Theflatpickinseller

Enterprise Account Executive

Good Citizen

Contributor

Fire Starter

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

37 comments

Sort by:

sahil

Notable Contributor

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

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

CMO (Chief Meme Officer)

An old employer implemented this and it worked out very very very well for everyone.

SalesPharaoh

Big Shot

Senior Account Executive

That is pretty well thought out plan. Is it implemented anywhere??

FeelItInMyPlums

Valued Contributor

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

Beasthouse

Opinionated

Corporate trainer

true facts i would have never left

Beasthouse

Opinionated

Corporate trainer

THIS

Beasthouse

Opinionated

Corporate trainer

@eds yoo
@JC10X thoughts

FeelItInMyPlums

Valued Contributor

Sales Account Executive

Wow I posted this months ago. my job is still shit. anyone hiring?

Beasthouse

Opinionated

Corporate trainer

cloudtask
yellowpages
nextiva
vonage partners
sourceforge

are all hiring from what I hear

sharpshooter2

Catalyst

MAKING IT HAPPEN!

Thats how most account managers are paid, on renewals etc.

CadenceCombat

Tycoon

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

Good Citizen

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

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

👑

I agree with all of this.

nomdeguerre

Executive

Account executive

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.

MinisterOfChaos

Politicker

Commercial Account Executive

Exponentially more important if you've climbed the ladder a bit and are at an Enterprise (or similar) level. At that level, it is a small world, and people have long memories.

An added bonus of treating customers well at that level: regardless of whether you get a bonus off renewal, etc. - they may offer you a better job down the line.

mosales

Executive

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

Curb_Your_Bro_Thusiasm

WR Officer

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.

SalesPharaoh

Big Shot

Senior Account Executive

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

Big Shot

Head of Sales

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

Big Shot

Senior Account Executive

makes sense in industries like that whom their product is B2C oriented if we reference your analogy. Marketing bears more of the grunt.

SalesMofo

Big Shot

Head of Sales

Agreed--I'm honestly not sure why B2C salespeople still exist. Can I just buy my cell phone online and be done with it? Pay those guys to be elite customer service agents, and pay them to solve problems.

SalesPharaoh

Big Shot

Senior Account Executive

well to make sure to get real estate (in stores it comes to product placement etc...) they have a role but I don't think they get elite pay at all, they are more towards operational and logistic activation than anything.

Beasthouse

Opinionated

Corporate trainer

b2c sales people exist to manage the crap service and or product complaints and still somehow trigger an upsell.\

RealEstateVeep

Politicker

VP of Real Estate

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.

wahmsales

WR Officer

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."

Beasthouse

Opinionated

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

CuriousFox

WR Officer

🦊

I'd pick C

Trinity

WR Officer

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

Good Citizen

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

Regional Sales Director

Point B and C resonates well.

Hoopnip

Politicker

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 ?

10XQLA

Politicker

Medical Sales Assassin

Definitely choice C

CRAG112

Valued Contributor

Account Executive

SALES
See all of us losing everything systematically.

TEAM
Together everyone accomplishes more.

Bravado is a community of trusted sales professionals endorsed by their customers.

Products

The War Room Jobs Salary Guide Tech Sales U

Company

About Us How It Works Blog Bug Bounty

Contact

Press Careers

If you are hired as a contract sales rep by a Bravado customer, we may ask you to prove access to the employee email account provided to you by that customer. This data will be shared with customers to track your sales productivity; customers can use this data to confirm you meet the minimum activity requirements to pay out your ramp stipend and commission.

Theflatpickinseller

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?

37 comments

Related posts

If Sales is a meritocracy and we all have the same expectation to produce, why is the so much talk about pay equity/inequality in sales? Shouldn't the meritocracy part be an equalizer?

Since pandemic pushing everyone to wfh, many people are of the opinion that all aspects of businesses (at least for software) can be done remotely. How many of you still believe that persona touch goes a long way to close a sales deal?

If you join a SaaS company and thrive at the beginning due to inbound leads and good SDR and then sales start going down due to a change of SDR and less inbounds, does that mean you’re not a competent sales person or does it mean it’s time to move on to another company?