Dan Martell - February 05, 2018


How To Compensate & Scale Your Startup Sales Team


Episode Stats

Length

5 minutes

Words per Minute

166.40227

Word Count

979

Sentence Count

48


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

Transcript

Transcript generated with Whisper (turbo).
00:00:00.000 Hi, I'm Dan Martell, serial entrepreneur, investor,
00:00:02.100 and creator of SaaS Academy.
00:00:03.680 And in this video, I'm gonna share with you
00:00:05.680 the five steps to compensating and scaling
00:00:08.240 your startup sales team,
00:00:10.340 specifically around hiring efficiently,
00:00:13.840 managing the expectations for comp structures,
00:00:16.560 and growing your team.
00:00:19.920 Now, be sure to say to the end,
00:00:21.260 where I'm gonna share with you an exclusive video
00:00:24.360 on building your sales engine.
00:00:30.000 So when you start building out your sales team,
00:00:44.980 maybe you're worried that you're doing it wrong,
00:00:48.120 that you're probably gonna put yourself in the hole
00:00:50.260 or that the person that you hire
00:00:51.700 is gonna feel motivated enough to really sell the product.
00:00:54.680 Maybe the pricing hasn't been figured out.
00:00:56.340 What I wanna share today are the five steps
00:00:58.140 to get you to a point where you feel
00:00:59.620 confident that you're moving towards the right direction
00:01:02.660 to build a fair comp structure for your sales team
00:01:05.820 where they can feel value-added, covered,
00:01:08.820 and also feel like they have room to grow
00:01:11.020 within your business.
00:01:12.600 Step one, paying a base salary.
00:01:16.180 Now, I really think it's important
00:01:17.540 when you hire salespeople to cover
00:01:19.600 some level of base salary.
00:01:21.700 I know there's days and areas
00:01:23.500 where you can pay somebody commission only
00:01:26.020 and have a churn and burn kind of culture,
00:01:28.500 but as I've seen, as I've worked on personally scaling
00:01:31.400 my own sales teams and helping my clients that I coach
00:01:34.620 scale to 150 salespeople plus,
00:01:37.320 is having that base really allows somebody to feel confident
00:01:40.600 that as you're investing in them, learning, training,
00:01:44.400 and growing, that they don't have to worry month to month.
00:01:47.160 The last thing you wanna do is invest in somebody
00:01:48.820 for a couple months, only having them leave
00:01:50.600 because financially they can't afford to keep on that track.
00:01:54.400 Step two, set a quota.
00:01:57.440 When you start off in sales,
00:01:58.880 it's really important to have a target
00:02:00.380 because you wanna know like,
00:02:01.600 what are the expectations for me?
00:02:03.240 If I wanna know, you know,
00:02:04.520 when I'm playing a game of soccer,
00:02:05.620 I wanna know what's the scoring structure?
00:02:07.720 Where's the goal?
00:02:08.940 What's the rules of the game
00:02:10.460 so that I understand what my target is?
00:02:12.200 And the same thing is for sales.
00:02:13.780 Understanding my quota gives me that mark.
00:02:16.640 Now, when you're starting off,
00:02:17.840 there's a good chance that you're not gonna hit that,
00:02:19.880 but at least you understand
00:02:20.760 what percentage of quota that you're hitting.
00:02:23.340 And over time, you wanna keep having that percentage go up
00:02:26.240 and up.
00:02:27.140 So it's really important that as a founder,
00:02:28.680 you set that quota for your sales team based on your industry
00:02:32.500 and the pricing of your product.
00:02:34.660 Step three, have a variable compensation component.
00:02:39.000 This means that a percentage of their pay
00:02:41.620 is based off of sales that they're making.
00:02:44.320 Typically that falls around 10%.
00:02:46.880 So whatever they sell on a monthly basis,
00:02:49.200 they're getting 10% added on top of their base salary
00:02:52.300 so that they have a target.
00:02:55.020 so quota would be 100%.
00:02:56.860 They know that as they grow their sales revenue,
00:02:59.420 they're gonna get paid a bigger and bigger commission check.
00:03:01.960 It's important to align their activities with incentives
00:03:05.300 that drive the business forward.
00:03:07.260 So having that variable structure is the way to do that.
00:03:10.360 Four, use sales accelerators.
00:03:13.280 So as a rep kinda grows and hits a higher percentage
00:03:17.400 of their quota, eventually there's gonna be a magical day
00:03:19.740 where they hit 100% or higher.
00:03:21.680 And what you wanna do is you wanna give them
00:03:23.240 an incentive to do that.
00:03:24.720 And the way you do that is through an accelerator.
00:03:26.480 Typically, you know, 15% is what I've seen.
00:03:29.500 So essentially, if they're at 10% sales
00:03:31.860 on a variable comp structure, once they hit 100% plus,
00:03:35.340 they get 15% on the previous sales
00:03:38.760 and any more they do ahead of that
00:03:40.500 so that they're feeling motivated to not only hit quota
00:03:43.240 but to crush it.
00:03:44.340 So you wanna do that through an accelerator mechanism.
00:03:47.380 Five, hire a sales manager.
00:03:49.980 Now, it's gonna be different for every kind of company
00:03:51.680 but typically, if you've got 10 sales rep,
00:03:53.940 and you can afford to hire a sales manager.
00:03:56.040 And what you wanna do is you wanna set their quota,
00:03:58.940 because they gotta kind of perform,
00:04:00.580 at 80% of the quota for their sales team
00:04:05.160 and allow them to manage.
00:04:06.560 And manage means setting up a training structure,
00:04:09.420 really coaching their new hires,
00:04:11.520 making sure that their reps are becoming efficient
00:04:13.860 and continue growing their quota structure,
00:04:15.960 hiring, firing, setting those expectations,
00:04:19.460 refining the pricing model,
00:04:21.140 ensuring that the reps are pushing the right products
00:04:23.780 that have the highest gross margin within your company.
00:04:26.600 And the way I think about it is that if you can get a new rep
00:04:29.620 up to speed within six months,
00:04:31.760 let's say 80% of quota within six months
00:04:34.200 and you wanna keep hiring because that's a great trend
00:04:36.680 and that's what you wanna hold your manager to.
00:04:39.280 So quick recap, one, make sure you pay a base salary.
00:04:42.320 Two, set a quota for them to hit.
00:04:44.740 Three, have a variable component of their comp structure.
00:04:47.560 Four, have accelerators that gets them excited
00:04:50.360 about growing in five, hire a manager at scale
00:04:53.020 so that you can manage your salespeople,
00:04:54.360 get them efficient and keep growing your business.
00:04:56.820 As I mentioned, I have an exclusive video linked up below
00:05:01.040 on the three forces of the sales pipeline.
00:05:04.260 And if you wanna watch that, just click that below.
00:05:06.460 It's not public, it's an exclusive for you.
00:05:09.520 If you like this video, be sure to click
00:05:11.080 the like button below, share it with a friend
00:05:13.000 and subscribe to my channel as per usual.
00:05:15.080 I wanna challenge you to live a bigger life
00:05:16.800 and a bigger business.
00:05:17.840 Thanks for watching and I'll see you next week.
00:05:20.300 Cool.
00:05:23.020 Thank you.