RandyLahey

Account Executive

Acclaimed Answer

Valued Contributor

Need some help/advice on structuring compensation

Good morning fellow savages,

TL:DR - A close friend of mine needs help with his software startup, I can help him sell the product, do demos, CRM setup, etc. Unsure of how to go about compensation.

A close friend of mine recently began making serious progress with their software startup. He's a full-time doctor, and this product is aimed at Physicians and the healthcare industry. Sadly, he is starting to burn through cash (paying developers) and is also burning himself out.

He recently approached me for some help. I have some experience building some demand generation strategies, and would also leverage my sales skills to help him out.

In my sales career, I have traditionally held full-time permanent roles in startups, mature companies, and a bunch of others in between. I have never quite consulted or freelanced like this.

When the conversation turned to paying me for my efforts, I was a bit stumped. The ad buying & demand gen will only be a few hours per month, so I'm inclined to just help him out.

However, when to actually selling the product, since it may end up being around 4-5 hours a week, setting up their CRM (HubSpot), doing demos, etc., I was unsure of what the ideal way to go about this would be.

My initial thought was commission only, some % of the ARR, as foregoing an hourly 'base' will help him out in the interim.

Notes on the product:

SaaS product with a monthly fee.
Selling to Physicians/Hospitals/Health care industry.
Entirely bootstrapped.
Developers are biggest cost at the moment.

If you chose 'other' in the poll, please elaborate in the comments below.

As always, your advice and suggestions are very much appreciated my fellow savages.

How should I structure my compensation

Attached poll

Commission only (figure out %) Charge an hourly rate and forego commission Mixture of both Other

*Voting in this poll no longer yields commission.

💰 Compensation

16

29 comments

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CuriousFox

WR Officer

6

🦊

What do you think your time is worth?

RandyLahey

Politicker

2

Account Executive

$400 per hour BOOM.

Nah but I do have my hourly rate, I’m just exploring the commission route first.

If it weren’t for a close friend I’d be more ruthless in my valuation.

Kosta_Konfucius

Politicker

2

Sales Rep

Is this going to be in addition to your current role or your new 40 hours/week role.

I would be less willing to give a big friend discount if this is your main role.

RandyLahey

Politicker

1

Account Executive

Yeah this would be on top of my 40+hr/week, full-time role.

poweredbycaffeine

WR Lieutenant

5

☕️

Set up a consulting fee. Good place to start is 1.5x your current hourly rate (either calculate it or it’s on your paystub)

Then, either negotiate equity or a commission structure. The problem with a commission structure this early on is a lack of clarity on the unit economics. However, you could decide that you get a flat 10% on monthly or quarterly ARR and then adjust at 6 and 12 months into the project.

If you don’t want to take a consulting fee to preserve cash, negotiate more equity and take 12-15% of ARR.

RandyLahey

Politicker

3

Account Executive

Because it is a close friend, I'm fine with charging my current rate.

I like the idea of adjusting every 6 months or so. I do have a good understanding of their sales to date, so I think around 10-15% ARR is the move. Maybe some equity as well.

Thanks for sharing your thoughts PBC.

jefe

Arsonist

5

🍁

I definitely think a mixture of both is the most fair to you both.

Glad you're not going to hose him as he's a buddy of yours, but we all know the risks of commissions only.

PBC nailed it, in my opinion @poweredbycaffeine

Maximas

Tycoon

3

Senior Sales Executive

Needs to be mixture of both Randey, I personally suffered from the commission structure only!

RandyLahey

Politicker

1

Account Executive

Yeah, I want to make sure I get paid sufficiently (don't we all). But I do have a high degree of trust in this individual, so I think a commission plan could be feasible.

Pachacuti

Politicker

3

They call me Daddy, Sales Daddy

Since this is for a friend and they are a start up, I’d go commission only.

However, going for equity might also be a play.

RandyLahey

Politicker

1

Account Executive

This is what I'm leaning towards. Considering they are entirely boot-strapped to date, Equity is an option.

