Basic treatise about sales force structure and compensation - mostly relating to the tech industry

1. This presentation is made possible by the support of the American People through the United States Agency
for International Development (USAID). The contents of this presentation are the sole responsibility of Rick
Rasmussen and do not necessarily reflect the views of USAID or the United States Government.
Sales Force Structure and
Compensation

2. Hiring a Sales Team
• Sales people are different creatures
• Motivation through compensation
• Top performing sales people are often
the highest paid –even above the CEO

3. Building a Sales Organization
• CEO must be the first sales person
• If you can’t sell, you don’t believe and you don’t
belong
• Do not hire the first sales person too soon
• Understand your own story and sales
methodology first..!

4. Sales type: Gladiators
• Solo hunters
• They go away, don’t check-in
frequently, bring back customers
having sold “the product”

5. The Professional Salesperson
• Usually trained at a big
company
• Require support staff to
succeed
• Good at taking orders &
building relationships
• Expensive

6. Timing
You will need different sales people at different
stages
Bootstrap seed series A series B series C exit

7. Scaling the Business
Search for Product/Market Fit
Search for Repeatable & Scalable
Sales Model
Conserve Cash Invest Aggressively
Scaling your Sales Force

8. What’s the blocker to faster growth?
• Usually it is the rate at which you can grow leads
– Typically each lead source maxes out
– Adding new lead sources often means paying more per lead
Source C
Source B
Source A
Leads
Time
• Another blocker:
– The rate at which you can hire and train really high quality sales people

9. Sales Force Considerations
• Market Type
– Existing
– Resegmented
– New
• Customer Engagement Type
– B2B
– B2C
– B2B2C

10. Sales and Marketing
• B2B
– Professional Connection
– Limited to direct contacts
– Sales motivated by direct connection
• B2C
– Virality, Customer Accrual, Churn, CAC<CLV
• B2B2C
– Day in the Life
– Teach and Educate

11. Types of Sales Forces
• Direct:
– Employed or contracted sales people (common in B2B)
– Your own web or other direct channnel (common in B2C)
– You directly interact, get contracts and collect monies
• Indirect:
– Distributors, VARs, Resellers,
Manufacturers Representatives (Reps), etc (B2B)
– Referral sites, affiliate sales, marketplaces (B2C)
– You dictate terms, someone or something else interacts with
customer. Either one may collect the money
– Managing a sales channel

12. Multi-channel sales force
VP Sales
Direct Sales
Region 1
Region 2
Region n
Channel
Sales
VARs and
Resellers
Distributors
Reps
Online Sales
Site creation
and testing
Customer
service
Customer
Admin

13. B2C Direct to Consumer
• Masses
• Rise above Noise
• Press, Blogs, Virality, Top 25 lists
• SEO/SEM
• PPC/CPC
• Free/Ad, Free/Upgrade, Freemium, Pay one time,
Pay subscription, Upgrades, Discounts

14. B2B and B2G
• Seen in high-ticket and/or long sales cycle businesses
• Direct sales people work directly for company
• Customer Behavior
– Selection by committee
– Risk averse
– Technical or service details to work through
– Higher cost of switching: Willing to strike long term relationships
• Sales person requirements
– Patience
– Professionalism
– Flexibility
– Service mentality

15. Setting a sales compensation plan
• Define Desired Outcomes
• Pre-Revenue:
– Pre-sales activities based on KPIs
– Objective: number of calls to target customers
• Once revenue is achievable:
– Revenues
– Margins
• Determine quotas
• Construct on-target-earnings (OTE) per role

16. What to measure?
• Bookings: An order being placed with the company
– Pluses: Incentivizes placement of orders, the one thing that sales has
control over
– Minuses: Subject to abuse. Adjustments for cancellations and returns
• Billings: An order that has been fulfilled and invoice sent to
customer
– Pluses: Incentivizes delivery to customer, sales works with factory
– Minuses: Adjustments for returns, non-collection
• Collections: Money received by company for orders shipped
– Pluses: Advantage to company, minimizes cash float
– Minuses: Sales force may not be paid for weeks or months. Customer
may not pay for non-performance, outside of sales control
• Other KPI: Meetings, Reports, etc. Useful when starting up.

17. Commission Structures
• Salary only
• Salary + Bonus (KPI)
• Salary + Commission
• Minimum Wage + Commission
• Commission only depending on situation
• Commission curves
• Setting commission % depends on the product, your margins, expected
volume, length of sales cycle, etc.
• All these variables get thrown in and you try to come up with enough $ for
the sales person to make it interesting.
• A part time person will probably want to see at least $3K to
$7.5K/month. Below that, it’s not very exciting. Full time, expect $5K to
$10K with upside potential for someone with prior experience in your
sector.

18. Quota-based plans
• Setting a variable compensation plan and paying out against
performance to that plan
• Two elements:
– “On-Target-Earning which is the equivalent to a standard salary for the grade
level of the sales person
– Quota, the expected amount of sales that person is to bring in
• Multiplier: Quota divided by OTE
– To earn one dollar, they must bring in X dollars
• Example:
– OTE of $60K, Quota of $1.2M has a multiplier of 20
– Cost of sales is therefore 5% of revenues (not counting
overhead)

19. Linear Sales Plan
Sales
Compensation
Base
Multiplier
Quota

20. Accelerators, Decelerators
• Beyond quota, “accelerators” provide motivation
– if the commission rate on performance up to quota level is 5%,
– 6% for 101% to 115% attainment and
– 8% for 116% and above
– always uncapped…

21. Up to an Amount
Used when capacity of product or service is limited
Often reset when new capacity comes online
Sales
Compensation
Base
Multiplier
Quota

22. Accelerated Pay Scale
Used to motivate your top performers achieve maximum results
Sales
Compensation
Base
Multiplier
Quota

23. Common Early-Stage Comp Structures

24. Summary
• Sales compensation can be an effective strategic tool
• Set your goals and design a program that steers your
sales force in the right direction
• It’s OK to do a mid-course correction for the year.
– Up is better than down.