Here’s the cold, hard truth: All SaaS companies that hit scale have quota-carrying sales reps.
You might think your product is so good it doesn’t require a sales person — but that’s just not reality. If your product is simply that good, you’re leaving money on the table by neglecting to hire a sales team.
To hire the right sales people and successfully manage a sales team, you need to think about your company goals and structure compensation and incentives to encourage sales reps to help you accomplish them.
In this article, we’ll look at how SaaS founders are managing a sales team, including quota targets and compensation.
What Do Sales Teams Do?
Your sales team is the connection between your product and your customer.
Their job, of course, is to make sales — but, more importantly, they forge relationships with prospects and customers. A sales rep is often the main point of contact for much of the customer experience, so they’re often the face of your brand.
A full sales team may include these sales roles:
- Business development representative: These team members are responsible for prospecting. They research, identify and draw in leads to pass onto sales reps.
- Sales manager: This person leads the team and keeps tracks of targets, and sales team reps report directly to them.
- Account manager: These people negotiate with clients and bring in new business. They may also act as an ongoing point of contact for clients, depending on the size of your team.
- Customer success representative: On a larger team, clients are passed to customer success reps after sales are made. These employees are responsible for follow-up, addressing customer concerns and renewing contracts to ensure retention.
What Makes a Successful Sales Team?
Sales is a tough job (no kidding!). Once you have a sales team in place, you’ll need a strong company culture and compensation to keep the reps motivated to hit targets.
Motivate your sales team by providing incentives, including commissions, for meeting goals or exceeding them. When setting goals, be smart and strategic about what you’re measuring — volume of calls isn’t enough. Track metrics that show the real value of your sales team, like qualified leads and customer retention.
But before you even consider compensation, you have to know which roles you need to hire for and why. Sequence is important. Before you hire, get a clear understanding of the goals you want a sales rep to help your company achieve — and make that clear to set them up for success.
Sales Tools
The function and success of your sales team will rely on having the right tools. Sales teams don’t need an extensive software stack, but make sure your team has access to and is properly trained to utilize common tools, including:
- Salesforce: Customer relationship management is key to smooth sales management. A proper system and sufficient training in your company’s CRM tool is vital to the efficacy of your sales team.
- LinkedIn: Give your reps access to LinkedIn Sales Navigator target buyers, gain insights and connect with prospects on the social media platform.
- HubSpot: Manage every aspect of your inbound sales strategy.
- Calendly: Make scheduling sales calls with prospects and staying in touch with customers easy with this appointment-management tool.
How to Hire a Sales Team That’s Set up for Success
I can hear you saying: I don’t want to increase my expenses with new hires!
However, we haven’t come across a SaaS company with more than $10 million in revenue that doesn’t have at least one sales rep. If you want to grow your revenue, you’ll likely have to hire a sales team.
Make Your 1st Sales Hire at the Right Time
While some companies hire sooner, Latka recommends waiting to hire your first sales representative until you’ve sold $1 million in annual revenue. Then, hire someone fast, and don’t worry about initial economics.
Here are some examples of the ARRs successful companies reached before making their first sales team hire:
- Supermetrics: $6 million
- SwoopTalent: $480,000
- Syndy: $240,000
- Upsales: $200,000
- Algolia: $1.2 million
- UBIWeb: $600,000
- Human Proof Designs: $500,000
- Lemlist: $1 million
- ShopperApproved: $360,000
- RockContent: $100,000
- Funnel.io: $300,000
- TeamSnap: $500,000
Make the Right 1st Hire
A common mistake when making your first sales hire is to recruit the VP of sales from another company. They’re not helpful to you, because their skills and their desire is to simply manage a sales team.
Instead, hire the No. 2 or No. 3 rep at a company similar to yours. They have the skills you need at this stage. Once they hit their own quota, have them document their sales process, and use that to build out a team.
Once you make the right first hire, you need to pay them appropriately.
Here’s a sample starting compensation:
- Quota target: $500,000 in added annual revenue
- Base Comp: $50,000
- Commission Potential: $50,000
- Full On Target Earnings (OTE): $100,000
- Quota/OTE ratio: 5x
Give new reps three to six months after onboarding and sales training to reach full productivity. The average ramp time for a sales rep is 3.2 months, according to a 2019 report of sales metrics by Bridge Group. In year two, double your reps’ quota and OTE.
If you want to save money but still hire, use equity or decrease the ratio of base compensation versus variable — for example, move from 50/50 to 30/70 (where base comp is $30,000 and the commission potential is $70,000 for the same OTE).
Sales Team Examples
Here are examples of sales teams and quotas set by 10 startups with quota-carrying reps:
SpotMe
- Team size: 100
- # Quota carrying: 17
- Quota target: $1.2 million
Cylynt
- Team size: 40
- # Quota carrying: 3
- Quota target: $1 million
Lyft-ai.com
- Team size: 8
- # Quota carrying: 1
- Quota target: $1 million
Rafflie.ai
- Team size: 23
- # Quota carrying: 5
- Quota target: $420,000
Limblecmms
- Team size: 31
- # Quota carrying: 3
- Quota target: $360,000
Clearview Social
- Team size: 15
- # Quota carrying: 2
- Quota target: $300,000
Ubiweb
- Team size: 20
- # Quota carrying: 7
- Quota target: $288,000
Cookie Information
- Team size: 27
- # Quota carrying: 8
- Quota target: $180,000
Safety Evolution
- Team size: 6
- # Quota carrying: 1
- Quota target: $150,000
Sanity Desk
- Team size: 14
- # Quota carrying: 1
- Quota target: $72,000
How to Manage a Sales Team
Once you’ve got the right roles filled on your sales team, your compensation structure is what will make or break their success.
