPath integration in town. We’re thrilled to partner with the industry-lauded financial operations platform. 

“Maxio’s partnership with QuotaPath will completely change the way finance and accounting teams calculate and account for the commissions their sales team earns,” said Barrow Hamilton, Chief Product Officer for Maxio.

Now, F&A teams that leverage Maxio and QuotaPath can add the QuotaPath Commissions Connector to fully automate the incentives’ management process. In return, F&A teams should expect about 17 hours a month back on their calendars for not having to do it manually. 

For: Finance and accounting teams

The benefits:

• Say “goodbye” to manual spreadsheets, and say “hello” to more time back
• Avoid awkward conversations with sales reps over paycheck reconciliations
• Quickly and accurately account for expenses from a single system
• Automate commission calculations and accounting
• Stay GAAP compliant with expense recognition

Our Founder and COO Cole Evetts echoed Hamilton’s excitement.

“Our partnership and integration with Maxio represent a huge milestone for QuotaPath,” said Cole. “This allows us to bridge the gap between two massively important steps in the commissions’ process. We’re able to provide a single source of truth that connects sales, operations, and now finance and accounting. Build, automate, and track your team’s commissions in QuotaPath. Then, seamlessly sync to Maxio to utilize their Expense Recognition engine.”

How it works

First, with the QuotaPath Commissions Connector, teams can design custom compensation plans within QuotaPath. Next, add deals within QuotaPath or feed them through a CRM integration via HubSpot, Salesforce, or Close.

Then, when a rep closes a deal, QuotaPath’s platform will recognize the Closed/Won opportunity and move it to a queue for earnings approval. Once the manager approves the deal, it shifts over to QuotaPath’s Payouts function, where the earnings from the deal get scheduled for rep payment.

This step sets off the integration, which syncs the commission data from QuotaPath into Expense Recognition by Maxio. 

From Expense Recognition in Maxio, F&A teams can select how they’d like to account for sales commissions and set up recognition periods. Then the automation kicks in. What follows is ASC-606 compliant accounting of commissions, prepaid expenses, fixed assets, and reseller agreements.

Additionally, F&A teams can lean on Expense Recognition by Maxio to generate reports that break down how each rep is accounted for. They can also consolidate journal entries for the general ledger to stay GAAP compliant.

Cue: chef’s kiss gesture.

Finance and accounting teams, you are the real MVPs. With our new partnership with Maxio, we hope to give you some time back by making it easier and more accurate to account for all earned commissions. 

To learn more, schedule a time to chat with one of our friendly team members.

When companies want to predict how much money they’ll bring in over the coming year, they look to a key business metric called annual recurring revenue (ARR). This metric, lauded by many industry experts as the “SaaS standard,” measures the current health of a company and acts as a predictor of what will happen over the coming year. For SaaS companies that rely heavily on subscriptions, upgrades, and related services, ARR can be a powerful tool.

What is annual recurring revenue?

In many ways, annual recurring revenue is the linchpin of SaaS business metrics. That’s because it indicates how much recurring revenue an organization can expect to bring in. Recurring revenue measures things like money generated via annual software subscriptions or service contracts.

For SaaS companies that offer subscription-based products and service-based upsells, ARR should reflect the combined total of those offerings. Consider a software company offering anti-virus software. In addition to its subscription rate for the software, contracts also include installation, training, and expansion packs for an additional fee. That company’s ARR would include the total cost of those services sold as a bundle.

ARR can also incorporate an organization’s month-to-month subscriptions, but that’s riskier. Since customers can choose to end monthly subscriptions at any time, accounting for those agreements as part of the ARR model could result in a less accurate metric. (That’s why monthly recurring revenue models, or MRR, exist. More about that below.)

How do you calculate annual recurring revenue?

To calculate ARR, first determine the total contract value (TCV) of your software revenue. This number should exclude one-time fees associated with the initial onboarding of that product, such as hardware costs. Then divide the TCV by the number of months of the contract. (This is important because contract terms aren’t always annually but instead might last 18 or 36 months.) Finally, multiply that number (the MRR) by 12 to get the annual recurring revenue for that product or service.

Why use ARR?

Annual recurring revenue measures the amount of money companies are bringing each year thanks to their subscription model. This standardizes contracts to the amount your company earns per year. Total contract value (TCV) is also important, but it can be misleading. A four-year customer contract for $60,000 looks better than a 1-year deal at $20,000 until you really break those numbers down.

Knowing ARR is helpful for:

• Forecasting revenue: First and foremost, ARR tells you how much revenue you can expect given current subscriptions and planned renewals. Comparing ARR year over year can also indicate churn. Knowing whether you have downward momentum can help plan promotions and slow or stop customer loss before it becomes critical.
  
• Increasing revenue: Using ARR as an informative metric delivers insight into customer behavioral patterns. If ARR is lower than desired, you can concentrate on attracting and converting more customers by booking more demos or reframing your value props. (Not to be confused with our Co-Founder and CEO’s podcast Value Props.) Or, you may want to reconsider how you’re pricing subscriptions or what features are included to make the package more attractive.
  
• Decreasing churn: If ARR is plummeting year after year, you’re not bringing in enough subscriptions to counteract customer falloff. Knowledge is power. Use your ARR calculations to fuel new plans to incentivize renewals.
  
• Guiding sales teams: You calculate ARR for the entire company or according to smaller segments such as specific territories, sales teams or individual salespeople. A salesperson who has low ARR may need to be coached on how to close more subscription deals. Or, sales teams may need to focus on capturing a higher percentage of renewals.
  
• Rewarding top performers: Experts have linked employee morale to productivity. Recognizing talent using ARR tells you when it’s time to adjust SaaS commission rates and/or add other perks to keep valuable salespeople happy.
  
• Understanding and shaping overall company health: Is your business performing well? Metrics are one of the few ways to answer this question objectively. ARR can guide everything from creating motivational plans for your sales teams to increasing sales effectiveness.

How does ARR compare to annual contract value (ACV)?

ARR and ACV are often used interchangeably. That’s understandable, as the two metrics are quite similar, especially if a contract is equal to or greater than 12 months. But the information generated has different purposes.

Annual recurring revenue looks at how much revenue all yearly subscriptions will bring in over a 12-month period. Annual contract value, or ACV, measures the value of a customer’s contract. ARR is ARR regardless of the length of the contract. Meaning, a year is always going to be 12 months’ worth of revenue. Even if a customer signs a six-month contract for $6,000, the ARR is $12,000.

However, ACV is calculated by taking the TCV and first dividing it by the number of contracted months. Then multiply that number either by 12 or by the number of months in the agreement (whichever is lower). Using the same example from above, a six-month contract for $6,000 in ACV terms would be $6,000.

Both metrics are vital to SaaS and SaaS organizations should track both to get a full picture of incoming revenue and contract value. ARR is a standalone metric that’s always useful. ACV is most effective paired with other metrics to measure performance, coach sales teams, and inform future sales and marketing strategies.

What are the alternatives to ARR?

ARR has undeniable value as a key SaaS metric, but there are other options too. For some companies focused on monthly recurring revenue or customer acquisition, other metrics may be just as important.

• Monthly recurring revenue (MRR): MRR is similar to ARR but measures recurring revenue on a monthly basis rather than annually. This metric may be more useful to companies focused on monthly subscriptions.
  
• Total contract value (TCV): Total contract value represents the combined value of all customer purchases included in a contract. This metric encompasses recurring revenue and fees as well as any and all one-time charges set to occur throughout the lifetime of the contract.
  
• Annual contract value (ACV): ACV measures the value of a customer contract over one year, regardless of the actual length of the contract.
  
• Non-recurring revenue (NRR): Non-recurring revenue refers to money generated by one-time purchases of products or services. This might be a customer purchasing hardware necessary for initial installation or one-off onboarding services.

ARR is just one of many key sales metrics that are important to track if you’re interested in maximizing the growth of your business. Sound like a lot to manage? Take one thing off your plate by automating your commission tracking.

For more information, see QuotaPath in action.

Some would say things are getting pretty serious between QuotaPath and HubSpot.