Sunbunny31

Politicker

3

Sr Sales Executive 🐰

Some solid recommendations below, so my contribution is caution. It's a friend, and you're helping out, but - treat this as business. Have everything in writing, solid expectations on both sides, and make sure that your time is compensated. This keeps you accountable for your time and them accountable for using it. The goal there is to preserve the cordial relationship and not have anybody feeling taken advantage of, because you've now put things into the business world, not "doing favors for a friend" world that can lead to missed expectations and hard feelings.

RandyLahey

Politicker

2

Account Executive

Well said - we've agreed to keep this as separate from our personal lives as possible, and writing it into contract will definitely help us achieve that.

Sunbunny31

Politicker

2

Sr Sales Executive 🐰

It's a smaller thing, but a comparison:
A friend of mine sharpens skates. He has invested in the equipment, and is very good at it. He charges a nominal amount for the sharpening, rather than just doing it. And here's why it matters: we can ask if skates can be sharpened by a specific day, and not feel as though we're imposing. He can always say no, if he's out of town or cannot get it done, but it's not awkward. He gets the money out of the deal to update his stones, so he doesn't feel like anybody is taking advantage of him. It's a win/win. He runs his little side gig, and we are still friends.

RandyLahey

Politicker

1

Account Executive

Beautiful; a fellow puck player❤️

WheelofCheese

Opinionated

2

Sales Executive

Commission only is a tough pill to swallow. If a base salary is just not feasible, I would lean toward commission with a monthly and/or quarterly bonus based on performance objectives. Even this is a bit of a stretch.

RandyLahey

Politicker

2

Account Executive

Under any other circumstance, yeah I'd insist on a type of base fee/salary.

WheelofCheese

Opinionated

1

Sales Executive

Very nice of you!! I get that. It’s a friend.

HVACexpert

Politicker

2

sales engineer

Make sure to get it in writing. Also, maybe start your own LLC company, not too hard to set one up, and provides some insurance / financial liability coverage for you at least.

Hard to get commission in sales they aren’t there. I would get a contract together that is month to month or 3 months long, then if things change and he is still using you l, you can renegotiate as each contract expires to change rates or add in a commission percentage.

RandyLahey

Politicker

2

Account Executive

Yeah so I do have a holding corp llc that I will invoice through, I was able to get a good gauge of their sales and progress thus far.

I think it's reasonable to expect them to grow, so I'm thinking 10% of the ARR would be what I'd ask for. Comped out either quarterly or twice a year.

HVACexpert

Politicker

1

sales engineer

It’s not a bad place to start the negotiations at least. Good luck!

RandyLahey

Politicker

1

Account Executive

Cheers!

SoccerandSales

Big Shot

2

Account Executive

With healthcare buying decisions being the way they are right now, going to be difficult to sell and commission only will be pretty dangerous. Obviously comes down to product a fair bit as well. Seeing as my entire day is spent in the ambulatory space, would be curious to hear about what it does

RandyLahey

Politicker

1

Account Executive

Happy to share more details via DM.

TennisandSales

Politicker

2

Head Of Sales

i would suggest against just being commission with a company at this early of a stage. a few reasons:

1. how many sales you will actually make is hard to judge. if there are not alot you dont get compensated for the work you are doing, which is valuable to the CEO even if no deals are closed. and if you close too many its way more expensive than the CEO expected haha.

2. If you only get paid on close won deals, then there is more pressure on the relationship. you are there to help, and to uncover key learnings. that can happen even with no closed deals.

i would go set fee for a period of time. then re evaluate from there.

RandyLahey

Politicker

2

Account Executive

Nice, thanks for your input.

I'm still leaning toward commission-only, I think I've got a good graps on their sales & trajectory.

But always helps to consider every option.

FinanceEngineer

Politicker

2

Sr Director, sales and partnerships

I love helping out a friend. However, this is your profession. The thing you’ll do is not pad your numbers. You have to be comped and just take some equity or warrants as a favor as you are probably offering your skills at a discount to make you whole. Respect and help is a two way street. If he wants to call you for help every now and the , that’s a different story.

RandyLahey

Politicker

1

Account Executive

Agreed. It’s difficult to strike a balance, but I won’t compromise my integrity.

Angusmacg

Valued Contributor

1

Territory Account Mgr.

Assuming he is a good friend and you want to see him succeed I would give him more of a fixed cost ($/hr) that he can plan for and then as a bonus he can provide some ownership stake for certain milestones.

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