The Good VP Sales have large OTE (On-Target Earnings) Expectations. They all either have in their back pocket, and/or are constantly on the prowl for the next 2-3 great reps.  Because sales is a lead-driven but headcount-closed business. This seems almost impossible, unless you give her a big quota, which as we’ve discussed, doesn’t scale. There’s no correct answer. No delayed gratification here. Don’t make your VP worry her quarterly bonus might not come, or be subject to vagaries. 8.1K likes. Really just the CEO needs to be great at one important thing that creates amazing start-ups. That’s stressful. Except it doesn’t — because believe it or not, even at just $1-$2m in ARR, you’re already getting too big for VP Sales to be spending most of his time selling himself. Do Sales Reps Get to Work Their Own Hours? They’re leaving something good for something risky. No best efforts stuff. And make them successful first. 200 deals. With permission from the SaaStr Blog – Written by the founder of SaaStr, Jason Lemkin. It’s hard enough to come into something new as VP Sales and make magic happen. Your VP Sales cannot rescue you from having no organic demand for your product. The thing is, it turns out the VCs are basically right. 25% or more upside for exceeding that plan. You’ll have to vary it for different types of SaaS businesses — a bit. Why? No draw (i.e., no guaranteed bonus for X months until you scale). Our goal is to help everyone get from $0 to $100m ARR with less stress and more success. I think anything works well here, as long as you align interests, and the plan is achievable. And perhaps most importantly, as a founder / CEO — I knew exactly what I was paying for sales. A number that’s hard to hit, but that you have say 50-60% confidence you can hit. Many candidates will tell you they want a guaranteed draw for 6+ months. 08 Feb 2018. So what happened? Apply to Head of Event & Industry Content, Full Stack Developer, Account Executive and more! This will ferret out if they know how to compete — or not. In SaaS, #1 most common misfire, with a bullet, is the VP/head of sales. How you develop your particular SaaS sales compensation plan will depend on a lot of factors and this process is a little too complex to dive into here. These questions mostly don’t have right or wrong answers, but will help you determine the quality and fit of the candidates: These questions aren’t magic. Not later. >> But a Great VP Sales can take that tiny bit of Initial Traction, that small little trickle of inbound lead flow … those raw materials … and do something really magical with them. And you want to accelerate, do better … so you want to hire a VP Sales to … sell better than you. Join us at SaaStr Annual 2020. And if you know more about any of these questions that the candidate does — pass. I don’t think it’s necessarily as nuanced and interesting a topic as how to pay and scale the sales team itself, or how to hire for this role. These questions aren’t magic. It was that simple. The VP Sales has to somehow be accretive. . Many sales leaders have some scar tissue about not being paid a bonus or two. Incentives are critical, and the VP Sales will likely be the Seemingly Most Expensive hire you ever make. They exist to teach reps how to do it. And scaling reps, of course, is expensive too. But do pay well when they kill it — against a sane plan. Of course you don’t … and you don’t pay it if it doesn’t happen … plus bonuses “vest” over the course of the year …. ). I don’t think it’s necessarily as nuanced and interesting a topic as how to pay and scale the sales team itself, or how to hire for this role. It becomes mathematically impossible without them. And then … as soon as you hit that run rate (which actually should happen earlier than month 12, because you have to hit the velocity early than that to hit the full year-end goal) … you’re gonna need 6. reps to hit the next goal. My stress re: sales comp and cost of sales flew right out the door. Up until you make this hire … you the founder have likely been the acting VP Sales yourself, hopefully with 1-2 reps to help you (ideally two). I didn’t have worry about anything, economically, in sales anymore. No best efforts stuff. It’s much worse than a. . No, not because the Pats won the Super Bowl (why would we be excited about that?) If he/she can’t describe how they built a team — pass. This will ferret out how well he/she understands the true customer lifecycle. And 400-500 deals a year. Let’s say you hire your VP, Sales when you are at $1m in ARR. None of them are particularly insightful or profound in isolation. This is the flip side of the no guaranteed draw. It used to really bug me because I am a firm believer in the strategy of Zero Voluntary Attrition and trying to hire fewer, more committed resources over a higher volume of mercenaries that turn over more often. It goes something like “You’ve Got to Get Past the Carcass of Your First VP of Sales” or “It’s The Second VP of Sales When You Really Start Selling” or variants thereof. The Good VP Sales have large OTE (On-Target Earnings) Expectations. by Jason Lemkin | Blog Posts, Compensation, Hiring, Sales. From