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Higher base + lower commission or lower base with higher commission?

What do you prefer and why? Higher base or higher commission payout?


Example:


A) $85k base with a $110k OTE


B) $60k base with a $150 OTE


extra question:


Monthly or Quarterly payouts?

💰 Compensation
7
CadenceCombat
Tycoon
+13
Account Executive
Personally, I've been burned so many times with inflated OTE. Give me option A + monthly payouts and if OTE is realistic then let me blow it out of the water. But yeah, there's no benefit to having your payouts being more infrequent as far as I can see, that's for sure.
CuriousFox
WR Officer
+11
Senior Account Executive
Option A without a doubt. I learned this lesson the hard way in my younger sales days with selling software.
RandomPaperclip
Valued Contributor
+4
Sr. AE
Same.. I've been in both and in B right now.  I was "sold a dream" really well and am kicking myself for it. Comp plan changed 3x in 4 months and goals have yet to be hit. All of it equaling low commish pay out. FML 
Da
DaveFromCollege
Notorious Answer
+7
Account Executive
As other comments have said, A is the correct answer. I've been burned before with unrealistic OTEs. Never again...
RandomPaperclip
Valued Contributor
+4
Sr. AE
Told myself "never again" and let myself down. Working hard on restructuring comp plans right now for the team. I feel like sometimes these things get decided via a game of darts at 2am. 

 "Hey Larry! Whatever I hit, that's the goal in this month!" **hits 18** 

4 months later, every rep is hitting between 7-10k and eating ramen.  
Da
DaveFromCollege
Notorious Answer
+7
Account Executive
I've shared pretty much that story on this account a few days ago, that's pretty much what happened at my last company lol
nomdeguerre
Valued Contributor
+5
VP of Channel Partner Sales
Option A) with no caps on comp. Btw... OTE is always inflated, it starts with a company number and gets inflation all the way down the org chart, from CRO, to SVP of sales, to VP of sales, to RVP of sales. By the time the number gets to the rep it is probably 50-100% inflated. In most companies, you are not supposed to make your number, even though they will tell you that you are.
RandomPaperclip
Valued Contributor
+4
Sr. AE
Jeez, coming from a VP of sales who must be in the know on a lot of this - that is super concerning. 
nomdeguerre
Valued Contributor
+5
VP of Channel Partner Sales
Well it might be, but it is not that strange when you think about it. If you are a good sales person you know how to back into your number right. You look at your quota, then based on your average deal size you figure out how many deals you will need to make your number, then you look at the average close rate and based on that you figure out how much pipeline you need to make your number. Based on that you'll then add a multiplier to be safe, meaning lets say you need 10 deals to make your number, the close rate is 30%, which means you need 33 deals in your annual pipeline, but to be safe you gather that you should probably add 50%, which means you need 50 deals. Now you need to figure out sales cycle and how many conversation you need to get that many qualified deals, but that is a different story for a different.

What you have to realize is that your company are doing the same exercise to back into their number, this is the company quota how many deals do they need to get there, whats the close rate etc, and then just to be on the safe side they add 50% or some other multiplier, and that becomes the goal. However, obviously the company doesn't go out and find deals, they look to the organization to generate those deals, so that multiplier gets put on the CRO. He or she does the same exercise and puts the multiplier on the SVP of sales, and so on down the org chart the multiplier grows as it componds on itself.

Here is what you need to understand, your quota is not based on what you can realistically close or what you closed last year. It is based on the growth plan of the company, and for a startup that means they have to double their revenue each year. For a non-startup they would typically look to growth at least 30% year over year to be a high growth company in order to be attractive to investors or the stock market depending on their plans.

So the board will look at what the revenue they did last year and apply above rule to come up with this years number - oh and they will probably add some buffer there too. So lets say it is a startup and they did $10MM last year, they year will be $20MM, some of that growth will come from existing customers, but the rest will have to come from new business.

From there it is simple math to figure out what the CRO's quota is, and put it on him or her to figure out what the quote is for the next person in line.

