Todd Busler’s Post

If you’re an early stage startup between $250k-$1.5M/ARR, here’s how you comp your first sales hire: BACKGROUND Early stage comp plans during ZIPR were insane. $300-400k OTEs with effective quotas of $250-400k/year were not uncommon. This was driven by companies raising gobs of capital AND trying to compete with mature companies offering generous ramp times, draws, and big OTEs. It’s a tricky situation for early founders. Founders don’t yet have the sales yield where a rep can bring in 5-6x their OTE in bookings. Yet, they still need to bring in top talent and pay close to market rate to attract them. So what do you do? Here's how I would structure the first comp plan (shoutout Jason M. Lemkin): The rep doesn’t get paid commission until they pay for themselves. Once they pay for themselves in terms of base salary, they start getting a hefty commission rate with accelerators. EXAMPLE: Market rate for the type of a rep you need is ~$180k OTE or $90k/year base ($7.5k/mo). They do not make any commission until they close their first $7.5k/mo or $22.5k/quarter. Once they go above that, they make a flat commission of all deals of 18% (this rate is based on rough goal of what you think is possible + getting right around the market rate). Assuming they can sell ~$600k/year (based on real historicals, not out of whack expectations based on other markets/companies), then they would end up making: $90k base $108k variable $198k total Equity should be a part of this plan but most early reps are joining for cash upside more than anything else. WHY I LIKE THIS PLAN: It gives sellers a lot of upside – the best AEs know they should be able to maximize the revenue from each new lead or opportunity It’s simple – complex comp plans are dangerous and ripe for gaming You attract the right type of talent – ones that want to bet on themselves and see the upside in closing the next big deal, having the biggest quarter, etc. WHAT TO DO IF THE REP START CRUSHING IT: The CEO of Qualtrics said he had 25 year olds making $500k/yr selling Qualtrics from his basement. They raised no money at the time so it was more evenly distributed toward variable comp. The 4th and 5th rep are taking less risk and it should be much easier to sell with proven customers, reputable logos, and a bit of awareness. It’s completely reasonable for them to get a smaller % of every deal. What I’ve found is that you can use equity to get people aligned to long term goals while continuing to make a lot of cash. The best reps realize they can make a lot of money over time OR you get them into a management track with more equity and less cash upside. TAKEAWAY: The market has adjusted back to reality. There are still deeply funded and extremely profitable companies that are hard to compete with. A straight forward, variable heavy plan with a lot of upside will attracts the right sales talent. Then, do everything humanly possible to keep them drowning in pipeline and excited.