Quick Access:
- Reverse Engineer Your Sales Compensation
- Components of the Sales Compensation Equation
- Advanced Strategies for Sales Compensation
- OTE split depending on sales roles
- Example from Business Operations Network with Formulas
- Benchmarks
- Uptoo - Études des Salaires 2024 (🇫🇷)
- Balderton - B2B Sales Playbook (🇺🇸 / 🇪🇺)
- Iconiq Growth - Sales Compensation Guide (🇺🇸)
- Figures - Sales Compensation Structures in Europe Report (🇪🇺)
- Winning By Design - Compensation for SaaS sales organizations (🇺🇸)
- Aircall - The Perfect SaaS B2B Sales Compensation Model
Reverse Engineer Your Sales Compensation
A successful sales strategy encompasses both financial management and field execution. Understanding the inner workings of your sales operation (i.e. SQL, PLG, and MQL) provides insights into the levers you can adjust to drive results.
In essence, it's like adjusting the settings on a machine to reach specific goals. You can either set quotas first and adjust salaries accordingly or use existing salary benchmarks to establish quotas.
For example, if you take a Junior AE:
- Quota (Target ARR) = €500k
- OTE using the rule of thumb would be €100k
- Assuming a commission rate of 10%, the variable component would be €50k
Given these parameters, the breakdown of the OTE components would be:
- Junior AE compensation = €50k (fix) + €50k (variable)
Components of the Sales Compensation Equation
- On-target earnings (OTE): OTE is the total earnings a seller can achieve by meeting targets, combining base salary and variable compensation, typically calculated annually.
- Base salary: Fixed earnings irrespective of performance.
- Variable compensation: Additional earnings based on performance, including commissions, bonuses, etc. Usually ~50% of OTE for an account executive, but varies across GTM roles.
- Quota: Performance target set individually or company-wide, tied to metrics (ex: monthly recurring revenue, annual recurring revenue, new bookings, sales qualified opportunities, number of new customers)
- Quota attainment: Measure of achieved quota by the end of a period, typically 50-60% for ramped reps.
- Quota to OTE ratio: This ratio indicates the potential ROI of a sales representative. The common guideline across the ecosystem is to aim for a 5:1 ratio, with a range of 5x-7x.
Advanced Strategies for Sales Compensation
Acceleration Mechanism: This mechanism motivates sales teams to exceed their quotas by offering greater rewards for surpassing targets. It's highly effective for improving performance and is typically applied on a quarterly basis.
Compensation Caps: These are implemented to avoid letting large deals disproportionately influence compensation structures, particularly when using acceleration mechanisms.
Clawback Policy: This involves retroactively reducing compensation if a customer churns quickly or fails to pay invoices, thereby mitigating the company's risk.
