The sales comp plan is the single most powerful behavioral lever in a startup. Rep behavior follows the comp plan far more closely than it follows the pitch deck, the CRM training, or the CEO all-hands. If the plan pays for logos, reps chase logos. If it pays for ARR with multi-year weighting, they chase multi-year contracts. If it pays for anything closed by year-end, expect a flood of ugly Q4 discounts.
Most early-stage AE plans run 50/50 (half base salary, half variable at 100 percent of quota). SDR plans typically run 70/30. Customer success plans that include renewals often run 80/20. Move the mix toward more variable only when the pipeline is predictable enough that a rep hitting quota is a repeatable outcome, not a lottery.
A good quota is 4-6x on-target earnings (OTE). If your AE OTE is $180K, the annual quota should land between $720K and $1.08M in new ARR. Below 4x, the unit economics stop working. Above 6x, reps stop believing the number and stop trying.
Ramp new reps with a reduced quota for the first two quarters (typically 25 percent in Q1, 65 percent in Q2, full quota by Q3). Skipping ramp is how you burn out your first ten hires.
Accelerators reward overperformance. A common structure is 1x commission rate to 100 percent of quota, 1.5x from 100 to 150 percent, and 2x above 150 percent. This turns your best reps into recruiters — they will bring you the next best reps.
Decelerators (paying a reduced rate below some floor, say 50 percent of quota) sound tempting but usually backfire on early teams. They tell struggling reps to quit rather than push, which is the opposite of what you need in year one.
If a customer churns within 90 days of close, the commission should be clawed back. Without this, reps sell to unqualified buyers, book the commission, and walk away from the mess.
1. Paying on bookings not cash. In an annual contract world, this works. In a monthly or usage-based world, it creates a giant AR problem. 2. Changing the plan mid-year. Even if the plan is broken, the trust cost of changing it usually exceeds the cost of leaving it in place until January. 3. Making the plan too complex. If a rep cannot calculate their commission on a napkin, the plan is too complex. Simple plans drive focused behavior.
The first version of your sales comp plan will be wrong. Ship it, watch what reps actually do, and iterate every 12 months.
