Sales Compensation Design
Sales compensation design is the strategic structuring of pay plans to align rep incentives with business objectives. The traditional 50/50 base-bonus split has remained unchanged for decades, but modern approaches consider long-term retention, net dollar retention, and customer success - not just closed deals.
The Guide
3 key steps synthesized from 2 experts.
Understand the standard 50/50 structure
The traditional model is 50% base salary, 50% bonus tied to quota attainment. This is the industry baseline that most reps expect. Before innovating, understand why this structure exists and what it optimizes for (new business acquisition above all else).
Featured guest perspectives
"It's usually 50/50, right? 50% base, 50% bonus for a sales rep."— Jason M Lemkin
Align comp with business outcomes beyond closed deals
Modern comp plans should align rep incentives with what actually matters to the business: customer success, retention, and net dollar retention - not just initial close. The old model was built for a different era. Consider how to incent behavior that leads to long-term value, not just short-term wins.
Featured guest perspectives
"Sales comp plans are stuck in the stone ages... What we haven't done is built a modern technical sales compensation plan that actually aligns the needs and incentives of the business, the customer and the rep."— Sahil Mansuri
Design ramping strategies for new hires
New sales hires need time to ramp up before they can hit full quota. Your comp plan should account for this with ramping structures that provide financial stability during the learning period while still incentivizing performance improvement.
Featured guest perspectives
"It's usually 50/50, right? 50% base, 50% bonus for a sales rep."— Jason M Lemkin
Common Mistakes
- Using the same comp structure as every other company without considering your specific model
- Only incentivizing new business while ignoring retention and expansion
- Creating overly complex plans that reps can't understand or predict
- Not ramping new hires appropriately, leading to early departures
Signs You're Doing It Well
- Rep behavior aligns with what's actually good for customers and the business
- Top performers are highly compensated and unlikely to leave
- Reps can accurately predict their compensation based on their activities
- Customer retention metrics are strong, not just new business metrics
All Guest Perspectives
Deep dive into what all 2 guests shared about sales compensation design.
Jason M Lemkin
"It's usually 50/50, right? 50% base, 50% bonus for a sales rep."
Sahil Mansuri
"Sales comp plans are stuck in the stone ages... What we haven't done is built a modern technical sales compensation plan that actually aligns the needs and incentives of the business, the customer and the rep."
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