Dear SaaStr: What are The Biggest Pains as CEO?

And How Should I Design My First Sales Rep Compensation Plan?

Dear SaaStr: What are The Biggest Pains as CEO?

The toughest part in the end is always recruiting.

And it never gets easier, not really. Every CEO I see past $2m in ARR or so, be it Unicorn, IPO’d, or figuring out how to get to $5m to $10m ARR … the pain is the same. Recruiting.

Over time, that’s recruiting more and more senior folks, so the target changes.

But it never ends.

As your company scales, you’ll start to hit 15%+ attrition in your employee base just naturally each year. It will take a while for that to happen, but it takes its toll. Your managers will handle this part, but it will be a lot of work to support the processes here just to keep up.

And even your best VPs will often want to do something new in 4–5 years. That seems like Forever in the beginning, but later it won’t. Others will need to be topped. You’ll have to be recruiting new ones all the time.

Your best directors that can’t get that promotion to VP? They’ll move on, too.

And folks won’t work out.

That means you are constantly recruiting. The bigger you get, the more you need to do here.

You need to get good at it.

More on how here.

Dear SaaStr: How Should I Design My First Sales Rep Compensation Plan?

Figuring out your very first sales comp plan when you don’t have a repeatable process or much revenue is confusing.

I was exactly in the place you were (first rep at $10k MRR) and everyone faces some similar challenges:

• There’s no way this early you can expect a rep to hit a “standard” quota of $600k, $800k, whatever when the company is so early.

but

• You don’t have the capital to invest here … the rep has to be accretive. And

• The business model does have to work.

So in the end, one way or another, most of us split the difference with some sort of step-function in quota.

I like having “new initiatives” (like this first rep) just cover their costs at first.

So one way to structure this is in the first 3 months, the AE has to cover his costs to hit OTE. I.e., here, her OTE is $120k, or $10k a month. So in the first 3 months, if she closes $10k a month in bookings/ACV, she hits her OTE and makes $10k. This isn’t profitable for the company, and maybe even she doesn’t cover her fully-burdened costs … but at least she’s covering her base costs.

Then, everyone gains confidence. You finally have someone that can close beside the CEO.

After those 3 months, you gradually step it up to a full quota over the following 3 or maybe even 6 months. So she has to hit $600k or $800k annualized or whatever the right quota is give your ACV and particulars (at $20k ACV today, a $600-$800k quota is very achievable — once you are at scale).

After your first few reps, you don’t need this intro period where they just cover their costs anymore to hit full bonus.

Until … you enter a brand new space, a new initiative.

Then try it again (e.g., a new market, a new vertical, etc).

A bit more here:

And a Great New Deep Dive Here with the CMOs of Salesforce, Box and Attentive:

See Everyone at SaaStr Annual 2022 in SF Bay Area on Sep 13-15!!