them, you’ll be able to determine: (x) if this candidate is for real, or not, (y) if this candidate can really be a true VP, a leader, a manager — or not — and take you to the next level — or not, and (z) if the candidate is a good fit for your company and space in particular. Just to want a budget and a top-line number to meet. But quotas just weren’t as important, because the plan created the right incentives to hit these numbers and exceed them — irrespective of what quotas were set. To hit their number, they know they need the heads. No more black holes like in the BigCo Plan. 200 deals. Stream SaaStr 153: How To Build and Scale Sales Teams As A Technical Founder, How To Scale The Sales Learning Curve & Why No One Actually Cares About Your Product with Spenser Skates, Founder & CEO @ Amplitude by SaaStr from desktop or your mobile device The sky was the limit for the A+ reps. 25% of ACV, all-in. The SaaStr Co-Selling Space is currently full. If not, red flag; VP Sales must take action fast. . Ideally, don’t do a guaranteed draw. Either way, not a great VP Sales. And the great VP of Sales all know this. - If you're joining for a Sales role, you 100% will need to go outbound if you want to purchase that BWM. OK, adding in churn, you’re going to have to add another >$1m+ ARR … quickly. Just my view.} Makes sense. Blog Posts, Featured Podcasts, Featured Videos, Podcasts, Product, Sales, Videos How Sales and Product Really Should Work Together with MongoDB. (After that, you’ll probably be looking for a different type of VP Sales. Sounds fair — on the surface. No cap. They all either have in their back pocket, and/or are constantly on the prowl for the next 2-3 great reps.  Because sales is a lead-driven but headcount-. Three of these companies went public. Working and closing key deals with them. So you can practice what you preach, and know of what you are hiring. If the Stretch Plan was exceeded, the comp goes up from there. Then later, in a different post, I want to describe who to hire, and how. And totally screw things up as they fail. Ready to hire your first VP Sales? In general, making sure his/her 3 reports, then 10 reports, then 30 direct and indirect reports — work as effectively and efficiently as they can. But there’s no frackin’ way he/she can do more than a handful of all your deals directly, him/herself. SaaStr is the most unique conference I’ve attended in that there really are sessions for every team member from marketing, to sales, to CS, to development, to the C-suite. How can the VP Sales not be a “tax”, at least from a financial plan perspective? In the beginning, consider bonuses and goals that match the overall company ARR goals — not just new new bookings. Our initial annual ACV quotas varied from $380k or so to about $550k, and we continued to refine this over time and drive them up as we got better at sales. And it’s great when they even take a quota at first, to do it themselves. Basically, we paid our VP Sales X% of every single dollar after we hit the plan for the year out. note: an updated version of our classic 2013 post. If they don’t understand sales tools, they aren’t a real VP Sales. The world's largest community for business software. Before we get there, though, let’s outline in order of importance The Top 5 Things a Great VP of Sales Actually Does at a SaaS Company from say $500k in ARR to $20m+ ARR: Like Nick Saban:  20%+ of their time. You need sales to sell your product. SaaStr 102:Why You Should Not Pay Your Sales Team Commission, Why There Is Such Little Innovation In Go-To-Market Strategy & Why Adaptability Is Key Not Efficiency with Didier Elzinga, Founder & CEO @ CultureAmp by SaaStr published on 2017-03-06T06:31:29Z So yes, your VP Sales should be out there closing the big ones, the huge deals, on a plane, on a jet, of course. Sometimes more if you’re well funded, but it’s usually in the 20%-25% range (i.e., reps have to close 4x-5x their On Target Earnings). What’s going to be key in our space about winning vs. competitors? What markets should we expand into? David Skok is a General Partner @ Matrix Partners, the firm with a portfolio including the likes of Hubspot, ZenDesk, Quora, CloudBees and more incredible companies. Because in SaaS start-ups, it seems like the majority of first VP Sales fail. But do pay well when they kill it — against a sane plan. So yes, your VP Sales should be out there closing the big ones, the huge deals, on a plane, on a jet, of course. But until you are at $Xm in sales, I say everyone should have the same revenue goal where practical. Not necessarily a bad thing as SaaStr is a very recognizable brand and has so much untapped potential but know that going into it so if you haven't stretched the surface or that muscle, you may have a more difficult time than others. Then, as we first scaled up a sales team, we ended up literally copying Salesforce’s comp plan. That’s the trade-off. One overall revenue goal for the founders and VPs and everyone. OK, so with that, here’s what I came up with. But what they will do, is they will create a dialogue. And as you can see if you look at the Boston Strategy Group chart at the right, as usual, it’s just a little different from The Ordinary way to go. Important, yes. I sold $6m our first year (man, that sounds good looking back on it). But what they will do, is they will create a dialogue. by Jason Lemkin | Blog Posts, Compensation, Hiring, Sales, I’m not ashamed to admit that when I set up our first SaaS sales comp plan, I had no idea what I was doing. But the same basic concepts work there too). However, Anna has written a fantastic guide to creating a SaaS sales compensation plan that covers just about every aspect of this topic beautifully. You could make an argument the VP Sales should only be responsible for net new revenue from sales. The Last 5 Years on Quora: From 2m to 45m Views. Last week I attended the annual SaaStr conference and learned about the most exciting software companies in the world. Instead, align it. By Amelia Ibarra | January 8, 2021. So my uber-point here is you shouldn’t hire a VP Sales until you are ready to scale and build and fund a small, growing sales team. Our goal is to help everyone get from $0 to $100m ARR with less stress and more … We can talk more about field sales later. You can see from the above chart, and in the BSG Team Ventures data here, that most VP Sales are heavy on guaranteed comp and light on the upside. business. Once you’re past $20m or so in ARR, Strategy passes Tactics and goes higher on the list — once the VP Sales has a strong group of lieutenants/managers (e.g., Directors of Sales) to repeatedly execute core Tactics. You need sales to sell your product. Once you are at $20 or $30m ARR or larger, or maybe, once you have 40-50 reps or more, and are adding another 40-50 or more a year … a Typical Bigger Company sales comp plan works well. It’s natural for a VP Sales not to care about costs. SaaS Enterprise Sales Compensation Plan Well, a typical BigCo Sales Comp Plan for an experienced inside sales rep works this way: Guaranteed, Competitive Base Salary. Don’t even make it 12 months. EchoSign has a self-service component, and the Client Success team managed churn, and upsells were split between Sales and Client Success. Sales just feels sooo expensive early on. In fact, hopefully they are kind of obvious. It sucks some of the hunger out. In addition, depending what stage of growth you’re in, you’re going to different sessions ranging from the more strategic to the deeper dive tactical sessions. Create a real machine to monetize the prospects and leads that find their way to you. The deal volume to hit your growth targets is just too high. We crossed 2,000,000 views and had just done our first meet-up (it had no content, just conversation): That seemed pretty epic. The team at SaaStr have assembled a strong, diverse line-up of speakers to provide what should be another simply amazing program. First, I did an analysis of what inside sales reps at SaaS companies are usually paid. Sales needs you to make a product they can sell. In the beginning, consider bonuses and goals that match the overall company ARR goals — not just new new bookings. 5 years ago today, it seemed like a lot was going on on Quora. 4 sales trends to keep an eye on from SaaStr this year, including AI Technology Apps & Services Earnings. So I want to try to help you if you’re going through this. Pay it out monthly, even if it’s a bit of a guesstimate, and true it up later. SaaS sales compensation = commission % x actual sales in recurring revenue Recurring revenue can be measured monthly, quarterly, or annually, because the sales commission percentage scales accordingly. Don’t even make it 12 months. How do we shore up our base? You can get a crummy one, however. It’s #5 I think that is the root of half of the problems hiring your VP Sales. Sales just feels sooo expensive early on. Mailing Address: PO Box 620733 2995 Woodside Rd Woodside, CA 94062. So how can this big salary not just be a big drain on limited capital? (Note: this is really an inside sales rep plan. And then … as soon as you hit that run rate (which actually should happen earlier than month 12, because you have to hit the velocity early than that to hit the full year-end goal) … you’re gonna need 6 more reps to hit the next goal. A free inside look at SaaStr salary trends based on 3 salaries wages for 3 jobs at SaaStr. In SaaS, #1 most common misfire, with a bullet, is the VP/head of sales. And lets the candidate blame others for their own issues. But the Mismatched Comp Plan made it all the more confusing and created all the wrong incentives. Sales needs you to make a product they can sell. {Yes, I know some will disagree and this is controversial. One overall revenue goal for the founders and VPs and everyone. Because with a bad VP Sales you can lose so much momentum, and create so much internal confusion, that this one bad hire can really cripple you as you try to get from Initial Traction to Initial Scale. Because I think this is 50% of the problem – founder/CEOs are looking for the wrong things out of their VP Sales. M8 convertible money, not Panerai watch money. But until you are at $Xm in sales, I say everyone should have the same revenue goal where