All right, so first of all, thanks for joining everyone. I believe I’ve met many of the folks on this call. I’m just looking around, but for those I haven’t met, my name is Colin Barclay and I’m a partner at Dell TV. Today, it’s my pleasure to introduce Rami Stephanos, who’s going to lead today’s discussion on setting sales quota. Rami, he’s an experienced RevOps practitioner.

He currently leads strategy and operations at Google Public Sector and has spent the last decade creating and managing compensation plans for growth stage companies like Elastic and FireHydrant, as well as companies as large as Salesforce and obviously now Google. And I’m going to turn it over to you momentarily, Rami, but before I do, just a couple quick housekeeping items.

First, just given the number of attendees that we have, we’re not going to do round robin intros, but to provide Rami with some context, if you could all just include your company name in your Zoom display, you don’t know how to do that. It’s the three buttons up in the top right of your screen. Just go down to the bottom on the menu, rename, and just include your company name.

And then second, Rami has slides that we’re going to walk through, but we found that these sessions always go a lot better when they’re interactive and driven by questions from attendees. So for those of you that submitted questions ahead of time, thank you, we forwarded those to Rami and you should feel free to jump in with those as the spirit moves you, but also as new topics arise and you have burning questions, just feel free to interrupt. We want this to be a conversation. So without further ado, Rami, the floor is yours. Take it away.

Thank you very much, Colin. I appreciate it. Thank you to everyone for attending. I’m happy to have this conversation with you all. As I said, it’s a conversation, it’s not me giving a speech. The best way for us to really get the most out of this is we actually have a fruitful discussion around topics, questions, et cetera. I do have a couple of slides that we’ll go through to help facilitate the conversation, but feel free to jump in either live or drop in a question in the chat and then we can go from there.

With that being said, can everybody see my screen? Perfect. So as Colin mentioned, my name is Rami. I’ve been in revenue operations for over a decade. I’ve been in investment banking before that. So I definitely come in from a finance background and a fiscal perspective of things. Definitely did compensation at all those companies and I’ve also done sales finance as well. So I kind of like worn both hats and being able to understand the implications of a comp plan but also how to like set up a comp plan and administer it as well.

So I’m happy to have this conversation and help share some of the knowledge that I’ve gained in my experience and obviously answering questions you folks may have. And then please feel free to find me on LinkedIn, Addy. Definitely if you folks have questions or anything after that, happy to answer them one- on- one if need be. So first and foremost, I have my coffee cup here. I wanna say who likes coffee? What does everybody drink, et cetera?

And I’ll explain why I’m doing this in just a second but just a show of hands, does everybody have their coffee cup ready? Yep, awesome, love it. So why are we talking about coffee? In the way that we wanna think about things is we have a wide gamut of preferences and we have a wide gamut of choices. So the way to think about it as you’re going through this presentation is understanding whether you’re a small, medium or large.

And for us, for the purposes of this conversation, small is a small organization where it’s less than 25 million ARR, less than 30 AEs. Medium would be over 25 million ARR, greater than 30 AEs. And then for large organizations, we’re gonna be talking about greater than 75 million ARR, greater than 75 AEs. The reason why we’re breaking it out this way is because for each one of those stages, there’s a bit of a nuance on how you wanna go to market, how you wanna think about comp plans, how you wanna think about strategy, et cetera.

And for us, as we go through all of this, we’ll be able to start saying, okay, you know what? This is really more important for the small, large and medium. So I do have those throughout the board but if you have any questions, please, first of all, say like, I’m a small, medium or large and like be able to paraphrase so we actually understand a little bit better.

So with that said, why is it important to set good sales comps and quotas? So you’ll want to think of it as a circle, right? Quotas really inform your capacity and your revenue. When you think about quotas, what is it? You’re saying, OK, well, I have a target of $ 10 million for my business. Well, quotas help understand and explain how you’re actually going to achieve that based on the sales army that you have.

So when you think about quota, you think about capacity and say, well, I actually don’t have enough capacity based on the quota that I would give to my reps in order to hit that $ 10 million target. So you’re like, all right, well, that means I either have to increase the quota per rep or productivity, I have to go out, hire more reps in order to make sure that I hit the capacity in order to be able to hit that number, or I have to reduce my overall company growth target.

So this is why quotas are very, very important because it helps operationalize your company goals and your KPIs. But they’re also good because they also align sales behaviors with business success, right? So if the AEs are hitting their numbers and hitting their targets, that will work backwards into a KPI metric of the company hitting their number and their targets. But one of the most important things as well is that it also helps hold sales organizations accountable, like the number is a number.

If you hit $ 10 million and your quota is $ 10 million, you’re at 100%, great job. If you hit $ 70 million, you’re at 70%. If you hit $ 15 million, you’re at 150%. And this is a way to objectively look at your business and look at your reps and performance and being able to understand who’s top of the head of the herd or who’s behind the herd and who’s right in the middle of the pack.

And this is really, really important because this is actually how you start being able to hold your sales organizations accountable and be able to understand who’s performing, who’s not performing, and how to manage those as part of the sales compensation conversation. So pop quiz. I know it’s the second slide, but I’m already doing a pop quiz. When setting up quotas, should you be doing a top- down or bottom- up? Let’s do with a show of hands. I think in Zoom, we can do a thumbs up or thumbs down.

