From Impossible to Inevitable: How SaaS and Other Hyper-Growth Companies Create Predictable Revenue

by Aaron Ross

Set comp expectations. Paul tends generally to advise companies doing big, new things (new products, teams, markets) to avoid commission-based comp plans as long as they can. You can't put together smart commission plans until you're smart about your sales machine, and that can take a lot longer than you want. While you're learning, it's better to pay salespeople a flat amount per month, or with discretionary bonuses, until you have enough experience and data to put together a practical (not arbitrary) plan that includes commissions. If you put a sales team on a commission-based plan too early, when you're arbitrarily guessing at realistic sales and business goals (even when based on other companies just like yours), you're setting yourself up for a no-win situation. One of two things happens: Either: Very rarely, the sales team will blow away the targets and you (or your board) will be upset at paying them “too much money” (although everyone agreed to it ahead of time), then quotas will be jacked up and commissions decreased, thus frustrating the reps … Or: (And this is the one that happens 95% of the time with new products and companies.) The sales team totally misses goals because the goals were unrealistic and arbitrary in hindsight. And the sales team is again left very frustrated, and perhaps financially desperate (never a good thing) if they need at least some commission income to pay for basics like rent.