Skill: 1kalin/afrexai-sales-compensation (version 1.0.1)

# Sales Compensation Plan Designer Design, audit, and optimize sales compensation structures that actually drive the behavior you want. Covers quota setting, OTE splits, accelerators, clawbacks, SPIFs, and multi-role plan architectures. ## When to Use - Designing comp plans for new sales roles (AE, SDR, CSM, SE, Channel) - Auditing existing plans for misaligned incentives - Modeling plan costs and quota coverage ratios - Building accelerator/decelerator curves - Comparing comp structures across industry benchmarks ## Compensation Plan Framework ### Step 1: Role Classification Classify the role before designing comp: | Role Type | Typical OTE | Base/Variable Split | Quota Multiple | |-----------|-------------|--------------------:|----------------| | SDR/BDR | $65K-$90K | 70/30 | 3-5x variable | | AE (SMB) | $100K-$140K | 50/50 | 4-6x OTE | | AE (Mid-Market) | $150K-$200K | 50/50 | 4-5x OTE | | AE (Enterprise) | $200K-$300K+ | 60/40 | 3-4x OTE | | CSM/AM | $90K-$130K | 65/35 | 4-6x variable | | Sales Engineer | $130K-$180K | 70/30 | Team-based | | VP Sales | $250K-$400K+ | 55/45 | 2-3x OTE | | Channel/Partner | $120K-$160K | 60/40 | 3-5x variable | ### Step 2: Quota Setting Methodology Use bottom-up capacity model: 1. **TAM Analysis** — addressable market in territory 2. **Historical Performance** — trailing 4-quarter attainment distribution 3. **Ramp Adjustment** — new hires at 25/50/75/100% quota months 1-4 4. **Coverage Ratio** — pipeline-to-quota (3x minimum for new business, 2x for expansion) 5. **Quota:OTE Ratio** — should be 4-6x. Below 3x = overpaying. Above 8x = nobody hits it. Red flags in quota setting: - Top-down only (board target ÷ headcount) - Same quota for all territories regardless of TAM - No ramp period for new hires - Changing quotas mid-quarter - More than 60% of reps missing quota (plan problem, not people problem) ### Step 3: Variable Compensation Design **Base Structure:** ``` Monthly Variable = (Attainment % × Quota × Commission Rate) ``` **Accelerator Tiers (recommended):** | Attainment | Rate Multiplier | Rationale | |------------|---------------:|-----------| | 0-50% | 0.5x | Below threshold — reduced payout | | 50-80% | 0.8x | Approaching target — building momentum | | 80-100% | 1.0x | At plan — full commission rate | | 100-120% | 1.3x | Above plan — reward overperformance | | 120-150% | 1.5x | President's Club territory | | 150%+ | 1.8-2.0x | Uncapped or soft cap (model both) | **Commission Rate Benchmarks:** - New Business: 8-12% of ACV - Expansion/Upsell: 4-8% of ACV - Renewal: 1-3% of ACV - Multi-year: 1.2-1.5x first-year rate ### Step 4: Plan Component Mix For complex plans, weight components: | Component | Weight | Metric | |-----------|-------:|--------| | New Logo Revenue | 50-60% | New ACV closed | | Expansion Revenue | 20-30% | Net expansion ACV | | Strategic Objective | 10-20% | Product mix, multi-year, strategic accounts | | Activity Metrics | 0-10% | Pipeline generated (SDRs only) | Rule: Never more than 3 variable components. Complexity kills motivation. ### Step 5: Clawback and Recovery Provisions Standard terms: - **Churn clawback**: Pro-rata recovery if customer churns within 6-12 months - **Non-payment clawback**: Commission reversed if invoice unpaid >90 days - **Early termination**: Unvested accelerators forfeit on voluntary departure - **Draw recovery**: Unearned draws recovered from future commissions (max 2 quarters) ### Step 6: SPIF Design (Short-term Incentive) Use SPIFs for 2-4 week behavioral nudges: - New product launch push ($500-$2,000 per deal) - Quarter-end pipeline acceleration - Competitive displacement bonus - Multi-year