Compensating Sales People in the Expansion Stage
At Openview Venture Partners we invest in expansion stage software companies. This means that the sales team is generally small and they have a very unstructured compensation plan. Many of the sales people are being paid a percentage of the dollar of closed sales and do not have specific targets or quotas.
We typically engage with hot companies, hot technologies, and great market economics so the sales representative is usually successful and making a nice living for themselves.
The question is “can this way of compensating sales continue and scale forward”?
I don’t think so. It works well when getting started, no question. However, when you move into hyper growth with aggressive targets against building a big company with big revenues, a sales team without quotas or a simple structured plan scales slowly.
My suggestions are:
1. Get to Quotas quickly
Great sales people love attainable quotas. They strive for achievement and will last far longer in your organization than those without them. Even if they are making more money!
2. Put a $ on quota attainment
Don’t just assign a percentage against closed dollars. Take a percentage of the agreed upon compensation package and reward the attainment. I suggest monthly versus quarterly targets if possible. It encourages over achievement (NOW) and eliminates sand bagging.
3. Make the over achievement compensation worth something
In the expansion stage, over-achievement is king. It will encourage a killer instinct and will make people want to work in your company. The key is to really think through the quotas and the fact that they are attainable.
4. If people are hitting quotas and the economic model works….DON’T INCREASE THEM!!
I have seen many companies continue to increase quotas to unattainable numbers. Guess what happens then?
These are just a few tips….there are more and I will add to these soon!