Building your First Sales Team

Embarking on the journey of setting up your first sales team can be quite the adventure. Let's dive into how you can structure quotas and compensation to drive your business growth.

Building Blocks for the Individual Plans

Imagine your sales rep, let's call them Alex, the Account Executive (AE). Alex's sales plan is a mix of:

• Base Salary: This is what Alex gets regardless of sales performance.

• Quota: The sales target Alex aims to hit.

• Commission Rate: A percentage of the sales that goes into Alex's pocket.

• Variable Pay: The Quota times the Commission Rate.

• OTE (On-Target Earnings): The total of what Alex earns (Base Salary + Variable Pay).

Some SaaS industry standards

• Typically, the commission rate is about 10% of the ARR on the deal closed.

• The Rule of 10 - The sales rep’s quota is usually ten times their salary.

Quarterly Plans and Boosts

Once Alex hits their quarterly target, their commission rate jumps to 15% for any extra sales. It's like a bonus level in a game, motivating Alex to keep pushing beyond the target.

Ramping Period

New AEs might take around four months to get up to speed. During this "ramping" period, they have a bit of a safety net with a lower quota and a "draw" – a sort of advance on their commission.

Team Plans: The Bigger Picture

Now, let's talk about your entire sales squad. The "Quota Capacity" (QC) is the total quota for your team. Say you have 10 AEs, each with a $500k quota; your team's QC is $5 million. Remember, that teams usually hit about 70% of their QC, so plan accordingly.

The Boss's Share

The Sales Manager is typically 80% of the team’s QC. Their pay (OTE) is split between a base salary and variable pay, just like the AEs.

Dividing the Sales Map

The sales map for your AEs are divided into territories. Each territory defines where each AE can sell. You can carve out the map based on geography or industry verticals for example. The goal is to avoid overlap and cover all bases.

Some Basic Terms

Here’s a breakdown of some general jargon:

• Accelerator: An increase in commission rate after meeting the quota.

• AE (Account Executive): Your frontline “sales warrior”.

• Base Salary: Guaranteed pay, no matter the sales.

• Commission Rate: A percentage of the sale that goes to the AE.

• Geos: Geographic territories for sales.

• M.E.C.E. (Mutually Exclusive and Collectively Exhaustive): A fancy way of saying that territories should cover everything without overlapping.

• OTE (On-Target Earnings): Total potential earnings (Base Salary + Variable Pay).

• Quota: The sales target for the AE.

• Ramp: The time it takes for a new AE to get up to speed.

• Round Robin: A way to assign leads in turns, like taking turns in a board game.

• Rule of 10: The quota is typically ten times the base salary.

• Territory: The focus territory for an AE.

• Variable Pay: The part of pay that varies based on sales performance.

Setting up your sales team is a mix of strategy, math, and a bit of sales magic. Stick to these guidelines, and you'll be on your way to building a rocking sales team that not only meets targets but supasses them!