A compensation plan tells the field what the company wants people to care about. Quota units and payout rules direct work toward that priority.1 Set each target from the pipeline a person can generate and the win rates on that pipeline, then plan for 70 to 80 percent attainment; dividing historical production by headcount to plan for 100 percent does not work.2, 3
Start with behavior
Check whether the metrics reward the behavior the business needs through the customer outcome.
The compensation structure is one of the strongest influences on SDR behavior.4 Review the plan from an NDR perspective and a retention rate perspective.5, 6 If an AE owns an account, include retention in that AE's compensation plan.7 Leave room for outsized rewards and achievement so strong performance has somewhere to go.8
Choose the quota unit
A clear unit tells people what counts as productive work. Use the sequence below to choose the unit, define quality, and set a target the operating plan can carry.
| Stage | What you are trying to learn | Example question |
|---|---|---|
| Outcome | Which business result should the plan make easier to produce and protect? | What should this plan make easier to produce? |
| Quota unit | A Demo Set quota can fit when meetings are passed on without qualification9 | Are meetings handed over before qualification? |
| Quality gate | In one plan, Stage One required budget, need, integration capability, and decision maker buy in10 | Which conditions must be present before credit is earned? |
| Progression | In that plan, Stage Two added another meeting to Stage One to move the conversation forward11 | What action proves the opportunity moved? |
| Capacity | Set the target from the pipeline a person can generate and the win rates on it2 | "How much pipeline can that person generate? What are your win rates?" |
| Attainment | Plan for 70 to 80 percent attainment3 | What attainment level can the operating plan carry? |
Move on when you can explain exactly what earns credit and why that unit connects to the business result. If the answer depends on activity that says little about quality, change the unit before setting the payout.
Pick a base and variable mix
Treat base and variable pay as separate parts of the package. Use the examples below as reference points against your stage, goals, and setup.
A market example describes approximately $80,000 in SDR OTE at quota, made up of base and variable pay.12 In that package, SDR roles sit closer to a 70/30 split, with about $55,000 to $60,000 in base and $20,000 to $25,000 in variable pay.13, 14, 15 A startup hiring its first SDR used 70 percent base and 30 percent variable because it had limited historical data and unconfirmed product market fit.16 Another example provides $40,000 in base plus $40,000 in variable for an SDR.17
Fit the package to the company's stage, goals, and current setup because there is no perfect plan.18 Make it competitive enough to draw high-potential SDRs, reward consistent performance, and encourage long-term commitment.19, 20
Choose payout metrics
A useful plan gives the person an early signal while keeping quality in view. Choose metrics that make the desired handoff and downstream result worth pursuing.
One example assigns 30 percent of compensation to demos booked and 70 percent to SAOs, with a recommendation to consider 10 percent on closed deals.21 Paying on closed deals can encourage the SDR to follow opportunities through the sales process and learn from the path to close.22 Paying more for bigger meetings is an option.23 An active deal can also carry a component for contribution to multi-threading.24
Keep the plan simple and add balancing components when quota increases.25 An example multiplier lowers the per-demo or per-SAO payout below quota and raises the commission rate above quota.26 Before publishing, model how many people regularly hit quota and fit the accelerator structure inside commission cost.27, 28
Review the plan after launch
Quota changes can change the work people choose, so build a review point into operating planning and inspect what the plan produces.
Compensation, quotas, and performance management are areas where leaders need to handle transparency carefully.29 Review quota annually alongside territory, headcount, and capacity planning.30 After increasing quota, inspect its actual effect on pipeline.31 Expect the people carrying quota to dissect the plan and look for how to reach target.32
What not to do
Check the plan before publishing and again when results start to move.
- Do not pay SDRs solely for meetings. The source identifies this as the number one mistake in startup compensation plans.33
- Do not set ramp quotas and leave them fixed during onboarding.34
- Do not pair annual accelerators with monthly quotas without checking the mechanics.35
- Do not treat transparency as optional when you change compensation, quotas, or performance management.29