After our first integration with HubSpot’s CRM in January 2021 and a HubSpot Ventures investment three months later, we’re ready to take it to the next level.

Today, we are excited to announce that HubSpot and QuotaPath users will now see QuotaPath updates live in HubSpot.

It’s a two-way street, baby!

We created our own custom card in your HubSpot CRM that automatically pulls over your earnings data. And we named the card — wait for it — QuotaPath Earnings.

Through our latest HubSpot enhancement, QuotaPath will provide visibility into every commission opportunity on every deal directly within HubSpot. QuotaPath Workspace admins will see live updates of the earnings on their team’s deals. And, our beloved sales reps, too, have the ability to track their commissions in real time without having to toggle between QuotaPath and HubSpot.

Basically, we made it even easier for your teams to ensure their commissions are up to date across their deals.

Can we get a “heck yeah!”

The best part? HubSpot Sales CRM users who leverage QuotaPath will not have to do anything to set this up.

Seriously. As long as you’re using both platforms, the Earnings card will show up upon clicking into a deal. Does HubSpot know how to make things easy, or what?

At QuotaPath, we recognize that CRMs are the tech stack MVPs of sales organizations. With this new functionality, we hope to empower your teams even more by streamlining workflows, saving time and providing meaningful insights around commissions and compensation.

To learn more about how HubSpot and QuotaPath can elevate your sales organization, set up a quick chat with one of our friendly experts.

Does the perfect compensation plan exist? 

We’ve certainly found some great ones. However, we’ve also seen pretty painful ones. 

For example, comp plans that cap commissions never end well. 

“A cardinal sin for sales reps is sandbagging, which occurs when a rep holds deals this month to earn more money next month. Capped commissions are a major contributor to this behavior,” our Chief of Staff Graham Collins said. 

On the other hand, a simple and consistent comp plan that includes uncapped commissions and allows for reps to make up on lost ground if they miss a month promotes positive sales rep behaviors. Take comp plans that feature monthly quota bonuses. These keep incentives up each month while mitigating sandbagging. 

“The right kind of sales compensation plan will reward desired behaviors and foster more consistent performance on a monthly, quarterly, and yearly basis,” said our CEO and Founder AJ Bruno.

But the impact of a “perfect” comp plan extends well beyond rep behaviors.

“Appropriate sales compensation plans aren’t just the sign of a healthy organization; they’re tools to motivate sales reps and power company-wide growth,” AJ said.

Solid comps have also been linked to higher sales rep retention rates and larger percentages of teams hitting quotas consistently. Plus, a pretty compensation plan attracts new hires, which continues to remain top of mind for any growing sales org. 

Comp plan best practices

AJ’s got a soft spot for the classic 50/50 ratio when the plan assumes bookings versus annual and monthly recurring revenue. 

That means 50 percent of a rep’s on-target earnings (OTE) consist of base salary and 50 percent being variable. A flat percent on anything the rep closes, paired with bonuses for hitting monthly and quarterly bonuses, leads to comp plan bliss. 

This plan is a beaut for its simplicity, consistency, and incentivization of overperformance. 

For more tips to reach that perfect plan, we’ve outlined seven compensation planning best practices. 

1. Align your comp plans to business goals.

First and foremost, “Sales comp is the caboose, not the engine.” That’s our friend Pablo Dominguez’s motto as it pertains to comp plans. The operating partner of sales and customer success for Insight Partners (one of our investors) suggests designing a plan that supports the business strategy. So, start with your company goals, then let that act as a blueprint for your comp plan.

2. Keep it simple.

Another tip, avoid novella-length comp plans. Better yet, fit it on a napkin. If it’s multiple pages, you’ll lose your reps. As a leader, you’ll also find it more difficult to explain. Shorter comp plans connect all parties involved, like RevOps, finance, sales, leadership, and accounting, through a common understanding.

 “Plans should be so simple, that someone could explain it to you in about 15 seconds.”

AJ Bruno, QuotaPath CEO and Co-Founder

3. Set fair and realistic quotas.

Every company wants to shoot for the moon, but when the moon isn’t remotely possible, companies won’t even reach the clouds. 