That is how they come up with your quota and why it is really not based on whether or not it is attainable, so don't let yourself get talked into some great sounding OTE plan. The OTE really doesn't mean anything, I can tell you that the OTE is $1MM and it will cost me nothing and doesn't mean you have any chance of getting there. So make sure you get a good base, a good percentage on your closes, that you are paid comp monthly if possible and on the full realized amount and that you have no cap on your comp.

Anyway, that's my advice.
Show 3 more replies
FullyDiluted
Opinionated
+6
Account Director
OTE is usually a lie or a very uneducated guess at best.  Take the higher base + push for monthly payout.
Jnye
Enterprise account executive
It depends on how many reps are actually hitting OTE and if you are with a proven sales organization. If talking about a start up, OTEs are inflated and rarely reached. 
RandomPaperclip
Valued Contributor
+4
Sr. AE
Seeing this now... pre-series A when I started. Told I could easily be hitting goals as the lone rep currently there was. Come to find out, that lone rep was juuuuust hitting those. So, you split by 2 people, guess what happened? Yep.. both not hitting. 
funcoupons
WR Officer
+11
up in Fiji, under paddy
I'd prefer option A with monthly payouts.
ri_ri
WR Officer
+4
Account Executive
Absolutely A!
I once took a paycut for a job at a well known company because “most reps hit quota”, and it was “easy” to get into the accelerators. So I figured, well I am a hard worker I’ll prove myself and knock it out of the park.
Lo and behold it was awful, I ended up hitting my ramp quota but there was no way anyone on the team would hit full quota. It was very demotivating, and you end up feeling like a sucker.
It is very important how you get into the company, negotiate everything- base, signing bonus, territory etc.
SalesGal
Politicker
+6
Account Manager / FSR
Option A for sure ! The payout frequency I don't have a fixed preference. Monthly seems nice but I haven't experienced it myself. 
closedwon
Politicker
+7
VP Sales
Option A.  I recently took a higher salary for a Director role with 1% commission of annual gross sales and the owner was surprised I didn’t go for the 35% lower salary but 5% of gross sales. 

I realized after a few months the goals were unattainable and glad I took the salary.  I’d rather be happy earning a realistic $110 than fairytale $150 OTE. 
Jo
JohnnyFire
Field Sales Executive
I've done both and prefer option B all day. We are working commission jobs so that we can blow it out and in my experience playing safer on an 80/20 model means that if you do hit accelerator territory its not that big of a game changer. I'm on the 40/60 model, quarterly and love it. 
Champ24
Good Citizen
Sales Director
A with monthly payouts for sure. As others have said, I've been burned been too many times with unrealistic OTE's.
Curb_Your_Bro_Thusiasm
WR Officer
+3
Founder
Definitely higher base. A bird in the hand...as they say.
SalesPharaoh
Politicker
+8
AM BDR
Stick with the "guaranteed" money always. 
matthach148
Fire Starter
Senior Enterprise Account Manager
Option A, no brainer. OTEs are often complete guesses, when starting somewhere new ask exactly how you can reach the OTE they tell you too. And monthly is far preferred. 
wahmsales
WR Officer
+10
SDR
A. The last company I was an SDR at said in the interview that AEs got a $50k base with $100k OTE. I should have asked if anyone was actually hitting quota. From what I saw after I started working there, they were at around 10%-25% of quota. 

I would do B if I knew reps were actually consistently hitting it.
Jackywaky
Arsonist
+9
Master of Disaster
I think that's the wisest wat to go - considering this assumptions 
ThebumpGiver
Account Executive
100% go for the lower base since +100 on the quota = MONEYYY
YoungGoat
Opinionated
+2
Surgical Technology Specialist
Definitely option A with monthly payments. My company has changed the comp structure every year and the reps that opt for higher commission structures always get burned. Also I’ve had friends get temporarily laid off this year due to covid and they’ve only been able to collect unemployment based on their base.
sahil
Notable Contributor
+15
Deepak Chopra of Sales
The most important question here is: uncapped commission or no? If it's uncapped, take A without a doubt. 

