Dear SaaStr: How Much Do I Pay My First Sales Rep?

Keep the Sales Comp Plan simple in the early days:

• In the end, in base salary AND commission, most sales reps take home about 20%-25% of what they close in first year deal value. So if your ultimate model sums up to that or close, you are in the zone.  But, you often can’t start there.  It’s often not enough comp for your very first rep, not to start.  So:

• You have to pay a living wage. No one in sales wants to work just for the fun of it. This may mean in the early days you have to pay out more than 20% of the deal size of the initial deals.  Maybe even 50%-100% of the deal size in the very early days.

• Your first rep doesn’t have to be magically profitable on Day 1.  It may be enough to break even at first, just to prove out non-founder sales even works.  It can often makes sense to pay a much higher commission for an introductory period for your first sales rep or two.  I paid my first reps 100% of what they took home the first 60 days, for example, and then 25% thereafter.

• You have to pay a competitive “OTE” (On Target Earnings), or base + bonus. Or else, they will do the same work at a company with a market OTE.

Back solve for these 4 points, and you’ll have the start of your first sales rep comp plan.