So for all of you who think that it’s a top- down, do thumbs up, bottoms- down, do thumbs down. Okay, I see two thumbs up. I see one person do two people do bottom- down. So it’s actually a trick question. You do have a total bookings target from the top, but you also have a bookings per rep from the bottom. And the way that you wanna do is you wanna do both in order to triangulate, to be able to get to a reasonable quota, right?

And so this is where, when you’re looking as a company and you’re saying, okay, well, my overall growth percentage for next fiscal year is 25% year- over- year growth, that gives you a number of what your performance and expectations are on the basis of the financial plan of the organization. But you also have to look at what is reasonable and what’s achievable from your AEs level and be able to say, okay, well, does that make sense? And does that really allow for an actual achievable company goal, right?

And this is kind of what I was mentioning in the last slide is if your target is a 50% year- over- year growth for the company, but you don’t have capacity for only like 20%, then you know that you already have a 30% gap that’s missing. And this is where you go talk to investors, go talk to your finance organization saying, we need more funding in order to be able to hit that company growth targets.

So this is a way to almost do a check and balance between the top and the bottom motion in order to find what is the reasonable expectation for the business going forward. Any questions? All right. So when we think about what is achievable for rep, you have kind of two different ways of going about it. For your large organizations, you really wanna look at what your historical performance is for your business, right?

If you’ve been doing this for a couple of years, you already know what your average deal size is, you know what the reasonable volume per rep is, you know what your growth quota percentage is for the business that could be loosely aligned to your growth for your quotas. But if you’re a small or medium business, you really wanna start looking at comparing, excuse me, to your competitors, right?

So you can utilize websites like RepView where you can see folks that are in the same space looking at their overall compensation, looking at their overall, their base salary, looking at their target earnings, but you’re also able to see who’s hitting their, what percentage of folks are hitting their quotas, et cetera. And that can help level set and kind of guide you as you’re early in your company career in order to be able to set those targets.

But usually, you’ll be able to find a little bit of mixture of both. If you have like one or two sales reps, you also want to be able to utilize some of that historical perspective. Because every company is different between their go- to- market motion, their deal sizes, etc., the sales cycle, etc. This is where you want to start figuring out, okay, what makes the most sense for your own business.

We had a relevant pre- submitted question here, which is, what do you do when you have a new product that’s launching, say in Q4 of this year, and you’re setting quotas for next year, and you don’t have historical data on that product for what’s attainable? How do you handle that situation?

Usually, the way that you want to handle that situation is, you want to put that as an above. When you’re creating comp plans, you have above the plan components and below the plan components. Below the plan components, those are what is your ACV target, what is your renewal target, if you have a new logo, bucket, etc. Those are all the things that you are managing your business as.

For new products, you want to do that above the plan components, where it’s like here, I’m going to play flat rate on this, or I’m going to give you a quota, but everything’s going to be above plan. This is almost gravy. This is a way to incentivize sales folks, because obviously, they’re not getting gold on this, but they’re going to get maybe a 1. 2 multiplier, or 1 or 2x multiplier on that product.

That will help incentivize them and help build that run rate of that business for the following year, then we can start moving it from an above the plan component to below the plan component. This is another way to incentivize it. You can also utilize SPIFs, which is, quote- unquote, another part of the above plan component, where you can say for the first half of the year, I’m going to pay 2x, and the second half of the year, I’m going to pay 3x. You can do that as part of your go- to- market motion.

Hey, Rangan, one other question here. We’re obviously operating in a pretty dynamic macro environment, and some of the companies out there might have experienced reps that have underperformed this year, but maybe either have more optimistic expectations for next year, don’t know what they’re going to find, given the macro uncertainty.

And so how would you coach companies to think about setting quota and communicating quota for next year if all of the assumptions, or maybe some of the assumptions that have gone into setting quota this year have been off? I. e., the historicals maybe aren’t as reliable as they have been two years ago in a more normalized environment.

That’s an excellent question. I’m actually going to touch that a little bit later in the presentation because there’s a whole section about that.

Okay, great.

A great question. So when we’re thinking about quotas, there’s a couple of different sizes. So this is really more for the larger organizations that are more established, where you’re thinking about the different segments of your go- to- market motion of enterprise, mid- market, and SMB. And so these are a little preview for the small and medium coffee cup drinkers. This is for really the folks on the large, where you be attacking the market based on the segmentation that you have. Now, the segmentation for each company is different.

You know, I’ve been at organizations where enterprise is perhaps 2, 000 sellers where an other organization, or sorry, 2, 000 employees versus other organization where it had to be like 10, 000 employees. So it really depends on each unique business. But this is some examples of what the quota would be versus the number of deals, ASP, and salary, and your on- target earning. So for this, usually it’s a 50- 50 base. I have seen it be a little bit more nuanced for like CEs or, sorry, excuse me, SEs like solution engineers or sales engineers.

They could be a lot more like base focus and like 25% compensation. And they’re usually tied to more like macro targets within the organization, either a geo or country region or a VP region. But here you can see that there are some multiples. Now the industry standard is usually you wanna have three X multiples, but we will talk a little bit more about that given the current economic environments of like how people are flexing that up and down based on the different environments.

So actually, before you go back, before you move on, a pre- submitted question relevant here is what should be the percent base versus variable? It looks like all three of your examples are kind of 2x, or you want half and half, half base.

