How to design a good SDR commission plan

Any company in the process of hiring its first sales reps will agree about the challenge of developing a good commission structure.

The existence of this detailed structure wasn’t so necessary when the founders themselves were in charge of the sales; however, when this new member joins the sales team, it’s essential to introduce an effective commission plan.

As obvious as it may seem, the remuneration will be composed of a fixed part (base salary) and a variable part (a percentage). Faced with the controversial topic of commissions, it must be adjusted to several factors:

1. Monetary value of the sale (deal)

2. Target Market (range of companies prospected)

3. Existence of Gatekeepers (difficulty in accessing the decision maker)

4. Market maturity (existence of established competitors)

5. Duration of the sales cycle (weeks or months).

Once we have analysed all this, we will then need to adjust the variable part of the salary based on trial and error as the SDR closes meetings.

In order to bring the most out of this situation, we must be honest with the SDR we want to hire and to have a collaborative attitude on both sides. It’s a good idea to explain to this new rep that we want to find the best way to create a commission plan not only for him or her, but for all future SDRs. Thus, if the SDR wants to maximize its profit, our company will not be the right place. Nonetheless, if the rep wants to get involved, learn and really grow, this will be the ideal place (working hand by hand with the founders or senior positions of the startup).

Once we have our final commission structure, we may need to change it substantially over time. But beware, it’s important to always do so in a justified and logical way! For instance, we may realize that it’s better to compensate meetings by the quality of their opportunities and not by quantity (it’s especially important to generate quality opportunities in the initial stage of a company). On the contrary, we should avoid doing it dishonestly simply because we want to pay less to our employees (as you may imagine, this can have serious consequences).

Despite everything, if we have a lot of problems finding a suitable commission structure, we can always contact The SaaS Institute. Based on the experience and specialization of their consulting services, they will analyse all the points discussed to develop a detailed plan to suit each company.

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