Design Compensation to Scale
The structure of your compensation plan depends on your sales goals, budget, culture, competition, the length of your sales cycle and the cost of living where your reps live.
Structuring compensation with the base salary and commission model outlined above ensures consistency for your reps and your budget, while still motivating them to hit targets. It works best if your structure is set up for reps to consistently hit targets.
To determine your quota, base compensation and commission rate, consider how experienced you need your reps to be, how much industry know how is required, your price point and how difficult it’ll be to make a sale.
When setting a quota, remember that only about 80% of your reps should hit the quota every quarter. It’s nothing to brag about if 100% of reps hit the quota. That just means it’s not pushing them enough.
Sales Compensation Strategy Examples
Here are examples of compensation structures that are working at 10 SaaS companies from the Latka database:
- Base: $85,000
- Full OTE: $170,000
- Quota: $860,000
- Quota/OTE: 5.1x
Cheq and the entire team have scaled to more than $24 million in revenue and 15 quota-carrying reps.
CEO Guy Tytunovich explains the structure includes a three-month onboarding grace period, no cap on commissions, and acceleration for over-achievement:
- 120% of full OTE if reps hit 100% to 120% of the quota.
- 150% of full OTE if reps beat the quota by more than 120%.
- Base: $75,000
- Full OTE: $150,000
- Quota: $600,000
- Quota/OTE: 4x
CEO Russ Heddleston and his team have retained top sales people by using uncapped commissions with a kicker for anything beating 100% of the quota. The model has helped the company grow by 75% year-over-year.
- Base: $55,000
- Full OTE: $105,000
- Quota: $360,000
- Quota/OTE: 3.4x
To make up for a low quote/OTE ratio, PingBoard structures variable pay as a monthly bonus.
Founder Bill Boebel explains commission is a “bonus paid out monthly of $4,167. Annually would be $50,000.” There’s no cap on commission, and the company offers 2x acceleration if reps beat 100% of the quota — so the annual commission is $100,000, instead of $50,000 for any sales above the quota.
- Base: $125,000
- Full OTE: $175,000
- Quota: $500,000
- Quota/OTE: 2.8x
BackBone gets away with a low quote/OTE ratio by increasing its quota after year one, as well as by including a significant monthly bonus.
Co-founder and CEO Mathew Klein says its monthly bonus is equal to the amount of new monthly revenue (MRR) a rep closes each month. So, if a rep closes $4,000 new MRR, they earn a $4,000 bonus.
- Base: $80,000
- Full OTE: $130,000
- Quota: $600,000
- Quota/OTE: 4.6x
GreenRope retains its sales leaders with a unique “forever commission” strategy. Top performers have the potential to earn unlimited commissions 11% recurring forever.
- Base: $80,000
- Full OTE: $110,000
- Quota: $1 million
- Quota/OTE: 9x
SpotMe is growing so fast partly due to its expansion revenue. It structures compensation to encourage account managers to focus on expansion:
- Account executives: $1.2 million quota, net new only, 60/40 base/variable.
- Account managers: $1.8 million quota, renewals and expansion, 70/30.
- Base: $50,000
- Full OTE: $98,000
- Quota: $432,000 new ARR added first 12 months
- Quota/OTE: 4.4x
This works, despite a slightly low quote/OTE ratio. Funnel has a total 37 team members, 27 of them quota-carrying reps.
- Base: $70,000
- Full OTE: $120,000
- Quota: $700l000
- Quota/OTE: 5.8x
Notably, ClickUp made its first sales hire when it had $12 million in ARR. If they can recruit a sales team at 5.8x ratio, expect to see rapid growth from this company over the next 12 months.
- Base: $45,000
- Full OTE: $75,000
- Quota: $250,000
- Quota/OTE: 3.3x
Winmo has more than 12 quota-carrying sales reps and north of $15 million ARR. Despite a low ratio, it’s making this model work by increasing quotas after reps have ramped to full productivity.
- Base: $50,000
- Full OTE: $100,000
- Quota: $500,000
- Quota/OTE: 5x
RockContent hired its first sales reps back in 2014, starting with a two-member sales team to compare systems. This model helped the company scale to $25 million ARR this year with 45 quota-carrying reps.
Compare Your Sales Process Using Multiple Reps
As soon as you’re able, hire at least two sales representatives to give you a chance to compare systems. A/B test various systems and comp structures among reps, and compare their sales performance to find the sales process and ratios that work before you scale.
Incentivize Talented Reps
A forever commission is a smart way to hold onto a strong sales talent. When you find a talented rep, get them to stay with your company forever by giving them 10% recurring commissions forever.
They’ll build a book of business and never leave.
Increase Economics on Closed Accounts Over Time
Build auto-increases into your multiyear deals so economics on closed accounts increase over time.
An automatic year-over-year annual contract value increase of 5% to 10% automatic is typical.
Hiring a Sales Team
You might be hesitant to make your first sales hire, but a sales team will set your company up for success.
Developing a strong compensation strategy that aligns with your company goals and the expectations of sales representatives in your industry will ensure you’re hiring top reps and motivating them to contribute to company goals.
Before you hire, get clear on the goals your sales team will help the company achieve and the roles you need in place to meet those goals. Make sales goals, KPIs and compensation structure clear to reps to make it easy for them to work toward targets.
Dana Sitar (@danasitar) has been writing and editing since 2011, covering personal finance, careers and digital media.