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If sales people didn’t have quotas, and were paid just a flat rate of whatever they sold, do you think think that A)Salespeople would work just as hard? B) Create a better culture within the Sales Org? C) Create better relationships with their buyers?

💰 Compensation
🧢 Sales Management
11
sahil
Notable Contributor
+15
Deepak Chopra of Sales
I'd propose a 3rd option: SP are paid commission, but not just based on revenue on first deal. Instead, commission is a product of:

- Revenue
- Renewal rate

Let's breakdown how this works with an example:

Current System
- Base: $80K
- Commission: $80K
- Quota: $800K ARR (20% Cost of Sale)

Which means that if you close exactly $800K in year 1, you'll make $160K. 

But you get nothing for those deals in year 2, where you have to go close a new set of customers. If you happen to close a bunch of misfit customers that churn... not your problem. If you happen to close a bunch of awesome customers that renew for a lot more... you still get nothing. 

Proposed System
- Base: $80K
- Commission: $80K
- Quota: $800K ARR (20% cost of sale)

Wait, this system is exactly the same. Yes, it is. In year 1. But let's look at how it works in year 2:

Proposed System - Year 2:
- Base: $80K
- Commission: $80K (+5% on all Year 1 renewals)
- Quota: $800K ARR (Eligibility: minimum renewal rate 80%)

Okay now we're cooking with gas. You are measured not only on your ability to close new customers on year 2, but you are getting compensated for the deals you closed in year 1. To qualify, you have to hit a minimum renewal rate (80% seems generally right as a starter), which incentivizes you to close right-fit customers. You make 5% on all renewal revenue from Year 1, which means you stay close to your Year 1 customers and make sure they're taken care of. The 5% affects COGS, but can easily be made up for by incentivizing high renewal rates, which makes the business far more profitable.

That 5% could easily amount to an extra $30-$70K in commission off your $800K sold the year before. And we're not done yet...

Proposed System - Year 3
- Base: $80K
- Commission: $80K (+2% on all Year 2 renewals, 5% on all Year 1 Renewals)
- Quota: $800K ARR (Eligibility: 80% renewal rate)

Nice. Now you're not only making money on all of last year's 1st deals, but you're also getting compounding interest on the deals from 2 years ago. So if you closed a customer for $50K in Year 1, they renewed for $60K in Year 2, and now they're renewing at $100K in Year 3 (this happens ALL the time)... you are still getting $2K in commission from that last deal. Sweet.

Again, this keeps sales reps close to all deals they close, rewarding you for the customer dedication that we all love to give anyway. It incentivizes you to close customers that will be successful for the platform for a long time, as well. 

And perhaps most importantly, it can help solve the constant turnover issue we have in sales. This would incentivize you to stay at one company for a long time, cuz you'd need to start from scratch to build up your renewal base at the next gig. 

What thinks you @CadenceCombat @salesnerd - I know you've got thoughts here :)
CadenceCombat
Tycoon
+13
Account Executive
I’m happy to tell you that, as a prospective employee of Sahil Industries, your pay plan pleases me. 

Slap on a reasonable dollop of stock options for good measure and let’s put this deal to bed. 

I can start Monday.
fuzzy
Notable Contributor
+21
CMO (Chief Meme Officer)
An old employer implemented this and it worked out very very very well for everyone. 
SalesPharaoh
Politicker
+8
AM BDR
That is pretty well thought out plan. Is it implemented anywhere??
FeelItInMyPlums
Opinionated
+4
Sales Account Executive
Had this plan been in place I would have stayed at my last company.  Grew a territory from nothing to 2.3m new revenue with 90+% renewal rate over 7 years.  never got paid on renewals.  eventually left for greener pastures that were very brown and full of horse shit.  

currently wading through shit
Show 1 more replies
Beasthouse
Opinionated
+5
Corporate trainer
THIS 
Beasthouse
Opinionated
+5
Corporate trainer
@eds yoo
@JC10X thoughts

FeelItInMyPlums
Opinionated
+4
Sales Account Executive
Wow I posted this months ago.  my job is still shit.  anyone hiring?
Show 1 more replies
CadenceCombat
Tycoon
+13
Account Executive
Sounds like you're not a fan of quota / commission pay structures, friend.

You've kind of worded your question weird but the nature of it is kind of telling. The options you've outlined all seem to imply a positive result with your proposed elimination of a quota / commission pay structure. Is that fair to say? If that's your premise, I respectfully disagree with it. Just my 2 cents.
Theflatpickinseller
Contributor
+1
Enterprise Account Executive
Thanks for the response... And no, I’m not really a proponent on either side of the fence. My intent was just to create an active discussion on the idea of “quotas” - is it necessary that we have them? Could companies drive more $$ with/without them? Are there viable alternatives to quota driven sales orgs? If so let’s hear them...
CadenceCombat
Tycoon
+13
Account Executive
Yeah, fair... It's just that if you're working in sales and you're not carrying a quota and you don't get some degree of compensation via commission, you're likely not a sales person, you're an order taker... Broadly speaking, of course.
salesman
Account Executive
A) No, I don't think they would work as hard

B) In my company, Culture between the sales team comes from quotas/competition 

C)I think your company should have a relationship with the client... I don't think it is necessary for you to have one with them after they have invested unless there is opportunity for more sales.  
funcoupons
WR Officer
+11
Kahluapons
I agree with all of this.
nomdeguerre
Valued Contributor
+5
VP of Channel Partner Sales
Just a quick comment to say, that I definitely think it is in your interest to develop a relationship with the customer after the sale, even if you can't sell them more at the same company. In the long run of your career you'll want to build that rolodex of contacts that you can sell to in the future when you are at a new company. That is going to be your biggest assets as a rep, otherwise you'll keep starting from scratch your entire career. Just my two cents.
mosales
Praised Answer
Account Executive
IMO, if I was paid a flat rate no matter the deal size, I would only go after the small easier wins. I guess it would depend on the industry you’re in and what you sell but the whole incentive of sourcing and closing a large deal is to get that fat commission check.

It wouldn’t be a great outcome for the company or reps who want to make the big bucks
SalesPharaoh
Politicker
+8
AM BDR
This question reminds me of the should we make waiters salary depend on tipping or give them a proper salary? But a sales version.

I think sales should rely on quotas for sure because it justifies salesmen to take shit from everyone if that is the way they will reach theor promices land
SalesMofo
Good Citizen
Business Development Executive
Having lived in a country that doesn't tip, it's great for society but way different for service at restaurants.  They're not that responsive, but they also don't push you out the door when you're done.  I'd assume the same would be true with Sales.  Service and responsiveness goes down, because who cares?...but you wouldn't get garbage reps selling garbage deals based on lies, and furious customers.  Basically, there would be no reason for sales, and Marketing would be responsible for revenue.  That sounds terrible.


Side note, I've seen massive beer companies pay this way, because beer sells itself, and let's not pretend the great sales rep made you have that 10th beer at happy hour... 
SalesPharaoh
Politicker
+8
AM BDR
makes sense in industries like that whom their product is B2C oriented if we reference your analogy. Marketing bears more of the grunt.
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SalesVEEP
Opinionated
+3
VP of Sales
A) I think sales people might mess up more because of quotas, we're always pushing to do more rather than do things better. 

B) Culture, mental health and productivity would be much higher.

C) Absolutely, rather than saying yes that's one of like seven sales this month I need to make, it's a valued sale either way rather than another rung.
Curb_Your_Bro_Thusiasm
WR Officer
+3
Founder
There needs to be a standard of performance to incentivize people to produce, but I'm not convinced that standard *has* to be built around quota. Leaders have to incentivize the behaviors that yield the outcomes they want. If closed/won is the only outcome that matters, then hitting quota has to be the standard. If customer retention, brand affinity/reputation and overall morale/culture are valued outcomes, then we have to get beyond quota. The problem is...I have no idea what that looks like.
wahmsales
WR Officer
+10
SDR
I worked my butt off when I didn't have a quota. But not having a quota gave the managers more opportunity to nag whenever, since we couldn't say "I already hit 150% of this month's quota so I can take it easy for a few days."
Trinity
WR Officer
+7
BusDev
I know quite a bit of B2C companies that have a flat rate for their salespeople. Although they still have quotas, they would have a bit higher bonus incentive than non-sales employees when it's time for a year-end company bonus.
The entire org works together to drive higher sales and improve loyalty/retention bec it impacts everyone's year-end incentive.
ThebumpGiver
Account Executive
To be honest i would say this would negatively impact the reps. 

I have been in a quota selling role for 5 years now and the +100 kicker is the only kicker which is worth fighting for. 

On the contrary my friend works on a non commission base and doesn't care if the client buys 10k of 15k since they is no money involved for the rep. aka; why would i spend more time selling if i can take the path of least effort. 

IMO; no quota = lazy sales rep
Theflatpickinseller
Contributor
+1
Enterprise Account Executive
@ThebumpGiver - Appreciate the comment, but don’t mistake quota with commission. I am 100% on board with commissioned sales people - but what I’m contesting is that maybe quotas have negative effects on internal culture and customer relationships. I have been in orgs(I’m sure everyone has) where we have damaged customer relationships for the sake of getting a deal done within the month, qtr, year, etc... I’m simply asking is there another way to hitting business goals w/o the classic quota system. This does not mean eliminate commissions/accelerators/etc...
Salespreuner
Big Shot
+11
Regional Sales Director
Point B and C resonates well. 
whissspy
Opinionated
+1
Commercial AE
Hey Sahil- What happens if your company changes your territory every year and hires a bunch of new reps...how long can you keep the existing reps in those accounts? What if those accounts are some of the highest paying accounts , how do you make it equal ? 
Beasthouse
Opinionated
+5
Corporate trainer
ok so here's my umm mental vomit lol 
I hate the idea of keep em lean keep em mean. forcing staff to accept conditions that require them to either sell or eat is bullshit and a very crappy way of running a company that will not create longevity or wealth ever. ask any slave-trading nation oh wait they all collapsed. keep em lean keep em mean is proven to be the fastest way to create decent and rioting. how do we know this? its literally the US armies psyops strategies for destabilizing influential companies and countries they proved it from Iraq to russia. 

Pay your staff a little more than you would think and then increase it with inflation yearly with or without performance. otherwise, your just putting them in debt long-term which will effectively shoot you in the foot. Desperate Reps damage reputations first.

PAY COMMISSIONS FOR GOING ABOVE AND BEYOND.
salary is for your job, your KPIs are your job your quota is your job.
the commission is for doing more than the job requires. % above quota keep it uncapped.

Yellow pages  CA followed that model and it still crushes it to this day in Canada with a b2b team calling since the 90s. i have never seen a better culture, and I would not believe how inclusive and supportive it was when NO ONE WAS STARVING huh kinda like happy reps make happy clients... who knew  
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