The Ultimate Guide to Sales Compensation in 2024 [New Research]

Sales compensation is the #1 lever companies have to attract top talent, drive the right sales behaviors, and ultimately hit revenue targets. But the sales comp landscape is changing fast as new roles emerge, selling motions evolve, and businesses adapt to economic uncertainty.

What worked in the past won‘t necessarily work today. That‘s why it‘s critical to stay on top of the latest sales comp trends and best practices – your ability to achieve your growth goals depends on it.

In this comprehensive guide, we‘ll equip you with everything you need to build a winning sales compensation strategy in 2024 and beyond, including:

• A deep dive into the key components of a well-designed sales comp plan
• The latest data and research on sales comp benchmarks and trends
• Tips and frameworks for optimizing your plan and avoiding common pitfalls
• Real-world examples from leading sales organizations

By the end, you‘ll have a clear roadmap to crafting a comp plan that attracts and motivates top performers while aligning with your business objectives. Let‘s jump in.

Why Sales Compensation Matters

First, let‘s look at why sales compensation is so critical to get right. Your comp plan directly impacts three key drivers of sales success:

1. Talent acquisition and retention. Top salespeople have plenty of job options and compensation is their #1 consideration in choosing where to work. A strong comp plan helps you win the war for sales talent.

2. Sales behavior and productivity. Your comp plan tells reps where to focus their time and energy. The right incentives drive the selling behaviors and activities that lead to more revenue.

3. Financial performance. Sales comp is a major investment, often accounting for 10-15% of a company‘s revenue. Optimizing your comp spend directly impacts profitability.

To further illustrate the impact, consider these findings from recent sales compensation studies:

• Companies with best-in-class sales comp plans have 15% higher revenue growth and 10% better rep retention than average. (Source: Sales Management Association)

• Reps are 3X more likely to pursue a sales opportunity if they think their comp plan incentivizes it. (Source: Xactly)

• Quota-carrying reps earned a record $108,000 median on-target earnings (OTE) in 2021, up from $102,000 in 2020. (Source: CIENCE)

In short, sales compensation has a direct, measurable effect on rep performance and overall financial outcomes. It‘s not something you can afford to neglect or put on autopilot.

The Anatomy of a Sales Comp Plan

Let‘s break down the key components found in most sales compensation plans:

Base Salary

Base salary is the fixed component of a rep‘s pay, typically paid out monthly or bi-weekly. It provides income stability and is based on experience level, industry norms, and cost of living in a given market.

According to 2022 data from RepVue, the average base salary for common sales roles is:

• Sales Development Rep (SDR): $51,000
• Account Executive (AE): $75,000
• Account Manager (AM): $67,000

Variable Compensation

Variable comp is the portion of a rep‘s pay that is tied to their performance against quota. It typically makes up 40-60% of a rep‘s total on-target earnings. The two most common forms of variable comp are:

• Commission: A percentage of revenue or gross margin paid on each closed deal. Commission rates vary based on the rep‘s role, experience, and performance.

• Bonus: A lump sum paid for hitting key milestones like quota attainment, sales contests, or annual targets. Bonuses motivate specific sales behaviors or outcomes.

Quota and Accelerators

Quota is the revenue or unit-sales target a rep is expected to hit in a given period, usually monthly or quarterly. It should be fair, achievable, and aligned with the company‘s growth goals.

Many plans also include accelerators, which are increased commission rates for performance above quota. For example:

• 102-125% of quota: 1.25X commission rate
• 126-175% of quota: 1.5X commission rate
• 175%+ of quota: 2X commission rate

Accelerators incentivize overachievement and help retain top performers who routinely exceed quota.

Compensation Mix

A typical on-target pay mix for a sales rep might look like:

• 60% base salary
• 30% commission
• 10% bonus

However, the optimal mix varies based on role, industry, deal size/cycle, and company growth stage. In general:

• Earlier-stage companies offer higher variable comp to fuel rapid growth
• Roles with more pipeline generation responsibilities have a higher base
• Reps selling larger deals with longer sales cycles need more base pay for income stability

For example, a rep selling $100K deals will likely be on a 50/50 base/variable split, while a rep selling $10K deals might be 70/30.

Sales Compensation Benchmarks and Trends

How does your sales comp plan stack up to industry norms and trends? Here are some key benchmarks to know based on recent research:

Average OTE by Role and Experience Level

Role	<2 Years	2-5 Years	5-8 Years	8+ Years
SDR/BDR	$73K	$78K	$84K	$95K
SMB AE	$90K	$112K	$134K	$161K
Mid-Market AE	$112K	$143K	$173K	$205K
Enterprise AE	$131K	$173K	$216K	$270K

Source: 2022 SaaS Sales Compensation Benchmarks

As you can see, OTEs increase significantly with experience as reps improve their skills and handle larger deals. Keep this in mind as you design comp plans for different tenure levels on your team.