To set a fair quota, look at your sales teams’ history. What percentage of your team hits quota every time? Anything less than 60 percent indicates too high of a quota. On the flip side, 100 percent attainment suggests your quota is too easy. Try to identify the intersection where ambitious meets achievable. Fair and realistic quotas will drive business goals and keep reps motivated. Whereas the opposite fosters defeat and negativity, which feeds employee attrition. 

Additionally, it’s important to provide an appropriate ramp-up time for new hires. Whether that’s through lower quotas the first three months or draws, align your ramp-up period to your sales cycle. Meaning, if your sales cycle is three months, one month of ramp up won’t cut it. Another way to offer new hires chances to hit quota is by setting commissionable milestones that help them hit the floor running. In practice, this could look like completing workshops, booking meetings, or opening up new opportunities.

4. Introduce comp plans in a timely manner.

Want to get your reps frustrated over their comp plans before they even see them? Delay sharing them with your team well into the new year.

By introducing your comp plans in a timely manner, you’ll establish trust with your reps. Lead a training session with them. Discuss changes and provide the “why.”  Address their questions. Keep it 100. This will build trust and motivate them. 

Extra credit if you can get these finalized, signed, and returned before the new year. A sales kickoff scheduled within the first few weeks of the new year is also a great time for comp plan rollouts.

5. Be transparent about how commissions are calculated and when they are paid. 

Another opportunity to pump transparency into your comp plan is to show how commissions are calculated and when they are paid out. Do reps see their commissions when the customer signs the contract, or is it paid upon the customer’s first payment? Make it clear. Make it consistent, and don’t leave reps wondering when they’ll finally see their sales hit their bank accounts.

Bonus tip: QuotaPath’s platform is a great way to execute on all seven best practices, and especially this one.  

6. Research market OTEs.

Our sixth best practice focuses on OTEs. Base salaries for sales reps are steadily increasing year-over-year. According to the recruiting platform Zippia, national account executive salaries in the U.S. earn an average salary of $95,300 before commissions. That’s a 3.1 percent jump from 2020 to 2021 and marks the largest YoY spike over the past decade.  

So, a lesson to all of us scaling our sales orgs this year, make sure your OTEs rise with industry data. We’d love to say money isn’t everything, but it turns out, money continues to be the biggest reason people leave jobs. 

For tips on how to split salaries and commissions, here are the most common we’ve seen:

• Sales representative OTEs usually consist of 50 percent base and 50 percent commission.
• Lead gen roles may have a higher base and lower commission, like a 60 percent base and 40 percent commission.
• Account managers will often have an even higher percentage of OTE made up of base salary. An example could be 70 percent base and 30 percent commission.
• Enterprise sales reps OTEs with large deal sizes could split between a 40 percent base and 60 percent commission.

7. Conduct ongoing evaluations of comp plans but try to avoid too many changes. 

Lastly, a comp plan shouldn’t remain static, but it also shouldn’t be changed multiple times a year. Continue to evaluate your comp plans. Note what has worked effectively and what hasn’t, and use these updates to shape the next year’s. 

“Too many changes or complications in a short period of time can muddy the waters, obscuring progress toward goals and hurting morale,” AJ said. 

In conclusion, the perfect comp plan exists for your business, but it’ll take research, experimentation, and evaluation to get there. When you drum up the perfect plan fitted for your business, expect to see happier reps and a healthier sales org. 

Sales team members are among the “most stressed” workers in the corporate world, according to a 2021 survey. This results in a continuous strain on their mental health.

Sales Health Alliance and UNCrushed, two organizations dedicated to improving sales mental health, collected responses from 770 participants for the survey. They found that more than 40 percent of salespeople reported struggling with their mental health. The data also indicated a correlation between mental health and hitting sales targets. Meaning, the worse the sales reps felt the further they were from achieving quota.

“Sales can be pretty cutthroat,” said UNCrushed CEO and Co-founder Tim Clarke. “There’s this added pressure of hitting your number on top of looking after yourself, family, and loved ones.”

