[HN Gopher] Sales Compensation Simulator
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Sales Compensation Simulator
Author : seanlinehan
Score : 99 points
Date : 2025-03-29 15:34 UTC (3 days ago)
(HTM) web link (www.exec.com)
(TXT) w3m dump (www.exec.com)
| ghiculescu wrote:
| I can see why you'd need software to calculate comp, if your comp
| system is so complex!
|
| As a case study in simplicity: our sales people get 1xMRR for
| each deal closed, or 2xMRR if the deal signs an annual contract.
| SDRs get a flat amount for each demo sat (doesn't have to close,
| but does have to be accepted by the AE). The amount is equivalent
| to 0.75xMRR for a typical customer.
|
| That's really all you need in SaaS. This has scaled from less
| than 1M ARR through to... more than 100x bigger than when it
| started.
| robertlagrant wrote:
| Interesting - I've only ever been on the buying side of this.
| How do you pay out? Do you pay out each month based on whatever
| was actually paid, or does the sales person get a chunk of
| money up front or yearly or whatever?
| ghiculescu wrote:
| We pay out each month, but only for deals where the customer
| has actually paid us.
|
| I think there's a clawback if customers churn within 3 months
| or something like that. It's rarely needed.
| robertlagrant wrote:
| That seems very sensible. I come from the world of
| salesperson signs giant delivery deal, buys Porsche, turns
| up every 6 months to rally the troops. This seems so much
| better.
| nprateem wrote:
| Helpful, thanks.
|
| Plus I assume they get some sort of middle of the road base
| salary? How low is that if you don't mind me asking?
| ghiculescu wrote:
| Yeah exactly. Can't share exact numbers but it depends on
| city anyway.
| liamwire wrote:
| Cool to see a response from someone else in Brisbane, thanks
| for the insight Alex
| seanlinehan wrote:
| A simple salary + percent commission is a great model.
|
| That said, this calculator was built to model/simulate the
| things that are super common in enterprise SaaS:
|
| 1. It takes sellers time to ramp up. Experienced sellers might
| be willing to jump to your company, but not if they are
| guaranteed to only get their (relatively) low base salary for
| 1-2 quarters.
|
| 2. If you decide to do a ramp, you have to make a choice about
| the OTE.
|
| If you can avoid doing these things, that's great. Though
| whether that will fly largely depends on whether your sales
| cycle and target talent market supports it!
| infogulch wrote:
| I wonder if it would be reasonable to offer sellers a sliding
| scale to trade off their salary and commission rate over,
| say, ten graduations. Then let them choose whatever scale
| they want, maybe with some rules about how they can change it
| etc to prevent high frequency minmaxing.
| seanlinehan wrote:
| Some companies do things like this, but I'd be cautious
| about it.
|
| There's a few things I'd consider:
|
| * If you have a bunch of reps, doing the periodic
| accounting to cut the right checks becomes more of a pain
| (though it's a pain anyways)
|
| * When you give a choice, the employee might make what, in
| retrospect, winds up being the wrong choice. This can lead
| to pissed off sales people and regrettable churn.
|
| OTOH, sales comp plans change every year anyways, so could
| just be renegotiated
| baxtr wrote:
| Thanks for sharing!
|
| How do you incentivize sales to focus on deals that churn less
| instead of deals that close fast?
| ghiculescu wrote:
| Don't let people sell shit deals.
| baxtr wrote:
| Yes sure, but how?
|
| This is not a trick question btw. Genuinely curious.
| ghiculescu wrote:
| Sure, it's a great question.
|
| This is the role of sales managers. They should be
| ensuring that known bad deals don't happen. Mostly by
| auditing every deal. Usually it's pretty quick and easy
| to tell if a deal is good or bad if you are trying to be
| objective.
|
| If a salesperson won't accept this rule - fire them.
| baxtr wrote:
| Thanks. Sounds like the right thing to do!
|
| I heard from some CEOs that they vest sales bonuses over
| a 2-3 year period to incentive longer contracts.
|
| But that of course makes the whole incentive scheme more
| complicated!
| senordevnyc wrote:
| I really appreciate this comment, I'm actively trying to figure
| out a comp structure for someone doing some sales for my SaaS,
| and this was helpful.
| xivzgrev wrote:
| Wow for SDR, 0.75xMRR for each demo? So if your typical MRR is
| $1000, you'd pay $750 per demo?
|
| My wife used to be SDR and I seem to remember she got paid much
| less, maybe like 0.1xMRR.
|
| Obviously your economics work & scale, just curious to
| understand how - is your close rate really high?
|
| If an AE closes an annual deal (worth $12k in this
| hypothetical), and there were 4 other demos that didn't close,
| then you are paying $2000 to AE and $3,750 to SDRs, or almost
| half of your revenue on comp.
| ghiculescu wrote:
| Yes your close rate needs to be 50% for this math to work.
| And you only pay for demos booked from a target account or
| ICP list.
|
| But even with your numbers, a payback period of 6 months is
| very very cheap in b2b SaaS. You don't pay commission in the
| second year the customer is with you and you expect customers
| to stick around for 5+ years (ideally much longer; it's the
| inverse of your churn).
| gadders wrote:
| Needs to also model when to increase targets when it looks like
| Sales are in danger of hitting them /sarcasm
| kraussvonespy wrote:
| "Sorry, the commission budget is out of money for this budget
| year. You sold way too much which made the company a ton of
| extra money. Sadly that means it's your fault we can't pay you
| the commissions you were promised."
| tiffanyh wrote:
| Small nitpick ...
|
| I see "Commission Rate (%)" as an input (when normally I see it
| as "Sales Target" as the input - which derives your commission
| rate)
|
| Typically I see, $X is your Target Commission and $Y is your
| Sales Target.
|
| (and when you divide those two figures, it equates to your %
| Commission Rate)
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