Compensation Mix by Role

Here‘s how the average base/variable split looks for common SaaS sales roles:

Role	Typical Base/Variable Mix
SDR/BDR	70/30 to 60/40
SMB AE	60/40 to 50/50
Mid-Market AE	60/40 to 50/50
Enterprise AE	70/30 to 50/50

Source: 2022 Sales Compensation Trends

Note that the mix skews more toward base pay for enterprise AEs to provide income stability on longer, more complex sales cycles. But most AEs are still on a 50/50 or 60/40 split to drive high performance.

Emerging Sales Comp Trends

As buyer behaviors and go-to-market models evolve, sales comp plans are adapting as well. Here are some of the top trends shaping sales comp in 2024:

1. The rise of hybrid and product-led sales motions is leading to new specialized roles like "sales engineer" and "product specialist" with unique comp plans.

2. Usage-based pricing is shifting more plans toward a variable comp model based on customer adoption and expansion.

3. Comp plans are increasingly focused on profitable growth and efficiency vs. pure revenue growth as the economy softens.

4. Automated commission tracking and payouts are becoming table stakes to eliminate manual calculations and keep reps motivated.

According to Gartner, adapting sales comp to the needs of digital-first buyers is a top priority for 54% of CSOs in 2023. Flexibility and continuous improvement are key to staying ahead of the curve.

A Framework for Designing Your Sales Comp Plan

So how do you actually go about designing an effective sales comp plan? Here‘s a simple 5-step framework:

1. Define your goals. What are the top 3 sales outcomes you want to incentivize this year? Align your comp plan to those priorities.

2. Understand your roles. List out all your sales roles and define the key responsibilities, quotas, and metrics for each one.

3. Choose your comp levers. Determine the right mix of base, commission, and bonuses for each role based on your goals, market data, and feedback from reps.

4. Stress test and iterate. Model out the financial impact of your plan and gather input from key stakeholders. Revise as needed before rolling out.

5. Communicate and track. Clearly explain the plan to your team and provide real-time visibility into performance. Coach reps and adjust if it‘s not driving results.

The keys are to keep the plan simple, align it to your business model and goals, and ensure it feels fair and motivating to reps. Don‘t be afraid to experiment and evolve your plan as you grow.

Real-World Examples

To bring this all to life, let‘s look at how a few leading sales orgs approach compensation:

HubSpot

HubSpot uses a simple base salary plus commission model for its sales reps. Base salaries are pegged to the 50th percentile of market rates and commissions are uncapped.

There are monthly and annual quotas with accelerators for overperformance. All plans are managed in real-time through a custom-built commission dashboard.

The focus is on aligning comp to the customer lifecycle and keeping the sales team hungry. Reps are highly motivated to hunt new business and expand existing accounts.

Affirm

Affirm, the fintech unicorn, takes a unique approach to comp. In addition to competitive base pay and commissions, all reps get stock options.

There are also creative SPIFF bonuses, like luxe trips for the top 10% of performers each quarter. The goal is to reward strong performance while fostering a culture of ownership.

Interestingly, Affirm also has a 4-year vesting schedule vs. the typical 1-year period. The longer vesting incentivizes reps to grow their skills and career at the company.

Zoom

At Zoom, sales comp varies significantly by region to account for market differences. For example, US-based enterprise reps have a 50/50 base/variable split, while reps in many international markets are 70/30.

Quota is based on a combination of revenue, retention rates, and product line mix. There are also significant commissions for multi-year contracts to incentivize long-term deals.

Zoom adjusts quotas and comp frequently to maintain an aggressive growth posture. The heavy use of variable comp aligns with their land-and-expand model.

These examples illustrate that while there are certainly best practices in sales comp, there‘s no one-size-fits-all approach. The right plan is the one purposefully designed for your unique business context and goals.

Conclusion

Sales compensation will be a major focus and challenge for revenue leaders in 2024 amid economic headwinds, evolving buyer behaviors, and intense competition for talent. An agile, data-driven comp strategy will separate the winners from the losers in the coming year.

Use the insights and tactics from this guide to pressure test your current comp plan and identify opportunities to better incentivize the right outcomes. Benchmark your plan against industry data, gather feedback from your reps, and model out the impact of any changes.

Most importantly, treat your comp plan as a living, breathing asset to be updated as your business needs change. Continuous iteration in response to market shifts is the only way to sustain sales growth over the long term.

Your sales compensation plan is one of your most powerful tools to drive revenue and retain top talent. Make sure you‘re wielding that tool wisely – your success in 2024 depends on it.