Clarke would know. 

The senior marketing director at Salesforce spent seven lucrative, stress-filled years in sales before transitioning to marketing. During this time, Clarke’s father died suddenly in 2013. Grappling with how to process his grief, Clarke went down a dangerous, drug-fueled path. 

“The expectation in the corporate workplace is that when you lose someone, you take a few days off for bereavement. Then you’re meant to come back feeling fine,” Clarke said. 

“I got sober that year.”

Tim Clarke

But upon returning to work, Clarke wasn’t fine. He turned to anything he thought would help him feel better, including drugs and alcohol. Four years and an overdose later, Clarke recognized that he needed professional help and sobriety. 

Now, he wants to share his experience, and that includes at the office.

As part of his ongoing recovery journey, Clake has committed to bringing his full, authentic self to work. He hopes to inspire others to be more honest and open about their personal lives and encourage work environments to create safe spaces for such discussions.

“Individuals want to work for an employer that allows them to speak openly about themselves and their challenges,” Clarke said. “In 2017, I thought I was the only person experiencing my problems. If someone had told me that they had also gone through something similar, I probably would’ve gotten help sooner.”

Fostering an open environment that values employee wellbeing is especially relevant today when one in five adults has reported experiencing a mental illness. Furthermore, burnout has reached an all-time high, with nearly 80 percent of US workers reporting concerns over their mental health.

As the “War on Talent” lives on, and job seekers continue to gravitate toward sales organizations that prioritize mental health, Clarke shared what leaders can do to best support their teams.  

Q&A with Tim Clarke

What are some immediate changes sales leaders can adopt to impact mental health?

Clarke:  Everyone can work on their listening skills. Sometimes people don’t spot the warning signs that someone is struggling, such as showing up late to meetings or inconsistencies in their work. People want to be seen, and they want to be heard. I encourage leaders to ask “Are you okay?” not once — but twice. This gives that person time to go a little deeper because it’s very easy to just say everything is okay when it’s not. 

The traffic light system is also a great way to start a one-on-one or team meeting by asking where they’re at right now through the colors of a traffic light. Their responses of red, amber, or green will give you a sense of how each person is feeling. 

Lastly, leading with vulnerability creates a space for others to be vulnerable. When I share my story with someone at work and they resonate with it, it builds a personal connection between us. Then we can navigate our challenges together. 

What can sales reps do to prioritize their mental health?

Establish boundaries. With so many of us working from home, everything blurs into one, and it becomes difficult to have separation. I block out a full hour for lunch every day on my calendar. I’ll still take meetings during this time, but it’s my choice when I do. 

At the company level, what should organizations be thinking about as it pertains to mental health?

Companies think that providing mental health benefits is the answer, but it’s only part of it. So many organizations that offer employee assistance programs discover that their employees don’t feel comfortable using them out of fear of leadership finding out. 

It really comes down to understanding what your employees want and need. Is it a week when the entire company shuts down so employees can recharge? Is it no-meeting Fridays or employee resource groups? It could be a variety of things, so the first step is to listen, learn the problems, and understand what they want. 

How can sales professionals who are struggling with their mental health leverage UNCrushed for help?

In three years, we’ve curated 150 personal stories that cover the whole spectrum of mental illness, such as addiction, grief, and trauma. Each one is tagged so that our readers can easily locate topics pertaining to their own experiences. We make sure that every story includes solutions. Additionally, we have free online mental health screenings available and a detailed resources page. We want to help people move from the darkness to the light. 

Hint: All of them.

QuotaPath’s Comp Plan Builder tool supports all comp plans.

Want to build a comp plan from scratch or borrow some of our most commonly used templates? Comp Plan Builder can help.

The tool includes a free library of 13 widely adopted templates and a create-your-own option. To access the tool, create your first Workspace or log into your existing one. From there, select “Plans” on the left-side toolbar. Then in the top right, hit “Add Plan.” 

Great work!

Once you’ve completed the plan, you can share and adjust as needed. Then, layer multiple components into a single plan and create Paths for each one. These Paths can represent quota, a one-time spiff, a monthly bonus, or more. Comp Plan Builder can also incorporate bonuses, accelerators and multi-year agreements.

