I am budgeting for building out a sales team in the US/Canada for a B2B software. How much should I budget for a Sales rep in a year in the US? And in proportion, what sort of a quota can I expect an experienced sales person to carry in ratio to their salary? The kind of information I am looking for are some general guidelines. Something like - 5 year sales experience 100,000k (mix of fixed + variable) and 500k in revenue. etc. I know it depends on the industry and if the sales rep comes from the industry I am in etc. Any sort of advice on how to go about planning quota vs sales salary would help?
PS: I looked online but the ranges are so large, I can't tell if it would fit well to my industry etc. Just so that there is context about the product, industry, and deal size, it is a Learning Management System (LMS) to be specific sold to Learning and Development/Training/HR decision makers in companies between 250 to 1000 employee size range. Average annual license cost would be 15,000 USD. Sales cycle may be 3-6 months. And I would be passing on inbound leads and hiring 1 to 2 outbound SDR to feed the sales person leads.
I have 6+ years of experience selling enterprise software and one of the products I sold at Oracle included their SaaS LMS application as part of the whole HCM suite.
Your question about comp definitely depends on the industry, location of the individual, experience level, average deal size, etc. However, VERY GENERAL guidelines that SaaS companies follow tend to be quota = 5x to 10x their salary. For example:
- If a sales reps salary is 60k, then their quota should be 300k- 600k (very rough estimate).
- For each deal that the rep closes, they should get a minimum 10% on each deal until the rep hits quota.
- If the rep hits quota, there should be an accelerator on their comp plan (15%-25% of each deal sold) so that they will be motivated to keep on selling (capping your commission will be capping your growth).
- After the rep hits 200% or 300% of their quota, the accelerator stays at 15% or comes down to 10%
- PLEASE READ: All of the above is very dependent on average deal size, time to closure, among other factors that I would be happy to get into if we jump on a call.
The most important factor here is to make sure your quotas are REALISTIC and ATTAINABLE- having a rep come in with an unattainable quota only to have them leave in a few months will be detrimental to your growth and even be a huge cost to your business.
Happy to answer any and all questions in regards to quota structuring, LMS sales strategies, selling to the right lines of business, etc. It is a super competitive field and I understand through first-hand experience how difficult it is to displace any companies' current application suite. Maybe I can help provide some insight into this aspect of your business as well.
Kevin Yang's answer is good and a model that is commonly used. It will depend on where in the United States they are going to be based. If you are in San Francisco you will be paying more than if you were in Denver or Dallas.
A question you should consider is how are these salespeople going to be managed? If you need help with that, I'd be more than happy to walk you through some options. I just set this up with an Australian company that expanded to the US.
One of the simplest and most used sales commission structure is variable pay as a percentage of a single sale’s revenue. Imagine your company sells a certain product for $100,000 with a sales commission rate of 5 percent. For each one they sell, your reps would collect $5,000. Another simple sales commission structure is the gross margin plan. These commission models consider the profit of each transaction, including the price of sale and the costs associated with making that sale. The company would then see a $90,000 profit on that deal. It is a good plan to use as you begin to grow your sales team and scale your business.
You can read more here: https://www.xactlycorp.com/blog/sales-commission-structures
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath