While a detailed implementation depends on your specific market and business goals, here is a helpful framework for compensation.
Business development roles, similar to Inside Sales, are common roles in technology and Saas environments where "someone has to make something out of Marketing leads", e.g., qualify them, nurture them to eventually initiate a sales cycle. Business Development works with Marketing, Sales and has a good understanding of the problems solved by your products or services.
The business development function is a vital element to put your sales efforts on solid ground, to give your sales team something to work on. While you might not have business development as a stand-alone group of individuals, you will most likely perform the activities, functions of business development. As a key driver of new business revenue, the compensation of individuals tied to business development should be structured to support your goals.
In the following example, we're using the following nomenclature:
Base Salary: The base income someone makes, regardless of success (or lack thereof).
Commission: The percentage of (deal) revenue given to an individual. The totality of Commission payments makes up the variable salary.
Cost of Sales: The % of revenue you spend on generating it.
On-Target-Earnings (OTE): The total of Base and Variable Salary upon 100% Quota attainment. The amount of money you pay someone who makes their number.
Quota: The Sales target (often in revenue or bookings) you give to an individual or group of individuals. "The Number" that needs to be made.
Variable Salary: The additional salary, on top of the base salary, that is tied to the individual's performance.
- Cost of Sales (of course, that depends on what you call sales). In established businesses, that will often be less than 20%. In a startup, this might be at 50% or higher.
- Base/Variable split of a business development rep (or any sales staff). Your compensation philosophy will drive a number you and your team will feel comfortable with and what makes you an attractive employer in the market plan. Examples:
- 65 (base)/35(variable) for business development,
- 45/55 for a VP of Sales
- Say a business development rep makes $120k OTE. That'd be
- $78k base per year or $6,500/month.
- and $42k in commission.
- if you had only above reps and no sales management and if you have 20% Cost of Sales, you'd have to have a quota of $620k in revenue for the rep.
- That'd define the commission percentage of $42k/$620k or 6.77%.
As mentioned above, the specific numbers for the sales or business development or sales function you are looking to fill and compensate depend on your specific business, your industry, your market, your product. $120k is not "the right" number, even though many pay in this range.
The above example also does not make any provisions for taxes, benefits, etc. All of those to be included for a real-life calculation.
The above is intended to give you a framework to set up your compensation spreadsheet and tweak it until it is right.
For specific assistance with getting your Sales Operations set up for your business, please contact our Sales Enablement team.