Dear SaaStr: How Should I Design a Sales Reps Compensation Plan at Just $10k MRR?
Figuring out your very first sales comp plan when you don’t have a repeatable process or much revenue is confusing.
I was exactly in the place you were (first rep at $10k MRR) and everyone faces some similar challenges:
- There’s no way this early you can expect a rep to hit a “standard” quota of $600k, $800k, whatever when the company is so early.
but
- You don’t have the capital to invest here … the rep has to be accretive. And
- The business model does have to work.
So in the end, one way or another, most of us split the difference with some sort of step-function in quota.
I like having “new initiatives” (like this first rep) just cover their costs at first.
So one way to structure this is in the first 3 months, the AE has to cover his costs to hit OTE. I.e., here, her OTE is $120k, or $10k a month. So in the first 3 months, if she closes $10k a month in bookings/ACV, she hits her OTE and makes $10k. This isn’t profitable for the company, and maybe even she doesn’t cover her fully-burdened costs … but at least she’s covering her base costs.
Then, everyone gains confidence. You finally have someone that can close beside the CEO.
After those 3 months, you gradually step it up to a full quota over the following 3 or maybe even 6 months. So she has to hit $600k or $800k annualized or whatever the right quota is given your ACV and particulars (at $20k ACV today, a $600-$800k quota is very achievable — once you are at scale).
After your first few reps, you don’t need this intro period where they just cover their costs anymore to hit full bonus.
Until … you enter a brand new space, a new initiative.
Then try it again (e.g., a new market, a new vertical, etc).
A bit more and a deeper dive here:
