It turns out a well-crafted sales and well-designed comp plan does retain sales reps fairly well.
Why? Well, if the comp plan is well put together, then:
- If a sales rep leaves, they sort of have to start all over again earning their bonus, unless they get a draw. And even a draw isn’t perfect. A standard AE comp plan is often 50/50 base/bonus. If the AE is already making 100%+ of their OTE, or even more because they are a top AE (say 150% of their OTE) … they really have to almost start from scratch when they go somewhere new. Especially if sales cycles are longer.
- Top sales reps should make a lot of money. Just the top ones. So if they leave, it’s too risky to try to earn that amount somewhere new. Again, if you are making well above 100% OTE at a good startup, it’s just risky to think you’ll surely do that again at some next startup you barely know.
- Top sales reps tend to build up a strong pipeline of deals that will close over time. This destresses their life significantly as they have a lot of visibility into deals that will close — and personal and financial success. Top reps don’t want to leave that pipeline behind. It’s just a lot of work to build it up again. And it again introduces risk.
So what’s key here?
- First, AEs will still leave a bad boss. So core to all this is having a VP of Sales that AEs love to work for. A related post here: What Makes a Great VP of Sales and How to Hire One | SaaStr
- Second, no caps on comp. If the AEs make, say, 10% bonus on each deal, don’t cap it. That way if they really close a lot, they make a ton. More here: A Framework For Your First SaaS Sales Comp Plan | SaaStr
- Third, make sure your top 1 or 2 AEs really do well — so everyone else can see it. That builds confidence and momentum. More on that here: Your #1 Sales Rep Should Be Driving a Tesla Plaid Or Buying a New Home By Month 12. (And Not Buying a Panerai Watch.) | SaaStr
- Fourth, make sure most reps hit plan. This takes work, but if most reps aren’t hitting plan, folks won’t stay. Key to this is getting the team to commit that each new rep you hire is at least as good as the average rep, and ideally, better. And then in the early days, don’t set quotas so high folks can’t meet them.
- Fifth, promote as many as you can. Most top AEs actually don’t want to go into management. But some do. You can’t promote them all. But err on the side of promoting more of them. A rough rule is try to fill 50% of your manager and director slots from your existing team. A bit more here: 11 Things That Set The Best Sales Teams Apart From The Rest | SaaStr
Do the above right, and you won’t see your top reps leave — other than for promotions. Because there won’t be anywhere better to go.
In fact, make Zero Voluntary Attrition an explicit goal on your sales team. Tell everyone that’s the goal.
(note: an updated SaaStr Classic post)
Published on March 28, 2023