But if it's capped commission, then B becomes more interesting for sure. Cuz you're basically swapping $25K of guarantee for $40K of upside... as long as you can hit 50% of quota, you're basically breakeven. (Assuming no accelerators/decelerators)
SalesPharaoh
Politicker
+8
AM BDR
What's capped/uncapped never heard of this here...
kr
kramersdoodle
Good Citizen
SMB Account Executive
It would make sense, in a new role, with a lack of understanding of quota attainment probability, you would opt for option A. However, if you are sure of yourself in your role AND your quota in your territory is attainable, option B starts to look a bit better as long as it comes with a boosted commission payout and/or top performing territory.
Bgame11
Good Citizen
+2
Business Development Manager (staffing sales)
A all the way
jefe
Politicker
+8
Sales Director
Like many others I've been burned by this, but also benefited from it as well.

I remember starting a new role with a lower base than tenured colleagues who were all smirking, and then finished second in the company and first for the team, made more money than any of them, and got a President's Club trip out of it.

That being said, in these unstable times, it's probably best to go with A.
RandomPaperclip
Valued Contributor
+4
Sr. AE
ah yes, these unprecedented times, what a 2020 phrase.. ha
jefe
Politicker
+8
Sales Director
Hahaha exactly! Bit of a cliché, but there's no doubt a TON of salespeople have been impacted, and pretty severely. 
StickToTheProcess
WR Officer
+7
AE
Give me that guaranteed money all day long.
DaveyDimes
Acclaimed Answer
+2
Account Executive
If you know the company and they have a proven product go with option B. If the product is proven and truly helps there will be enough inbound to provide consistent opportunities and commission.

If you are dealing with a younger startup go with option A. Oftentimes your funnel is starting from scratch. It's not unrealistic to go your first few months without a win.

I've always had monthly payouts with quarterly goals tied to bonuses. I love this because it avoids the need to provide pressure on a month-to-month basis. You have more room to work and close deals when they are actually ready to go.

 
UltimateMango
Praised Answer
+1
Chief of Nothing
A and Monthly
slaydie
Politicker
+5
Account Executive
Option A! Also been burned on being sold the dream of OTE which is never achieved. 

If you really want to work at a company that offer's B - then inquire about how many people are actually hitting quota. I want to know the percentages of AE's that hit quota last quarter and then for the year before. 
Sa
SalesCabbage
Account Executive
Just look at the sales reviews on Glassdoor. I’ll always trust the advice of my fellow sales reps ✊
AssistantToTheRegional
Opinionated
+4
Enterprise Account Executive
Answer A.

Do the math, if 60% (or whatever it is these days) of reps miss their quota, they aren't hitting OTE. 

Also, find it strange when companies don't do 50/50 base and ote. And never work for someone that has caps.


Maybe I've just been lucky?

Monthly payouts. I had one place do quarterly and we begged them to change because it was stupid to go 12 weeks between commission checks. Super demovitvating.
RandomPaperclip
Valued Contributor
+4
Sr. AE
Comp plans are all over the place, it's wild to me. 60/40 40/60 some are 50/50 but honestly, give me 80/20 upncapped and let me hit a damn goal... 
Waffles
Old School Bravo
VP of Sales
It all comes down to where you think you're going to land on performance.  If you know there is great market fit, good leadership, a high chance to succeed, and you commit personally to the role then you choose higher OTE every time.   If it's the inverse then you should choose the inverse.  

Now, in most situations none of us should take roles or choose companies where we think we have a low probability of success, so we should almost never be choosing the lower OTE.   This just means during the interview process make sure to do your research on the market, competitors, trends.  Reach out to others in the role if possible to get their feedback.  Then make sure to ask the manager not only what the average attainment is, but how many reps are hitting plan.  You want to make sure its just not the top 2 reps. 

If the company has 50-60% reps hitting plan, then bet on yourself and go higher OTE.  If it's above 60% of reps hitting plan, there is no question you bet on yourself and go higher OTE.   When it drops below 40% you should pause and consider.....if it's below 30% well, should you take that job? 
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