I've seen both models - the will likely be dependent on the length of your sales cycle. It's hard to comp an inside sales rep on an opportunity won if the opportunity isn't going to close for 6 months or a year. If it's a 30 day close it's much easier. If you do have a longer cycle and need to comp on pipeline, then make sure the sales rep has to accept the opportunity and measure the % of opportunities closed by rep to ensure they aren't just accepting any deal.
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Creating a good comp plan can be tricky and there's certainly not a one-size-fits-all approach. Start off by deciding what you want them to accomplish. Sure, everyone wants revenue but let's be realistic. Do you want meetings? What kind of meetings? Lots of meetings with people with a passive interest or only a few meetings with people that are highly qualified? How many meetings, and subsequently opportunities, can your sales team handle?
I'll give you three examples. While I was at Marketo we started off by giving the SDRs a pipeline goal, we determined pipeline from opportunities and estimated the opportunity's value based on their employee headcount. This made sense for a while and was in line with our ASP based upon company size. However, as our business began to grow and the types of companies buying Marketo began to diversify this model became less useful. Then we moved to just comping on opportunities. This worked for a while, but at times it began to strain the relationships between SDRs and AEs where they were hounding AEs to convert leads all the time. By the time I left we had moved to a model that included SQLs (what the SDRs could control) Opportunities (what the combined effort of SDRs and AEs could control) and Closed-Won (what AEs could control based on the quality of the opportunies sourced by SDRs). I believe the breakdown was 30% SQL, 50% Opportunity and 20% Closed-Won. This was the best model we created while I was at Marketo and was very fair and balanced.
When I left Marketo and moved to Tibco the comp plan that was in place was just around setting meetings. In the BU I was working in there was no demand generation when I joined. There were just lists purchased for the SDR team to call into. We segmented by persona and vertical as best we could but we were essentially calling on cold leads. Qualification around a meeting was low, essentially if they had a pulse and wanted to talk they were passed to an AE. As a result we had a very low conversion rate and the amount of closed-won deals sourced by SDRs was very low - there was no real accountability nor any checks and balances to determine quality. Ultimately, I switched the comp plan to one that included a check on opportunities, so SDRs were comped on meetings as well as opportunities created as a result of those meetings. I chose not to include closed-won as a part of this plan because sales cycles were extraordinarily long and the SDR team there was relatively new - essentially most of the closed-won deals they sourced would be completed by the time they had promoted into a sales role. This plan was better than what came before it, but probably would have evolved had a stayed to include deal progression stages as a part of plan.
Now I'm at a start up called EverString where I've just built the first SDR team (currently at 4) in the last 60 days. At this point there is a heavy emphasis on meetings being set, but I don't want to build a bunch of false or un-closable pipeline, so I've started with a combination of SQLs (meetings) and opportunities. We don't have a great gauge on ASP or length of sales cycle just yet, but as those statistics become clearer I will add the closed-won aspect to the SDR comp plan, beginning in 2016. Prior to hiring SDRs or building their comp plans, I spent a month on the phone dialing all day. I used this data to build the KPIs and comp plans for the SDRs (as well as establishing messaging for prospecting emails and talk tracks/objection handling). This is a great way to begin building the "a day in the life of an SDR" internally and I would highly recommend it.
Since you are starting out with a single SDR and you're moving into new and unknown territory the best advice I can give you is to not be too married to the comp plan you give them. If you're finding that they can't hit it, change it. If you're finding that they're crushing it every month, change it. Keep playing with it until you get it right. Be open with the SDR at the beginning and set the stage for the fact that their plan might change. You want it to be fair for them and for the company. Get it dialed before you decide to scale the team. My recommendation would be to have a component that they can control and one that qualified the leads they are passing or good and closable.
I hope this helps. If you have any other questions, please feel free to reach out any time.
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The most successful IS comp plan I've ever seen was actually a hybrid model for a B2B enterprise software company. Since the sales cycles were 9 months +, as Maria mentioned it's difficult to create an incentive based on won opportunities, but it was also important to having the IS reps feel a sense of actual achievement since MQL's don't come with a bell ring.
The comp plan was set up with 3 components:
- A garaunteed base rate
- An outcome based addition based on the KPI of MQLs at a certain acceptance rate (since working with just MQLs made it too tempting to manipulate the system come EoQ
- An incentive based component based on closed opportunities. This was a relatively minor percentage, but it provided a motivation to the IS team to follow opportunities moving forward.
The team would calculate their income based on the base + KPI (MQL target) and the incentive based component proved to be a huge motivator.
The other interesting side effect of the incentive based component was that, since opportunities would take 9-12 months to close, the IS actually started to develop pipelines of their own. This led to creating a "stickiness" which generally doesn't exist in Inside Sales, and that particular IS team has an average employment term of over 4 years (compared to an IS industry average of 18-24 months).
Hope this helps