It gets even better with our Official Plan subscription. Upon upgrading, you can design a plan, assign it to members within your QuotaPath Workspace, lock it for admin control, set team goals and so forth.

We’re ready for you to start your 2022 comp plan in QuotaPath!

Below, we’ve highlighted some of the most commonly used templates. Still have questions on comp planning? Reach out to our Chief of Staff Graham Collins to build a plan fit for your business.

Sales Representative Comp Planning Templates

First, we offer four compensation plan templates to support sales representative roles. This includes account executives, enterprise account executives, senior account executives, sales executives, and sales reps.

• Single Rate Commission: If you get paid a single commission rate on every single deal
• Commission With Accelerators: If you get paid a different commission rate depending on quota attainment
• Commission With Bonuses: If you earn a commission on every deal you close and a bonus upon hitting quota
• Commission With Multi-year Accelerators: If you earn a commission on every deal closed that varies depending on the length of the contract

Sales Leader Comp Planning Templates

For sales managers, VP of sales, director of sales, head of sales, and chief revenue officer, we recommend the following four templates.

• Team-based Commission: If you get paid a single commission rate on every deal your team closes
• Team-based Commission With Accelerators: If you get paid a different commission rate on deals your team closes depending on your quota attainment
• Team-based Commission with Bonuses: If you earn a commission on deals your team closes and a bonus once you hit your quota

Sales Development Representative (SDR) Comp Planning Templates

We offer the following three templates to support compensation planning for sales development reps (SDRs), business development reps (BDRs), market development reps, and account development reps.

• Activity-based: If you get paid based on how much activity you do, like demos set, qualified opportunities created, or cold calls made
• Revenue-based: If you get paid a commission on the opportunities you create that close.
• Activity and revenue-based: If you get paid on both activity and revenue generated.

Account Management and Customer Success Comp Planning Templates

Lastly, if your organization compensates account managers, account supervisors, client managers, and customer success managers, QuotaPath has you covered. Here are three templates to work from.

• Retention-based Commission: If you earn a commission on accounts you renew
• Retention and Upsell Bonus: If you earn a bonus on accounts you renew and accounts you upsell
• Retention-based Bonus: If you get paid a bonus on every account you renew

If none of these fit what you’re looking for, remember you can build your own within our tool. And for additional comp plan best practices, check out this article. Happy comp planning!

Our QuotaPath team has safely returned from California and is eager to share their wins. Here, we recap SaaStr 2021.

“I didn’t have any expectations going in, but it was clear as soon as we arrived that the energy was ramped up ten times, ”said AJ Bruno, QuotaPath CEO and Co-founder. 

For many of the 5,000 attendees, and for our nine team members, SaaStr 2021 marked everyone’s first conference since the pandemic had begun.

“SaaStr’s event team did a great job with COVID-19 protocols,” AJ said. “Lines and signage were clear, and the messaging of the event was very relatable to current times.”

The overall vibe undulated between upbeat and optimistic. For instance, signage throughout the outdoor venue turned away attendees if they had symptoms of COVID-19, racism, and homophobia. Additionally, an event DJ complemented keynote addresses and booth visitors with an ongoing set of catchy jams. 

So, QuotaPath met SaaStr with open arms, and we’re happy to report that SaaStr attendees returned the love.

“We had a weird, low-key buzz about us,” AJ said. “People would visit our booth and mention how they heard our name four times that day.”

A myriad of conversations followed regarding the challenges of paying sales commissions properly. 

“Every time I introduced someone to QuotaPath, they said they’ve had this exact problem,” AJ said, who addressed a large crowd on the second day about how to grow a sales team.

By the end, our team had conducted more than 30 formal demos on sight while setting up more than 150 follow-ups since the event. We also treated attendees to printable custom avatar stickers, thanks to the work from our talented marketing engineering team. 

As COO and Co-founder Cole Evetts put it: The QuotaPath hype is real.

“We have a ton of opportunities ahead of us, and we couldn’t be more excited!” Cole said. 