Yeah, so 50% base and 50% target earnings. That’s usually the industry standard, and I’ve seen that to be the work the best. For other organizations where you are trying to grow the business, and if you’re earlier in your career, you may want to have it a little bit more skewed where it’s a higher base salary, because it’s still not a proven model.

It’s still not a proven business, et cetera, or product.

And so you’d want to be able to make sure that all sellers actually have enough food to eat and no quote, unquote, worries about income. But they want to be able to drive and do that. But for most businesses, once it’s been established, I’d recommend 50%, 50%.

I think we got a question from Andre.

Yeah, thanks. Two questions, really. One, why isn’t there a difference in the OTE to salary ratio depending on S& P mid- market enterprise? That’s question one. And question two is, can you maybe explain the multiple again?

Sure.

So the multiple is taking what your quota is divided by your on- target earnings. So right now, just the way that I just did the math here, it’s the same. But I would not stick to these. The guideline is around three. But it really just depends on your average selling price. Because with the number of deals, you may have a very technical product where you’re only maybe doing four or five deals in a year, but each deal is in the six figures. And so that would perhaps be something different versus this.

As you can see here, as you’re working up with that, the assumption is it’s a longer sales cycle.

It’s more complex sales, sales motion.

And so you’re doing less deals. But the ASP starts to be higher.

And the quota, just to be clear, the quota that you’re talking about here is annual bookings? Is that what you’re saying?

Yeah, like annual contract value, ACV, or ARR from that.

Now, you can also, there are some businesses that do a consumption model. And we can talk a little bit more about that. But that compensation model is a little bit more different. Because usually, when you’re doing consumption, you want to go more of under revenue bookings or revenue invoicing methodology versus an annual contract value.

But that gets a little bit more nuanced and a little bit hairy. Nobody’s really figured it out.

Probably Amazon’s probably the closest to it from a consumption perspective. But they’re still tweaking the model further on that.

Any other questions? That was a good question, Nate.

Robbie, we have a handful of companies tending that have various business models. Some of them have longer implementation cycles, as well as more services- based time and materials, more so time and materials than preset contracts. And so how should companies with those types of business models think about quota relative to whether it’s bookings or invoice or implemented? Do you differentiate between those depending on the company?

Yes.

So that’s a great question. So usually, for these kind of comp models, you really want to focus on recurring revenue, right?

Services or an implementation is usually a one- and- done thing.

It’s having been in the industry for a while, some services are recurring, where you actually end up just being able, like as a support model, where you have that.

But usually with the services, it’s more of a different bucket. And you can pay as a one- time fee and say, OK, well, this is how much you’re actually going to retire in revenue or in quota, excuse me. But it’s not recurring revenue. So we would actually adjust it as a different part of the comp plan depending on how much of that of your business it is. Most businesses I’ve been in, it usually is not more than 10%.

But if you find that the mix of your revenue is closer to 50%, then I would actually have that as a separate bucket and make sure that that is something that the AEs are focused on and selling on just to make sure that we’re not losing that part of the revenue stream. Does that make sense?

Yeah, Harris, feel free to hop off mute.

Yeah, quick question for you, Rami. As it relates in a hybrid model, both fast and revenue generated from use on the product, have you seen these multiples and divides remain the same? Or is there different guidance as it relates to, I guess, to say the question differently, is the guidance to look at the revenue that you’re basing on for the multiple from the average revenue brought in from the unit, SAS plus, that per use that you get? Or is there recommended complexities of having two different portions of a quota? Definitely.

I don’t know if anybody refers that.

Great question, Harris. Definitely, there is a consumption model. I would definitely separate that out. Usually consumption, the growth rates on consumption is actually very, very high. I’ve seen in some organization where it’s growing on a compounded and monthly rate of greater than 10%. So that number can grow dramatically and increase dramatically. And so when you’re doing on a consumption basis, you really want to make sure that, A, you’re setting the quotas, which I will tell you now you’re probably going to get wrong.

And that’s OK. But this is part of the learning process in the journey of saying, OK, well, I’m assuming that my growth rate, if I’ve seen that it’s growing at 10%, I would probably do it at 8% to give the AE a little bit of benefit that it’s growing faster. But you’re also accounting for any churn that could happen as part of that, right?

Because there’s a lot of volume and a lot of business that happens on a consumption basis, especially if you’re focused on selling into retail, where you’ll see major spikes around Black Friday and the holidays, but it’ll come down again. And so with consumption, I would definitely make sure that you do set quotas. And I’d apply a haircut, but I would also definitely keep it as a separate bucket with its own quota and its own compensation.

And then how you divide that from an on- target earnings, if it’s 50- 50 or if there’s more of a revenue stream, I would equate it to be a little bit more based on kind of where the business is going. Does that make sense?

Completely. And I do have one other follow- up question. In a prior sales org, we had an inside team and an outside team with very distinct strategic goals. The outside was all about very specific strategic targets and the inside was about scale. And so as a business, the idea was to grow both the strategic outcomes with the scale. As you think about the multiples on the right- hand side, is it a fair practice to look at this as the entirety of the sales org or should this always be true at the individual level in what you’ve seen before?