practical. Revenue per lead fell by over 50% with the BigCo sales plan. If it’s not a similar fit to you, pass. Either way, not a great VP Sales. But haven’t done it before? SaaStr began in 2012 as a simple attempt via a WordPress blog, together with a few answers on Quora, to help share back Jason M. Lemkin’s learnings of going from $0 to $100m ARR with the next generation of great SaaS and B2B entrepreneurs. This will appeal to a great VP Sales on the way up. SaaStr, Inc. Office: Heart of SOMA San Francisco, CA . Read that article here. . My uber-learnings from that are that BigCo sales comps plans are great tools — once you are reasonably post-Scale. It also incents the VP Sales to work with the other functional areas around post-signature revenue (support, product, client success, etc.). But it costs the company almost twice that typically. What Makes a Great VP of Sales and How to Hire One, Going Long: The 20-year Journey of Being a CEO + Founder with BlackLine | SaaStr, Speaker Submissions for 2021 SaaStr Events are Now Open! It rewarded the hungry. If you do end doing a draw, keep it short (e.g., one quarter) and make sure the VP Sales have to “make it up” in sales quota payments by the year-end. Just to want a budget and a top-line number to meet. Get from $0 to $100 Million in ARRwith less stress and more success. None of them are particularly insightful or profound in isolation. So now that you’ve hired your VP Sales, it’s important to know how to. 13 Feb 2018. Not later. I know it seems to make sense. As for David, he started his first company in 1977 aged just 22. Spotting issues before they blow up. , How To Still Hire a Great VP of Sales Even If You Are Struggling, Most Read in 2017: Hiring Sales, Sales Comp Plans, and more, Going Long: The 20-year Journey of Being a CEO + Founder with BlackLine | SaaStr, Speaker Submissions for 2021 SaaStr Events are Now Open! These questions mostly don’t have right or wrong answers, but will help you determine the quality and fit of the candidates: If he/she can’t answer — right or wrong — pass. And 400-500 deals a year. That’s the magic in a great SaaS VP Sales. Now if you are ready, but haven’t done it before in SaaS, here are 10 good screening questions to see if you have a real VP, Sales candidate in hand — or not. More here in our prior VP Sales post: When You Hire Your First Sales Rep — Just Make Sure You Hire Two. Because you’re going to need a team to sell. And you want to accelerate, do better … so you want to hire a VP Sales to … sell better than you. But sales is sales. And sales quickly, elegantly … became a profit center. Just my view.} And the great VP of Sales all know this. The 50/50/25+ plan. From them, you’ll be able to determine: (x) if this candidate is for real, or not, (y) if this candidate can really be a true VP, a leader, a manager — or not — and take you to the next level — or not, and (z) if the candidate is a good fit for your company and space in particular. If the Stretch Plan was exceeded, the comp goes up from there. You can see from the above chart, and in the BSG Team Ventures data, , that most VP Sales are heavy on guaranteed comp and light on the upside. Instead, he/she is either just a great individual contributor, a great figure-it-outer … or a deeply flawed candidate. Not a lot different, but meaningfully so. Pitch scripts. But the thing is, if you pay your VP Sales in full on hitting the plan, it shouldn’t matter if that gratification is delayed a few months, so long as the real OTE is high. What is SaaStr Annual? We put together a basic 50/50/25 VP of Sales comp plan early on at SaaStr, and it seemed time for an update. Tell me about them, by background if not name. [caldera_form_modal type="button" id="" width="600"]. Compare pay for popular roles and read about the team’s work-life balance. It’s #5 I think that is the root of half of the problems hiring your VP Sales. That was epic. My VP Sales and I both worked toward the same goal as everyone else in the company — the end-of-the-year revenue goal. In a start-up, the VP Sales has to also be aligned to costs, not just revenue. But sales is sales. Blog Posts, Featured Podcasts, Featured Videos, Podcasts, Product, Sales, Videos How Sales and Product Really Should Work Together with MongoDB. There was no need to “ratchet up” the plan. Where should we spend our resources, our money? Drive your revenue per lead way up, and put you in place to jump on and close every practical piece of business that comes through the door. Sometimes, soup to nuts, lead to close. Instead, it is crucial to retain customers over many years, as that is how you maximize your revenues. Justin Welsh, former SVP of Sales at PatientPop explains how he started in SaaS in 2009 as the second sales hire at Zocdoc. If any don’t make sense, pass. >> But a Great VP Sales can take that tiny bit of Initial Traction, that small little trickle of inbound lead flow … those raw materials … and do something really magical with them. We will debunk some commission myths and talk about how your company can most effectively use incentive compensation. 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