OTE split depending on sales roles
Role | Fixed Salary / Variable Comp (% of total comp) | Performance Indicators | Performance Indicator Weighting (examples) | Additional Notes |
SDR/BDR | 70-80% / 20-30% | - € per appointment set
- % of revenue generated per prospect | - Sales cycle < 1 month: 50/50%
- Sales cycle 1-4 months: 70/30%
- Sales cycle > 4 months: 100% appointments | The incentive structure for SDRs/BDRs is designed to motivate both the generation of new leads and the development of those leads into actual sales revenue. |
Sales | 50-60% / 40-50% | - % of revenue generated (ARR or MRR) | - Revenue generated: 70%
- One-time payment: 15%
- Multi-year engagement: 15% | The compensation mix reflects a balance between securing new business and building long-term relationships. |
CSM/AM | 70-80% / 20-30% | - % indexed on renewal
- % indexed on additional/complementary sales | - Renewal: 50%
- Expansion: 50% | Adjust these allocations based on the specific goals for customer retention and expansion within the company's strategy. |
Example from Business Operations Network with Formulas
Benchmarks
Uptoo - Études des Salaires 2024 (🇫🇷)
Average SaaS salaries in France:
All the salaries read: Fix - OTE
Poste/XP | 0-2y | 2-5y | 5-10y | +10y | %OTE in variable |
BDR/SDR | 31 - 38 | 36 - 49 | 30% | ||
Team Leader SDR | 36 - 49 | 43 - 61 | 20% | ||
Sales Executive | 40 -55 | 55 - 70 | 60 - 85 | 70 - 95 | 25% |
KAM | 33 - 42 | 41 - 55 | 47 - 67 | 58 - 82 | 30% |
Sales Manager | 51 - 72 | 65 - 87 | 30% | ||
Sales Director | 53 - 76 | 69 - 93 | 25% |
Balderton - B2B Sales Playbook (🇺🇸 / 🇪🇺)
Europe
Role | OTE | %OTE in variable |
VP Sales | €130-200k+ | 30% - 50% |
Sales Manager | €80-120k | 30% - 50% |
AE | €70-125k | 40% - 50% |
Pre-Sales / Sales Engineer | €40-90k | n/a |
SDR | €30-45k | 10% - 30% |
US
Role | OTE | %OTE in variable |
VP Sales | $250-450k | 40% - 50% |
Sales Manager | $250-300k | 40% - 50% |
AE | $80-150k | 50% |
Pre-Sales / Sales Engineer | $70-150k | 20% |
SDR | $40-70k | 20% |
Iconiq Growth - Sales Compensation Guide (🇺🇸)
Compensation for Key Sales Employees (Displayed in Median Range):
Role | OTE | %OTE in variable | Quota to OTE ratio | Commission Rate |
SDRs/BDRs | $80-95k
SMB: $70-80k
Enterprise: $100-115k | 30-40%
SMB: 30-40%
Enterprise: 25-40% | 10-15x
SMB: 5-8x
Enterprise: 15-20x | n/a |
AEs | $235-250k
SMB: $140-155k
Enterprise: $325-340k | 45-55%
SMB: 45-50%
Enterprise: 45-55% | 5-9x
SMB: 5-7x
Enterprise: 6-9x | New Logo: 10%
Expansion: 10%
Services: 5%
Renewals: 4% |
AMs | $165-180k
SMB: $110-165k
Enterprise: $170-195k | 40-45%
SMB: 35-40%
Enterprise: 35-45% | 4-7x
SMB: 5-7x
Enterprise: 6-7x | Expansion: 9%
Services: 5%
Renewals:5% |
OTE range and Variable (Displayed in Median Range):
Role | OTE | %OTE in variable |
Director Sales | $260-300k | 45-55% |
AE | $235-250k | 45-55% |
Sales Manager | $210-225k | 40-45% |
Account Manager | $165-180k | 40-45% |
Sales Engineer | $150-175k | 20-25% |
Sales Ops | $115-130k | 10-15% |
Sales Enablement | $110-125k | 5-10% |
SDR | $85-95k | 30-40% |
%OTE in variable (Displayed in Average):
Early-Stage <$50M ARR
Later-Stage
$50M+ ARR
Role | Combined Team | SMB | Mid-Market | Enterprise |
SDR | 39% / 32% | 39% / 31% | 39% / 37% | 37% / 28% |
AE | 52% / 47% | 50% / 46% | 51% / 47% | 53% / 48% |
AM | 40% / 42% | 36% / 39% | 41% / 43% | 38% / 41% |
Figures - Sales Compensation Structures in Europe Report (🇪🇺)
SDR:
BDR:
AE:
Winning By Design - Compensation for SaaS sales organizations (🇺🇸)
Set expectations based on seniority levels and clear scope
“Companies should refrain from calling any sales incentives a “bonus.” A bonus is not guaranteed and usually on-the-spot, whereas an incentive plan is forward-looking with payment tied to the achievement of specific objectives that have been predetermined, communicated to the employee, and noted in the incentive plan.”
