What Should You Be Paying?

You’re an expansion stage start-up and you just got a ton of money from an amazing venture capital fund. Since you have a great product and you are ready to take it to the next level, it’s now time to focus on scaling a business. More often than not, you do this by bolstering up the sales team. We all know that commissions are the bread and butter of every successful salesperson’s earnings. So stick with that! But when you make the offer, it’s critical to remember not to under or overpay.

If you make a low offer, don’t pat yourself on the back too soon. Sure you saved the company some money, but it’s only a matter of time before that salesperson realizes he/she is getting the shaft and looks for a better opportunity elsewhere. If you make an offer that’s too high, then you might be blowing through funds that the company could have used toward something else like product development, a new office space, etc.

Think I’m being dramatic? Think about this then. In Boston, the average inside sales representative with 2 years of experience in a small (50 employees) software company makes a $35,000 base and $10,000 in commissions. Let’s say you give in to their higher demands during a negotiation and agree to pay $50,000. Do that with one more hire and you’ve exceeded your budget so far by $30,000. That’s almost enough to hire another rep! You’ve lost the company one full-time employee in future headcount and here you are trying to scale the business.

But they were worth it, you protest. How do you really know? All you did was interview them. Why not let them prove themselves on the job first? If they kill it, then you can show your appreciation with a nice bump in pay. That way, you didn’t jump the gun and needlessly harm the budget. Furthermore, the employee feels valued and will probably stay with the company even longer!

In the grand scheme of things, there are resources out there to help you get an idea of what are low, high, and competitive pay ranges. Be competitive! And by that I mean offer a minimum of the market average (50th percentile mark), but in the interest of keeping your company afloat during this scaling period, try not to go past the 75th percentile mark. Sure if you come across a rock star, you want to pay them more, but just don’t go crazy.

So where does this candidate or that candidate fall between thr 50th and 75th percentile? Use your best judgment. You are the manager after all … aren’t you?