It’s no easy feat motivating your sales development team to close deals quarter after quarter. While ebbs and flows mark any sales cycle, the pressure to bring in more revenue remains.
So what will you do differently to boost morale and drive high performance among your team?
A few weeks back, we spoke of the basics for creating an SDR comp plan to give that extra push. However, as these plans come in all shapes and sizes, let’s delve into one example. We’re certain it will have your sales development representatives celebrating non-stop wins.
When it comes to sales, the individual performance of an SDR can either contribute to or impede overall company gains. Variable pay looks to motivate reps through sales performance and financial incentives. When sales reps reach their target goal, they can expect extra sales commissions tacked onto their base pay.
In layman’s terms:
Variable compensation plan = base pay (fixed annual salary) + variable pay (financial incentive based on performance variables)
Of course, for an effective variable compensation plan, a target pay mix presupposes a fair base rate for all members of the sales team. Unfair and constant ratcheting (increasing sales reps’ monthly quota if they surpassed it in the past) can lead to a higher turnover rate and impact long-term results for the worse.
On the other hand, take into account factors like SDR experience, company goals, inbound vs. outbound function, etc. to create the ideal variable compensation plan. Timely compensation tied to direct, visible, and pre-defined contributions can positively shape company culture. Use it to encourage specific behaviors among SDRs, i.e. booking qualified meetings or contributing to closing deals.
At Bloobirds, our sales managers are proud to have struck a balance concerning commission rates and SDR performance. We set a quota based on qualified meetings completed, AKA opportunities, and pay-out incentives on a monthly basis.
Your comp plan is not just an extension of management; it’s a reflection of the vision your company aims to fulfill. That being said, the right plan should encourage workers to make the right decisions at an individual level for the company as a whole. Essentially, the structure must support your sales playbook and drive the behaviors most favorable to success.
While additional incentive is the most challenging decision in a comp plan, base salary deserves your attention too. The ratio of base pay to variable compensation can differ from one sales organization to the next as per the company’s objectives and culture. However, you’ll find that combinations between 60/40 and 75/25 are the most common.
In sales compensation plans specific to startups, it’s ideal to lean towards a higher variable percentage given the lack of reliable and prior data. Although, this aspect could also signal the immaturity of a company and the need for a more savvy sales talent crew.
According to numbers provided by The SaaS Institute, clients experience the most success with a 70/30 split. To give you a better understanding, let’s take the average salary of a Barcelona-based SDR as an example. Imagine he/she is earning €25K. In this case, €17.5K would be base pay while €7.5K would comprise the variable pay based on direct contribution to opportunities and revenue.
The SaaS Institute advises that an SDR hit 70% of their quota before any incentives are paid out. This minimum performance level keeps reps upbeat regardless if it’s an off month or after a quota ratchet. Similarly, the minimum performance level promises that individual SDR strives for 100% with each new prospect on a continuous basis.
Keep in mind the need to customize this baseline according to evolving CAC and other costs affecting the bottom-line.
Once you have created your variable compensation plan, we recommend that you sit down with your SDRs to explain it in detail. Not only will it allow you to outline your goals for that individual, but it will align expectations and underscore your company’s policy for transparency and fairness from the very beginning.
Similarly, because compensation plans are prone to human errors during accounting practices, we recommend selecting a compensation software suitable for your company’s objectives and culture. The right tech stack will avoid any headaches arising from financial mistakes, relay a sense of confidence to your SDRs, and tap into SDRs’ nature for healthy competition.
Now that you have gone through a quick breakdown of the variable compensation plan, you’re ready to figure out the right pay mix to rally up your SDRs and increase sales revenue.
Of course, if you want to make sure you’re not missing anything, check out our how to create an SDR comp plan. The template inside is a total time-saver!