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First Sales Hire @ Seed Round Startup <> Is My Commission Fair?

Hey All!!


Need some insight from big dogs that have been there, please assist;


I'm at a Healthcare tech start-up in its seed round, and am the first sales hire. Taking the responsibility off the cofounders plate. I was able to negotiate a good base because i'm building out everything from scratch, but the comp structure has been challenging to nail down for a few reasons.


They had a few studies they participated in, and only 2 real contract deals. So not much to base it off of. And the founders are both new to how commission works. I want to make sure i'm asking enough... but not being to greedy... but also getting paid my fair share.


For context, these are mainly larger deals with health plans & healthcare systems. 75K - 160K has been the standard. Either lump sum or paid as a Per Active Member per month basis.


I've asked $305 per demo/ meeting, and 20% on anything that closes.


Would you all say that's a good/ fair ask?

๐Ÿ’‰ Medical
๐Ÿ’ฐ Compensation
๐Ÿ“  Startup
5
wolfblitzer
Member
8
CRO
I'm a CRO at a startup - seed round. If you asked for this from me - I'd not even bother calling you back.

My questions for you - do you believe in the product? do you believe in the founders? do you believe you have what it takes to build a business?

If yes, quit your squabbling on cash out of the business, and start focusing on long term equity. A startup is an opportunity for wealth building - not making quick money. If you are in it for the cash - go be an AE at something much more established.

From a founders perspective, they are all about managing cashflow and growth. If you ask for big numbers, you put a target on your back if you're not performing & not performing might not be your fault. Product may not be finished, pricing might be wrong, marketing might suck, there are literally thousands of things that can go wrong.

When I was in your shoes - i pushed hard for as much equity as the company could stand giving up & put myself on a plan to earn 10x that based on performance. I took very little cash out of the business, and only asked for more once i had proved i could do it.
poweredbycaffeine
WR Lieutenant
3
โ˜•๏ธ
This is one of the only opinions that matters in this thread. Someone who has been there. Great way to put this all into perspective.

When I was the first sales hire, and 5th overall, at a pre-seed company I took a marginal bump in base to smooth out the bumps knowing that Iโ€™d be up and down on variable for 18 months as we figured our suit out. I took a flat $ amount on deals closed and a retention bonus of the same amount if the account stayed for 90 days. This encouraged us to find good ICP fits and didnโ€™t draw heavy on cash flow.

Eventually we took a seed and built a real comp plan when I hired my first reps. However, my equity was second only to our CEO. Company fucked itself in the long term due to slow product and engineering teams, but thatโ€™s a story for another day.
rruggzz
Good Citizen
2
Strategic Partnerships
Thanks for that.ย  Really needed insight from someone who been there. Yes to your 3 questions, and appreciate you laying out some risks.ย 
CuriousFox
WR Officer
5
Senior Account Executive
So many questions. Seriously keep us posted on your journey. No way in hell I'd have the guts to join at this stage.
Pachacuti
Politicker
3
They call me Daddy, Sales Daddy
Cost to make.
Cost to sell.
Somewhere in there is a profit margin and you need to figure out how much of that you can get.
rruggzz
Good Citizen
1
Strategic Partnerships
But if my commission was based off of deal size, instead of the margin.ย  Wouldn't that be a bigger piece of the pie?
Pachacuti
Politicker
0
They call me Daddy, Sales Daddy
Potentially. Iโ€™d have to see the math
braintank
Politicker
2
Enterprise Account Executive
Hard to tell without knowing what you sell and COGS.

Comission on SaaS vs medical devices are very different.
braintank
Politicker
1
Enterprise Account Executive
Also hard to tell when they only have 2 deals.
braintank
Politicker
3
Enterprise Account Executive
Also pre-seed is the only thing worse than series A
rruggzz
Good Citizen
0
Strategic Partnerships
Yeah typically the deals/ studies have been $250 - 1350 per participant.ย  Then either paid upfront or as a Per member per month basis for give or take 100 participants.ย 
rruggzz
Good Citizen
0
Strategic Partnerships
LOL has its ups and downs for sure
rruggzz
Good Citizen
0
Strategic Partnerships
Its an app and remote monitoring device.ย  Device is $60 a unit, so 100 participants would be 6K.ย  Everything else is software.ย 
braintank
Politicker
1
Enterprise Account Executive
Thats the retail cost. How much does it cost to make?
rruggzz
Good Citizen
0
Strategic Partnerships
Are you asking to make the device?ย  Or too have created, and continue developing the platform?ย 
braintank
Politicker
1
Enterprise Account Executive
If you're selling the device for $60 there should be profit built in. Same with the software. Your cut will come out of that profit. Your CEO or CFO should have this number. If they don't -- run.

So without knowing your costs it's hard to tell what an appropriate commission should be.

In my business (enterprise cybersecurity SaaS) the norm is 10% commission. I'm sure there's medical device salespeople here who can comment on what the average is in that industry.

Now, as for the demos -- who are you demoing to? Are you recruiting people off the street to participate in a medical device trial? Are you trying to get meetings with healthcare systems so they can use your device with their patients?

Back of the napkin math, if I pay you $300 to book a meeting with someone who buys a $60 device, I'm going to be out of money soon.ย 
rruggzz
Good Citizen
0
Strategic Partnerships
$60 is the cost to create the device.ย  Consumer is buying our program that includes the device & app platform/ software.ย  Program runs between 250 - 1350 per participant, based on needs.ย  Long story short, its a solution to a chronic disease that is high touch, low cost & delivered remotely.ย ย 

This is an enterprise sale, so yes health plans, healthcare systems.ย  ย Im running full cycle from hunting gathering to close. Example of good prospect would be a Medical director, population health exec.


Regardless, sounds like I need to dig deeper on margins.
SADNESSLieutenant
Politicker
0
Officer of โ™ฅ๏ธ
60$ is the cost of the device AND ur selling it for 60$?
rruggzz
Good Citizen
0
Strategic Partnerships
Cost to create device is $60, yes.ย  I'm then selling the "program" which includes the device and App/ software. The program ranges from $300 - $1350 per participant (including the Device and access to program).

So cost to create it $60 per unit... then selling for $300 - 1350 depending on demographic & intensity or program.ย 
SADNESSLieutenant
Politicker
0
Officer of โ™ฅ๏ธ
i see so the device is never sold seperately it always comes with the program so on avg the proft is 240-1290?
SADNESSLieutenant
Politicker
2
Officer of โ™ฅ๏ธ
I'd be more concerned with how many users you are asked to sign up to hit 160k than the amount per demo. and 20% on anything that closes seems a little high
rruggzz
Good Citizen
1
Strategic Partnerships
Its tough because the number of users ranges, depending on the population size.ย  Then the cost per user ranges, based on need.ย ย 


One deal with an "average population" can be for 100 users @ $500 per.ย  Another deal with a "high risk population" user can be for 100 users @ $1300 per.ย ย 

So sounds like I got a good number with 20% on closing, at least ๐Ÿคทโ€โ™‚๏ธ
DungeonsNDemos
Big Shot
0
Dialing for Initiative
You guys have only 2 contracts, and you're asking for $305 (specifically)ย  AND 20%???

is that correct?
rruggzz
Good Citizen
0
Strategic Partnerships
Yeah 20%. High risk high reward.