contract premium SPIF rules: - Max 4 per year (they lose impact if constant) - Clear start/end dates - Simple qualification (one metric) - Immediate payout (within 2 weeks of close) ### Step 7: Plan Cost Modeling Model these scenarios before launching: 1. **Bear case**: 40% of reps at 80% attainment → total comp cost 2. **Base case**: 60% at quota, 20% above, 20% below → total comp cost 3. **Bull case**: 80% at 110%+ attainment → total comp cost (check for budget blow-up) **Healthy ratios:** - Sales comp as % of revenue: 15-25% (SaaS) - CAC payback: <18 months - Quota:OTE: 4-6x - Rep productivity: >$500K ACV/AE/year at maturity ### Step 8: Annual Plan Audit Checklist Score each item 1-10: 1. ☐ Quota attainment distribution (bell curve centered at 100%?) 2. ☐ Voluntary turnover of quota-carrying reps (<15%?) 3. ☐ Time-to-ramp for new hires (meeting benchmark?) 4. ☐ Deal size trends (growing or shrinking?) 5. ☐ Discount depth (comp plan driving discounting?) 6. ☐ Multi-year mix (incentive working?) 7. ☐ Product mix (strategic products getting traction?) 8. ☐ Comp cost as % of revenue (in healthy range?) 9. ☐ Accelerator payouts (are top reps being rewarded enough?) 10. ☐ Clawback frequency (too high = bad customers, too low = loose terms) **Score interpretation:** - 80-100: Plan is working. Minor tweaks only. - 60-79: 2-3 components need redesign. - Below 60: Full plan overhaul needed. ## 2026 Benchmarks by Industry | Industry | Avg AE OTE | Base/Var | Quota:OTE | Avg Attainment | |----------|-----------|----------|-----------|----------------| | SaaS | $165K | 50/50 | 5x | 62% | | Fintech | $185K | 55/45 | 4.5x | 58% | | Healthcare IT | $155K | 55/45 | 5x | 65% | | Cybersecurity | $175K | 50/50 | 4x | 60% | | AI/ML | $190K | 50/50 | 4x | 55% | | Legal Tech | $145K | 55/45 | 5.5x | 68% | | Construction Tech | $135K | 55/45 | 6x | 70% | | Manufacturing | $140K | 60/40 | 5.5x | 67% | | Professional Services | $150K | 55/45 | 5x | 64% | | Real Estate Tech | $130K | 55/45 | 6x | 72% | ## Common Mistakes 1. **Capping commissions** — your best reps will leave for uncapped plans 2. **Quarterly resets with no floor** — creates sandbagging and feast/famine 3. **Too many metrics** — if reps can't calculate their own comp, the plan fails 4. **Equal quotas across unequal territories** — punishes reps in harder markets 5. **Changing plans mid-year** — destroys trust faster than anything else 6. **No accelerators** — linear plans don't motivate above-quota performance 7. **Ignoring ramp periods** — new hire attrition spikes when they can't earn early ## AI-Era Adjustments (2026+) Sales teams using AI agents for prospecting, qualification, and proposal generation are seeing: - 30-40% increase in rep capacity (more pipeline per AE) - SDR role compression (AI handles top-of-funnel → SDR quotas need restructuring) - Faster ramp times (AI-assisted onboarding cuts ramp by 30-45 days) - Higher quota expectations (adjust gradually — 10-15% annual increase, not 40% overnight) Comp plan implications: - Shift SDR comp toward quality metrics (SQL conversion, not just meetings booked) - Add AI adoption component (5-10% of variable tied to tool utilization) - Model higher quotas with maintained OTE — don't cut OTE when raising quotas - Budget for AI tooling ($200-$500/rep/month) as sales cost, not IT cost --- *Built by [AfrexAI](https://afrexai-cto.github.io/context-packs/) — AI context packs for businesses that ship.* Get your industry-specific AI strategy pack: **https://afrexai-cto.github.io/context-packs/** ($47/pack) Calculate your AI revenue leak: **https://afrexai-cto.github.io/ai-revenue-calculator/**


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