It should be true at the individual level. For the inside sales org, I would be, I’m assuming you’re talking about more like BDRs, SDRs, essentially like driving pipeline generation. For those folks, I’d usually put them on a two- component plan where one component is tied to the overall target of the team that they’re supporting, whether it’s like California or the US or EMEA, et cetera, or the Eastern Seaboard.

That would be one component, but the other component would be like more KPI metrics around like, okay, meeting set, like pipe generated, deal closures, et cetera. I wouldn’t, actually, excuse deal closures. You wouldn’t wanna put too much KPIs on things that are outside of their control, right? Like they can’t influence if a deal gets closed or not, but they can influence what the pipe is generated, right?

And so usually what you’ll do is you’ll basically figure out okay, what is the qualifying metric in your business and how many deals that a BDR generates is ends up getting qualified. And I would actually compensate them on that and set targets on that, right? So I’ve seen it done where on average for the BDR organization and SMB, the qualified target per month was around 10 qualified pipe, right? But that’s at the SMB segment where there’s a lot more volume business, but maybe at the enterprise segment, it was about six, right?

Because we understand that you’re not gonna go get 10 deals out of IBM in every single month, right? And so there has to be a little bit of thought process with that. And so that’s where the focus on generating that top of the funnel, but you also are making sure that they’re aligned with the sales organization by tying them to the overall targets and performance of the team.

And I think there was actually a pre- submitted question around how do we actually handle and support the sales organization where there’s some of the top of the funnel metrics are not being met. And this is as part of your go- to- market motion. And this is really a little bit out of sales, but this is something that you should have something called a pipeline council, where it’s usually the marketing organization, the sales organization, the partner organization. Thanks for posting that, Kate.

You’ll have all of those components meet on a monthly basis, right? And making sure that the BDR organization is part of that pipeline. At Salesforce, we actually called it the four horsemen. And it’s essentially making sure that all of them are aware of the targets that they have to hit on a monthly or quarterly basis, but also holding them all accountable to that, right? And then you can start to see, okay, well, if I know that marketing is dropping the ball, maybe we can like lean more on the BDRs, right? By maybe doing a SPF, right?

Or maybe we can lean more on partners to incentivize partners to be able to surface more deals. Or you can say if the BDR organization is lacking in the quarter, maybe we can do like more marketing events, more webinars, more meet and greets, et cetera. And to be able to meet some of those demands. But that pipeline council is really what’s gonna help keep you on target throughout the year, because then you can quickly see, okay, well, you know what, we’re seeing there’s a little bit of challenge in this one segment.

Let me see if I can help alleviate some of that stress in the other components. Good question though. So this is the fun part of compensation is accelerators. So this is usually the meat of the conversation is actually how do you set up comp plans and what kind of accelerators are you thinking about? This example is really more focused around subscription revenue. The way that the industry is kind of coalescing around this is really around a couple of different tierings.

I do have all the coffee sizes in here because there is a little bit of nuance on this. For the most part, you really never want to exceed about 1. 3 overall target for your comp plan. What does that mean? Meaning you don’t really wanna spend more than 30%. For every dollar that you close, you don’t wanna spend more than 30 cents in compensation for your whole organization. That’s kind of like best practice of maintaining some of the margins and some of the commission expense that you have in your organization.

And you really don’t wanna spend more than like 20 cents on the dollar for every single deal. Now, this is average out based on all the different math that you have in here. But the reason why I’m mentioning all of these is these are kind of some of the accelerators that you wanna have as part of your organization. So from zero to 75% attainment here, you really wanna have a modest accelerator, right? Because you really wanna focus more folks on hitting their 100% of their quota. And so from the 75 to 100%, you accelerate to at least be one X earnings.

So if you hit 100% of your quota, you should hit 100% of your target earnings. Oops, sorry about that. And this is where you start getting, you can start being creative as part of your modeling to be able to say, okay, well, how do I accelerate to make sure that I’m incentivizing for every single dollar that I have being brought in? How do I reward the AEs? And so then this is where you can start accelerating some of their rates here, where you can say, well, from 100 to 110, I’m gonna pay 1. 2 X, from 110 to 125, I’m gonna pay 1. 3 X and vice versa.

And then like after a certain threshold, depending on where you are, if you’re a small medium, I’d actually raise it a little bit higher where you put the decelerator. But the reason why I’m saying that is you do not wanna cap earnings. Capping earnings is an outdated model. It can work, but from what I’ve seen and based on my years of experience is having an uncapped revenue compensation model, it helps incentivize and keeps the AEs selling.

You don’t wanna have an AE saying, you know what, I’m not gonna sell this deal because I’m just gonna wait until the next quarter or next fiscal year to close it because I know I’m not gonna get paid on it. And so this is a way to remove some of the, excuse me, some of the roadblocks or some of the behaviors that may not be hardly desirable from an organization by making sure that you’re always paying on every single deal that comes through. Any questions on this?

Go ahead.

I just have a question. I’ve always used accelerators and decelerators in different sales orgs and had different approaches.

As you think about, and this may be something you get into later, but as you think about planning and ultimately knowing that some quota versus your business target is going to have some level of a delta to factor in the reality that sales orgs don’t achieve 100% always, as you think about the accelerator, should that be matching off against where the budget line is drawn as opposed to the sum of quotas, or is that individually at the level?