To close out the event, we asked AJ to share his key observations from SaaStr 2021.

Meeting people in person reigns supreme

The pandemic forced a handful of introductions to be conducted virtually. Many of us adapted and made it work out of lack of other options. 

For instance, AJ met Gradient Ventures investor Asif Moosani for the first time over a conference call during quarantine. They have continued bi-weekly meetings in a virtual setting ever since. 

At SaaStr, they finally got to shake hands.

“It’s so good to meet people in person again,” AJ said. “The conversations from the past year become a lot more real and you’re able to make a better connection.”

Product-led growth is not a new concept

Product-led growth (PLG) conversations dominated the conference. But for the right reasons? 

AJ said he noticed a wild amount of PLG talk, with speakers leveraging it as a buzzword as if it’s a new concept. Quite the contrary. 

“It’s not a new trend,” said Shawn Herring, PandaDoc’s VP of marketing, in a recent Forbes article. “For some years now, people have been doing their own research long before they engage with sales.”

AJ, who has studied PLG for three years, also got the impression that the SaaStr speakers highlighting it didn’t actually come from PLG companies and seemed to not fully understand it.

“When I talk about QuotaPath, I won’t even say it’s product-led, because we started as a customer-led company, first and foremost,” AJ said. “That allows us to focus on the end user, the time to value, and how quickly we can onboard.”

Practice makes perfect

Lastly, the vast amount of virtual events set public speakers back a bit. With the return of in-person conferences, it’s time for people to re-up their public speaking skills. 

AJ said he observed several panelists responding directly and only to moderators.

“It felt like they were still on Zoom calls,” AJ said, adding that speaker mannerisms, in general, felt “off.”

This resulted in a lack of connection between the speakers and the audience, a key characteristic of effective public speaking. 

The next SaaStr event is slated for this summer. In preparation, let’s all take a public speaking refresh and deliver engaging content that keeps a crowd hungry for more.

We plan to return. Are you? 

In 2018, QuotaPath attended our first SaaStr event, a marquee SaaS affair in the Bay Area featuring thousands of founders, VCs and executives.

And by QuotaPath, we mean our co-founders, AJ Bruno and Cole Evetts, who at the time had just launched our commission tracking platform. 

Well, we’re back. And this time we’re bringing a whole crew to SaaStr 2021!

That’s right, seven Navigators will join AJ and Cole at this year’s event, including our VP of Marketing Carrie Fisher, Chief of Staff Graham Collins, and Director of Product Andy Keil. We’re even welcoming our first VP of Sales and Customer Success Caroline Tarpey to the team at SaaStr!

It’ll mark our first in-person event in 2021 and it’s shaping up to be the Bay Area’s largest in-person tech event since early 2020. Also, did you hear it’s entirely outdoors? 

Quite frankly, we are psyched! 

We’ve grown so much since our last SaaStr event and look forward to returning with gusto. For instance, in three years, our team has scaled to 40 people. We’ve opened offices in Austin and Philadelphia, both of which we’re quickly outgrowing. We’ve raised $21.3M in funding. We’ve onboarded thousands of users and added compensation management and finance and accounting team payouts to our product.

So, to commemorate this occasion, we’ve set up some special experiences for SaaStr attendees.

First, members of our team will be schmoozing all three days at our booth, No. 304. Find us near the registration office. Those who visit will get an intro to our easily implementable compensation solution. Plus you’ll get the chance to create something truly unique to take home. Pics and videos on our LinkedIn and Twitter profiles to come, so give us a follow!

Then, on Tuesday, Sept. 28, AJ will speak to his experiences growing high growth sales teams. He’ll cover topics on every startup founder’s mind, such as making the first sales hire, the founder’s role in sales hiring, and how to build successful comp plans. If you can’t wait for our recap and need immediate help shaping your 2022 comp plans, did you know you can book a consultation with Graham? 

Lastly, we’ll be squeezing in some face-to-face with our incredible customers and partners, and potential new ones, too. 

Will you be there? Let us know on social, stop by our booth, and say “hi” to our dream team of Navigators.