For early-stage startups that are raising a Series A, moving from a founder-led sales approach (where the founder is often the primary salesperson) to a playbook-led model represents a significant milestone. This shift entails implementing structured and scalable sales processes and methodologies. A crucial aspect of this transition is the design of a compensation plan that motivates and aligns the sales team with the new strategy.

When you are raising funds and you need to demonstrate and execute a scalable business model, your sales compensation plan is a manifestation of your whole go-to-market (GTM) strategy. It reinforces your business goals, sets up the right sales behavior and balances the cash-out of customer acquisition costs (CAC) with the cash-in from collections to help meet your capital efficiency goals. In addition, it is both the roadmap and contract with your sales team.

In this blog, we’ll explore the key considerations and steps in creating a compensation plan for sales reps that drive the right sales behaviors and support the desired outcome.

Download Companyon’s Sales Compensation Framework HERE.

Understanding the Transition from Founder-Led to Playbook-Led Sales

The shift from a founder-led to a playbook-led sales motion signifies a maturation in your startup’s sales strategy: founder-led sales rely heavily on the founder’s network, evangelization, and domain expertise, whereas playbook-led sales introduce standardized processes, sales methodologies, and scalable tactics executed by professional GTM teams to drive predictable revenue growth. Implementing a comprehensive and thoughtful sales compensation plan is a crucial aspect of navigating this shift well.

A sales compensation plan is not just about setting parameters for salaries, commissions, and bonuses. It’s about aligning your entire sales team to ensure every rep is focused on your company’s short-term and long-term goals. Let’s discuss how to reach that alignment.

Key Considerations in Compensation Planning

Compensation plans guide the behavior of your sales channels. They need to be dynamic enough to tweak behaviors and outcomes according to short-term tactics but robust enough to align sales behavior and compensation to longer-term goals. Here are some of the key considerations when building your compensation plan:

1. Align with Strategic Objectives: Align the compensation plan with your startup’s strategic objectives, not just revenue but specific goals such as target market segment expansion, ideal customer profile (ICP) acquisition, existing customer revenue expansion, pipeline development, and customer logo retention.

Ensure that the plan incentivizes behaviors and outcomes that support the unit economics you need to build a strong business that attracts customers, employees, and investors.

2. Balance Fixed and Variable Components: Balance fixed salaries and variable incentives (commissions, bonuses) to attract and retain top sales talent.

Allocate 50% to a maximum of 70% of on-target earnings (OTE) to fixed salaries. In an early-stage business, a lower fixed income of 50% will give you more incentive leverage to target specific behaviors and outcomes as you build your playbook while allowing you to offer higher OTEs to attract the right talent.

Don’t overengineer the variable compensation. It is not unusual to offer a simple flat commission for 75% of the variable and a quarterly bonus targeted at short-term incentives for the other 25%. It is hard to establish credible goals when there is limited traction to base them on, so make it clear to your team that goals may change as you climb this learning curve together.

3. Set Realistic Quotas that Reward Performance: Establish achievable yet ambitious sales quotas that reflect your startup’s growth trajectory. Design commission structures that reward new customer acquisition (new logos) and existing customer expansion (upsells, cross-sells). To encourage reps to go above and beyond, include accelerators or bonuses for exceeding quota or landing high-value accounts.

4. Consider Adaptive Quotas to Manage Headwinds: At this stage of growth, quarterly targets often change, necessitating flexibility in compensation plans throughout the year.

To address this, quotas can be set every six months and sometimes quarterly during the first year of expansion to adapt to evolving market conditions and performance trends. Incorporating a portion of variable compensation paid out regardless of sales in a given quarter can provide stability and motivation for sales reps during periods of volatility.

This adaptive approach ensures that the compensation plan remains aligned with the company’s evolving needs and encourages consistent sales performance despite challenges.

5. Leverage “Disincentives” to Align Sales Behavior: To focus on the right market segment, you must do more than target it. Sales disincentives—such as withholding quota contributions, commissions, or bonuses for sales made to non-ICP customers—can steer sales teams toward desired behaviors and outcomes. For instance, by implementing disincentives for selling to non-ICP customers, sales reps are encouraged to focus on prospects that align with the company’s target market, resulting in higher-quality leads and improved customer retention. If you pay lower commissions on non-ICP customers or exclude them from quota attainment, sales reps will only focus on your ICP.

6. Track and Adjust Performance: Implement a robust tracking system to monitor sales performance against quotas and targets. Be prepared to regularly review and adjust the compensation plan based on actual performance, market dynamics, and business objectives.

The compensation plan is critical to your desired outcomes in a coin-operated role like sales. Implementing these methodologies will help transform your sales department from a group of individuals to a true team—sharing a focus, a vision, and objectives under your control. This is a vital step for any expanding company transitioning from founder-led to playbook-led sales.

At Companyon, we specialize in accelerating growth for early-stage software companies by providing the expertise and hands-on guidance needed to navigate these pivotal transitions. If you’re ready to propel your startup to new heights, contact us today to learn how we can support your journey from seed to Series A and beyond. Explore our blog for more insights and detailed guidance on scaling your sales operations.