So to play out a tangible example in a prior sales org, we assumed that, and historicals had shown, our sales org was achieving at 90%. So our accelerator actually kicked in at 100%, 90% was not accelerated nor decelerated, and then decelerators came in in the 80% tranche because it was ultimately about expectations. Here, you have it as the 75% to 100% being non- accelerated, and then once you add 100% and above.

So curious, that balancing act between what the company growth is desired for some of the quotas, which has been outperformed that, and where to drop the accelerator line.

No, that’s a great question. I think there’s a nuance to the answer. When you are going through your planning cycle and saying, OK, well, my target for next year is $ 10 million. Let’s just use that as an example. Your quota to the street, if your team is performing at a 90% attainment overall as a sales organization, then you should be setting that 90% at that $ 10 million.

So you’d be over- assigning the organization to maybe be $ 12 million, if the math is correct, in order to make sure, OK, well, on average, my historical trend that I’ve been hitting at 90%, that gives you that haircut in order to make sure that you’re hitting your target. And this goes back to what we were talking about earlier from a tops- down and bottoms- up approach. And this is how you make sure that you build up enough buffer in the organization.

So let’s say if you have a bad year and your team hits 85%, you’re still within range of that $ 10 million target. That’s how you handle the attainment versus company goals perspective. From an accelerated perspective, it doesn’t really apply too much, because once you already set those targets, the accelerator then is just trying to figure out, how do we drive the AEs to hit that $ 10 million target that you already set as part of your planning process? So it is loosely aligned.

But really, how you set your targets and your attainment is really at the beginning part of the cycle of what is your overall company goal versus what is your quota at the street level. But great question. So what are some of the guardrails that you want to have as you’re doing all of this? So for folks, first of all, the first thing that you do, and it’s not on this, is make sure that whatever you’re going to actually compensate your team on is easily and readily available from a metric and standpoint.

You don’t want to make the compensation too difficult or too detailed, because then you’re not going to be able to execute on that. And it’s going to be very, very, very, very hard for AEs to actually understand how are they going to get paid. And the things AEs love the most is to be able to put in, OK, I closed this much money this quarter. Let me put that into a spreadsheet or into a system. And let me see how much money I’m going to get at the end of the month or at the end of the quarter.

So you want to make sure that whatever metrics you’re measuring your team on, it’s readily available. You have the dashboards, reporting, everything set up in order to be able to do that so everybody can see and you have leaderboards set up on that. As I mentioned, you want to have a decelerator at the top end. Obviously, as you sell more money, you don’t want to be able to have a negative impact on the business. So you want to put a decelerator in place. But you definitely want to make sure that you’re not capping it.

Definitely, as part of your sales organization, you should have discount limits and approvals at each level of the organization in order to be able to scale your business as you go from like three AEs to over 100 AEs plus that you’re actually at each manager level. There’s a discretion there to be able to approve discounts, approve different terms, et cetera.

Definitely, definitely, definitely use a clawback policy. This was actually one of the things that was really, really important for us at Salesforce. And it’s not just at Salesforce, it’s actually every organization I’ve seen is the clawback policy. If you see a deal that attrits and you already paid it out in advance, there’s an ability for the company to say, well, you know what, we paid you out on the fact that we’re actually going to get 12 months of revenue. We only got three. We’re going to call back that nine months of revenue.

This is a way to help discourage poor deals. It helps discourage overselling a customer. It helps incentivize the right behavior of making sure that the AE, the company and the customer are all aligned on a deal. Churn is really, really not a positive thing. For every dollar that you lose from churn, it takes about a $ 1. 30 to fill the bucket. And so it’s easier to keep recurring business if it’s good recurring business, as opposed to losing out deals that were improperly sold. Write a look back policy. This is something that’s very, very important.

We’ll find that some AEs are very, very, very clever in understanding the terms and conditions. And they will say, okay, well, you know what, we had an attrition on this account three months ago. And the policy says that for the next three months after an attrition, I have to fill the back of bucket of everything that was attrited in that one customer. So they may sit on a deal until the 91st day or the 93rd day to sell a deal and qualify and make up all of that. And so this is where you want to make sure there’s a look back policy.

You want to make sure that you are seeing kind of what the trends are and being able to see who are some of the quote unquote bad actors that could be playing that little bit of a game from a look back policy to be able to make sure that they’re qualifying for closing deals, but it’s not negatively impacting the company. I know I said a lot there. So I’m happy to answer some questions or clarify some of the nuances in some of those do’s that I just mentioned. Andy, it looked like you had a question. There is.

It’s all you too.

Andy, go ahead first. I feel like I’ve done a lot of talking now. I was just going to ask some callbacks of, in your mind, is this for all cups of coffee? Yes.

Cool.

So even in deal size range. Sorry. No, no. It definitely is for all sizes. I would definitely put a threshold if you’re on the smaller end just because there’s going to be a lot of learnings as part of your journey. And so you don’t want to be chasing after every single dollar, but every single dollar is important. But you just want to make sure that there’s like a threshold of what you actually want to spend on, especially if you’re limited on resources.

If you don’t have an operations team, if you don’t have a finance team, a large finance team that can go actually do all of this and it’s up to you. So there’s definitely a threshold of what is a good use of your time as you’re progressing. Definitely if you’re a larger organization, you have a large comp team, finance or revenue operations team. This is definitely something that needs to be included as part of the process.

There’s a lot of gaming that I’ve seen done in this, and this is just another way to A, nip it in the bud, but also figure out how to actually address the quota and the terms and conditions in your comp plan to mitigate that risk the next fiscal year. Robin, do you recommend quotas always be quarterly or do you believe that it should always be annually or case dependent? It’s case dependent and it’s definitely definitely case dependent on the segment as well.

So for annual or for enterprise organizations or enterprise segments, I would definitely be focused more on annual plans and annual quotas. For this SMB segment, you can either do monthly or quarterly. There’s benefits to that, but there’s also cons to that. The con is if you…

If you hit your number in one month, you may have reps that will save a deal for the next month if they’re not, don’t have anything really in their pipeline, they may save the deal for the next week to make sure that they, quote unquote, don’t miss a month or don’t miss a quarter.

And so there’s a little bit of gaming that can happen on that, so you just have to be going in with eyes wide open when you have a quarterly comp plan or a monthly comp plan, that there could be a little bit of a behavior shift on how you close deal based on how the comp plan is set up from a monthly or quarterly perspective. That being said, quarterly, and I’m gonna touch upon this later, but having a, let’s actually, I’ll talk about that later because that’s actually important as well.

From a don’t perspective, I will say that don’t make, don’t write a lot of exceptions, don’t make it too complicated. And for long deals, I would not pay everything upfront. So long deals, meaning it’s a multi- year deal. If you’re assigning a three year, four year, five year, I would pay out the first year, I’d pay out the second year and perhaps the third year, but anything longer than that, I would hold onto it. And on the anniversary of the first year, I would then pay out the fourth and fifth year.

Another thing to do as well is, and I didn’t mention this here, is you have a opt- out policy or opt- out verbiage in the contract that you’re signing with the customer. I would not pay out any commissions on those deals as well until you pass that opt- out date. That’s a little bit of a nuance there just because if a customer ends up opting out, you never wanna be in a situation where a rep has to write a check back to the company. It’s just very manual intensive and is also a very poor experience across the whole sales organization.

From a systems and tools perspective, I’ve kind of put all the coffee cups in here. Obviously for all organizations, you should have a CRM of choice. Obviously Salesforce, HubSpot are the biggest ones out there. There’s obviously Microsoft Dynamics. I believe Oracle has one as well and there’s others, but you definitely have a system of record to be able to track all of the opportunities and the crediting that is associated with them.

Obviously with a finance system, you wanna make sure that we have QuickBooks, NetSuite or any other multitude, excuse me, ERM platforms, ERPs platforms out there. From a coffee cup size perspective, small is really important that you do just have the CRM to be able to have a source of truth that everybody agrees of on the reporting, the dashboards associated with that.

As you get into the medium and large businesses, this is where you have a revenue operations team, where you have a finance team, a compensation team, where you wanna be able to start scaling. If you wanna get out of the spreadsheet motion that you’ll probably be in the small coffee cup size and you wanna be able to like leverage some of the tools out there. So there’s exactly, there’s QuotaPath, there’s Calidus, Forma. ai, Spiff, et cetera.

A lot of these tools are out there that can help operationalize and be able to simplify some of the heavy lifting that is done from a revenue operations or a financing perspective. But it’s definitely something that either you should be having if you’re at a large company. And if not, this is something that should be on your fiscal plan for next year. It will help a lot from operationalize the organization.

It also provides a better user experience for your sales organization, as opposed to having like multiple spreadsheets, version control issues, et cetera, that there’s just one sort of system of record for compensation that everybody can go in, utilize, do the reporting and dashboarding off of that. So I definitely recommend having a tool. I’m fairly agnostic at which tool, they’re kind of all do the same thing.

But I definitely would do have a bake- off if you have not started that, have a bake- off with those that I’ve mentioned here, as well as whatever else is in the market and be able to figure out what best fits your needs. But definitely, definitely do have that, especially if you do not have a revenue operations or a strong or large finance team. If you’re doing this yourself, I would definitely make sure that you have some system or tool that can help you as part of this process.

Hey Rami, at what point do you think an organization needs somebody dedicated to compensation? Definitely when you’re crossing into the like the $ 25 million mark, that you should have someone that’s completely like at least an analyst that’s helping do like managing the crediting, the compensation, the documents, et cetera. Usually with any of these tools, it’s usually about a head count and a half from an expense perspective. And it’s, I definitely believe that it’s a good ROI because that can help scale the business.

So you may only need like a compensation manager to be able to do this, as well as having a system or tool that helps them as part of that. And they could be part of the revenue operations team where they could be doing other things, but like maybe 50% of their business or 100% of their business, or sorry, their day- to- day function is focused on compensation as part of their overall job activities.

And one more question, and forgive me if you covered it earlier. So somebody signs a new deal and they get paid commission at the appropriate rate for 12 months. And then I guess you’ve got two kind of motions with a customer.

You’ve got protect and grow.

So you want to protect the revenue you’ve got and make it repeatable and try and grow the revenue. In the protect motion where you’re maintaining relationship and gaining repeat business every 12 months, do you pay commission at the same rate or do you reduce the commission for the retention, customer retention?

So I’ve seen it done both ways. So if you are you can either do it where you’re paying on every single dollar. Right. So if let’s say I close a million dollars this year or last year, this year my quota will be the million dollars that I closed plus my million dollars in quota that I have here. So my quota for this year is two million dollars. But what you’d want to do is say, OK, we expect that I may lose some business as part of the normal churn. And so that one million that I closed last year, it’s maybe nine hundred thousand this year.

So really what I should be assigned is a one point nine million dollar number. So that’s how you protect and grow, where you’re making sure that every single dollar that is sold in the business is, quote unquote, accounted for and every expansion is there. That is good, but that is also can be an operational nightmare if you are growing your business a lot and you’re hiring new folks to be able to track. OK, well, this renewal was in this quarter.

OK, move to the prior earlier in the quarter, earlier in the year or a slip to the following year, et cetera. And so there can be a bit of a challenge from tracking and managing all of that. It really depends on the business, and that’s why I’m saying the operation component can be challenging. Another.

Excuse me.

Go ahead.

Sorry. Sorry. So that’s that that’s absolutely understandable in quota versus OTE. But what if you’re paying out people on percentage of revenue?

So this is where I was going to mention is that you can actually do a renewal retention rate or renewal rate where you’re saying, OK, I’m expecting you to renew 90 percent of your business. I don’t care which business it is, as long as you’re protecting the base of 90 percent of your overall territory. And so this is where the renewal rate comes in, because it’s very, very agnostic. But it’s also very helps from an operational perspective, say, OK, I’m expecting that 90 percent of the business that you had going into this year, you’re going to protect.

And if you don’t, that comes out of your renewal bucket from a component perspective. Does that answer your question?

Yep.

Thank you.

Yeah. So those are kind of the two different methods. I lean more to the. As you get into the larger part of the organization with more revenue and more the percentage renewal bucket component, I would heavily favor that and I would definitely make that a bigger part of your component. And so if you think about it, if you’re a rep with a large territory that has large renewals, it might be a higher weighting of, let’s say, 40 percent of your target earnings is around renewals because you want to protect that renewable base.

But if you are a rep, that’s pretty much Greenfield, then you may not even have a renewal component because all you’re really focused on is ACV. And instead of a renewal component, you might have a new logo target saying, OK, you know what, I expect you to at least, you know, depending on the business, maybe have five new logos this fiscal year. And that would be a different component that you have as part of your overall compensation plan. Go ahead, Corey. I would say one of the things, what do you think about?

So what we do is we try not to compensate people equally for renewals as we do for net new. And so we pay on the difference. So all net new deals for us have some growth in the deal. And then secondly, we have an entire team dedicated to renewal. So their compensation plans are built on gross revenue retention. So really, the sales team is brought back in for net revenue retention.

Right.

So growth. And that’s how we run it. So that way we’re collaborating, we’re working together. But we are not paying a dime on renewing a dollar for a dollar. Right. So it’s all growth plus net new, which is where we want 95 percent, because I think what I’ve learned is, look, where you pay people, they’re going to spend their time.

Right.

So you’re going to pay equally on renewals as you are net new. That’s not necessarily a smart thing if you’ve got another team already dedicated to those renewals.

A hundred percent. And that’s kind of what I was alluding to earlier, and maybe I should have been a little bit more clear on that.

you pay on new and expansion. So NNE, right? So it’s basically if I close a million dollars last year, this year I close 1. 25 million, I should that two and a half, 250, 000 should go into my ACV bucket. And that 1 million will be part of my renewal comp plan that I’m just making sure that I’m maintaining my renewal business.

Because renewal managers are great, but usually it’s the AEs that have that relationship and can help, you know, figure out, okay, well, if there isn’t a trip here, let me see if I can throw a different product in there or do something along those lines. And this is why you may have a renewal component as part of your comp plan. But if you definitely have a renewals team, then yeah, I would definitely wait that less just because you have a renewal manager that’s focused on gross revenue retention.

Yeah, and the only thing, only point I was making is if you tie them together, so instead of having a million dollar goal of net new growth plus 900, 000 in renewal, if you tie those together with one multiplier on a $ 1. 9 million goal, the challenge is a really crafty rep’s gonna go, screw that, I’m gonna go renew everyone really quick and I’ll be 50% of my plan, you know, by March. And the reality is, have they really done anything that you’re really after them doing? Probably not.

Probably not, but I will say at the earlier stage in a company life cycle, every dollar counts, right? And so this is where you may be more focused as a smaller or medium organization that you’re doing this. But as you get to a larger organization where you have larger teams and where you want more focus on N and E is when you start going to that model where you actually have a separate team that managing the renewals, right?

So it just really depends on the journey of where you are as an organization and where you’re and how mature your sales and renewal managers are as part of that journey.

Well, I think it also depends on what you’re selling, right? A renewal can be straightforward in some instances and more complex in others. And actually in areas where it’s more complex, you probably want people looking after your existing accounts as in the complete relationship and then people in customer acquisition.

Correct. Like at Elastic, it was a very, very technical product, very, very developer focused. And so there was a lot more effort involved in actually maintaining every single dollar. So you actually had to apply SE and AE resources to the renewal early part in our career at Elastic to make sure that every dollar counts, right? Just because it was a very, very developer complex tool as opposed to like Salesforce, where everybody understands CRM, it’s just a click and you just proceed and go forth.

Yeah, I guess the other flip side of it is if you focus all your best people on effectively new logo acquisition and that leads to customer loss, then all of your new acquisition is replacing revenue that you lose because you don’t look after it properly.

Exactly. And this is where I was saying a dollar lost in recurring revenue, it costs usually a $ 1. 30, $ 1. 50 to make up that dollar, right? And so this is why churn and attrition is very, very, very important. And it has to be something that is measured, has to be something that’s focused on. And you definitely wanna make sure that’s part of your comp plan to make sure that it’s being tracked because the cost of the company over the long run is very, very high.

Just anecdotally, I’ll just give a quick bit of feedback from several roles ago. We used to have two buckets for reps, a renewal bucket and a new business bucket, and you couldn’t get paid on your renewal bucket until you’d done 85% of your new business bucket.

That’s awesome. That’s great. Definitely, there’s definitely complications on how you wanna make sure and operationalize that, but that’s actually a very good threshold that you have. And this is where you can start being a little bit creative in your comp plan about certain thresholds that are being met. If you have a renewal component, for example, I would put a threshold and say like, if you don’t renew 80% of your business, you get zero.

Right, and so like that’s, if you have 100 grand target earnings and 30% of that is tied to renewals, if you don’t renew, that’s 30 grand out of your pocket that you gotta go figure out as a rep, okay, well, I lost 30 grand, how do I make that up on my new and expansion business in order to overcome that? We’re running up on time, so I just wanna make sure that we just cover a few different things that I have left, but this is a good conversation. I appreciate everybody’s input.

If you’re on the smaller side for different quotas, I would make sure just to give all your reps like a quota menu of just saying, okay, you know what, on, if you’re on the smaller end of the scale, like this is what you get if you’re enterprise rep versus a small, medium business rep.

As you start getting larger, more complex and territories become different, you have renewal rates are different, this is where you wanna make, start making sure that quota is a great equalizer across of your different segments, but they should all be roughly within, excuse me, the same kind of range, right? So all enterprise is one level, all mid- market is one level, all SMB is another level.

You definitely want to have a haircut. This is kind of what I was mentioning earlier about what is your company earnings versus, or sorry, company target, growth target, versus what your component quotas at the street level is to make sure that, you know, if there’s a miss or anything of that sort, you mitigate some of that downside risk if there’s a problem from an attainment perspective in order to make sure that you hit your targets. This is kind of what I was mentioning. Colin had asked this question.

In these times, you definitely can increase your quota to OTE earnings. So this is the multiple I was mentioning around three. You can definitely flex it up a little bit, like three and a half, four, four and a half, but I definitely would not want to increase it too much because that could be an impact from an attrition perspective. And then there’s a lot of problems of backfilling capacity due to regrettable attrition.

So you definitely can flex that, but I would just be more, I would definitely think about it as you start flexing it up of what is, what can the quote unquote AEs carry as part of their multiple going forward. Definitely adjust quotas of territories change.

And so if you are consolidating, let’s say you had 20 reps this year, but you’re like, you know what, actually I only need 18, you know, and we’re gonna manage out some of the low performers and we’re only gonna keep 18, definitely consolidate territories and I’d also increase quotas and say like, rep, you’re actually, you know, getting two territories, each one was carrying a million dollars.

I’m gonna give it to you for 1. 8, give you a little bit of a haircut on that, but this is a way for you to increase and improve productivity out of your reps as you start consolidating and thinking about how you actually manage your business going to next fiscal year.

And Rami, we’re actually at the top of the hour. So we’ll probably have to call it there with good discussion. And we’ll make sure that this deck gets sent out to everybody on the call, as well as information for how to follow up. Yeah, we actually, we could probably squeeze in. Kyle, do you have one minute to do one last takeaway?

Yes. So this is for all you folks. I appreciate that, Kate. This is, I think would be the key takeaway from all of this is to think about if you’re in the small coffee cup, I would definitely be, don’t be afraid to be innovative. I would also do two planning cycles a year at the halfway mark. And this is a way for you to flex up and down your quotas, targets, et cetera. This is a very, very, very good tool and I highly, highly recommend.

So I would do an annual plan and then halfway through the mark, you can review the second half of the year and say, okay, does this make sense? Does it make sense? Let me adjust my targets, my quotas, my territories in order to meet the market demands that are happening. As you get into the 25 to $ 75 million range, I would definitely make sure that you have a starting investment in tools, operations, establish your scale and your processes. Also do the planning cycle by annual. I definitely would recommend that.

And then as you obviously get into the same $ 5 million range, I would do less innovation and more customization, iterations of what you already have from a scale perspective and tweaking that further. You don’t want to like break the model and go. That can be a very, very painful process and you may lose like a year of productivity or may have an attrition impact if you change things too much on a year to year basis.

But these are kind of some of the key takeaways outside of some of the things that we discussed that I would keep in mind as we end this conversation.

Robbie, thank you. This has been great. I know we’re one minute over. And so attendees, if you have follow- up questions, reach out to your Delta V contact. As Kate said, we’re going to make sure everyone gets slides. This has all been recorded, but if you want to go deeper or cover something we didn’t get to, let us know. And we’ll try to make sure that we close this out in the way that is most helpful and relevant to you all. But thanks again, Robbie. And thanks to everyone for attending.

Thank you, folks. This was wonderful. Appreciate it.

Bye- bye.