A Quick & Easy Compensation Calculator for Outbound Lead Generation

May 29, 2013

In one of my previous posts I covered three key concepts of outbound lead generation compensation plans:

  1. The Cap
  2. The Cliff
  3. Incremental Pay Out

I wrote those three concepts as a follow-on to a great article from Anneke Seley of RealityWorks, which covered some fantastic high-level tips for designing compensation plans for lead generation reps. If you haven’t read that article, I recommend doing so before continuing on.
In addition to the three concepts I covered there, I wanted provide some more specific guidance on how to build a compensation plan for your outbound team. Below, I’ve also included a very basic compensation plan calculator for outbound lead generation that you can use to build your own.

4 Questions to Answer Before Building Your Sales Compensation Plan

To build a solid compensation plan for your outbound lead generation reps you must be able to answer the following:

  • What are the right metrics to tie incentives / bonuses to?
  • What are the goals for those metrics?
  • What is your rep’s total incentive compensation target?
  • How much of the rep’s bonus should you allocate to each metric?

If you haven’t already established goals for your outbound lead generation team, take a look at this blog post on how to establish those goals. I will also be happy to send the template from that post if you leave a comment.

A Quick & Easy Sales Compensation Calculator for Your Lead Generation Reps

The image of the calculator below shows you the calculations and payouts for your outbound lead generation compensation plan based on the inputs in the yellow boxes. Below the image there is a more detailed explanation of how to answer the questions above. The answers will give you the inputs for the calculator.
Sales Compensation Calculator for Outbound Lead Generation

1. What are the right metrics to tie incentives/bonuses to?

  • For outbound lead generation reps the two key factors that you want to incentivize with the compensation plan are the quantity of the appointments and the quality of those appointments. So, the two most important metrics to incentivize are number of appointments and the number of opportunities (good appointments that turn into pipeline).
  • A third metric that should never account for more than 10% of the total target bonus is bookings generated from the appointments set by the lead generation rep.
  • Note that the corresponding goal for the commission component of the compensation plan is the “bookings generated.” You should be able to estimate how many bookings one rep can generate if they are on plan using the sales activity funnel template.

2. What are their goals for those metrics?

  • Goals for outbound lead generation teams vary based on industry, product markets, average deals size, and sales cycle complexity (among other things).
  • Using historical data to establish the goals for your team is the best practice. However, in the absence of historical data, you can use industry benchmarks to estimate conversion rates, and plug those numbers into the sales activity funnel template to get to the right goals for your own team.
  • The Outbound Index is a great benchmark established by The Bridge Group and AG SalesWorks.

3. What is your rep’s total incentive compensation target?

  • In Anneke’s article, she mentioned that the incentive pay should account for roughly 40% of the rep’s total compensation. In my experience, any more than that and it will be tough to find good talent if you are in a competitive market.
  • For example, if the total annual target earnings for the position are $65k, then the base should be $39k with an incentive of $26k.

4. How much of the rep’s bonus should you allocate to each metric?

  • This is a critical step. It is important to keep the majority of the weight on the appointments, because that is the primary objective of the team. At the same time, incentivizing reps to generate opportunities that need to be accepted by a sales rep in order to get credit will help ensure that they aren’t just sending junk over the fence.
  • Finally, tying a small portion of the compensation plan (no more than 10%) to the total bookings that the reps generate helps keep them tied closely to the sales team and aware they are making a real impact on the business.

The output of the calculator looks like this, and can be copied and pasted directly on to your paper work:
outbound lead generation rep compensation plan

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VP, Sales

Ori Yankelev is Vice President, Sales at <a href="">Own Backup</a>. He was previously a Sales and Marketing Associate for OpenView.