Inside sales compensation plans might not—at first—seem like the sexiest topic. But I have news for you: awesome sales comp plans can actually be the secret sauce to not only hiring great reps, but motivating them to peak performance. We recently participated in a webinar covering how to create and implement inside sales compensation plans that drive powerful results. The webinar is packed with tips that can help you create more effective sales comp plans.
Keep it Simple for SDRs
The webinar kicked off with a fantastic presentation from OpenView Partners’ Sales Strategist CeCe Bazar on how to structure comp plans for sales development reps (SDRs). CeCe routinely helps OpenView’s portfolio companies optimize their compensation plans to drive killer results. When it comes to comp plans for SDRs CeCe advises keeping it simple. SDRs are usually millennials who are taking their first or second job after college. If compensation plans are too complex, it might easily seem confusing or overwhelming.
For simplicity’s sake, CeCe recommends separating comp plans into three sections:
Base: The regular amount that reps see in their paychecks that is unaffected by performance
Bonus: The additional amount reps receive based on meeting various goals.
Kicker: Any additional bonus that is tied to closed won deals or competition
In addition to simplicity, CeCe emphasized the importance of structure. According to CeCe, for many millennials, “downtime is scary.” She recommends offering more structure by measuring both activities (e.g. calls and emaills) and outcomes (e.g. appointments, opportunities and wins). Strong activity goals are something that can keep your sales team active and focused. Later in the webinar, our CEO Howard Brown offered some awesome ways to measure reps’ activities against goals in Salesforce dashboards.
The 40/60 Rule for Bonuses
Several of OpenView’s portfolio companies are using a 40/60 rule when it comes to SDRs’ bonuses. 40% of their bonus is tied to appointments, while 60% is tied to opportunities. I like this rule because it prevents reps from setting appointments with unqualified prospects just to hit an appointment quota. Rewarding SDRs with a kicker for opps that close is another great way to motivate SDRs to source quality opportunities.
OTE Breakdown: Base Vs. Bonus
So what’s the best way to set on-target earnings in comp plans? It’s important for many reps (especially younger, unseasoned ones) to be able to rely on a regular salary in order to pay their bills. CeCe Bazar therefore recommends a plan that is weighted toward the base: 70% base and 30% bonus. More seasoned inside sales reps and managers, on the other hand, may prefer a salary with less of a base and a bigger bonus. When hiring account executives, this is always an important conversation to have.
SDR Comp Plan Example
So tying it all together, for a newly hired SDR, a comp plan may break down like this monthly:
Base Monthly Salary: $2K
Potential Bonus: $1K Monthly Payout
Goals: 16 Appointments, 8 Opportunities
Payout: $25 per appointment and $75 per opportunity
For a LOT more insight into structuring sales compensation plans, check out our sales compensation eBook!