Dear SaaStr: What's a Good Comp Plan for Our First SDRs?
A good SDR compensation structure should be simple, motivating, and aligned with your business goals. Here’s how I’d structure it:
1. Base Salary + Variable Compensation: 60/40 Or So
SDRs typically have a base salary that makes up 60-80% of their On-Target Earnings (OTE), with the remaining 20-40% tied to performance bonuses. For example, if the OTE is $85k-$95k, the base might be $55k-$70k, and the bonus $20k-$40k, depending on your market and stage.
2. Performance Metrics: Pick One KPI They Can Control
Bonuses should be tied to metrics SDRs can control, like the number of qualified meetings or sales-qualified leads (SQLs) they generate. For early-stage companies, focus on quantity—getting enough opportunities into the funnel. Over time, as you learn more about your business, you can shift to incentivizing pipeline quality or even revenue sourced
3. Frequent Payouts: Don't Make Them Wait
Pay bonuses quarterly or even monthly. This timeframe is long enough to smooth out fluctuations but short enough to keep SDRs motivated. SDRs want quick wins, and pay them quickly. Without it, it can lead to burnout or disengagement.
4. Clear and Simple Goals. The Clearer, The Better
The compensation plan should be easy to understand. For example, “Schedule 20 qualified demos per month, completed by an AE partner.” If an SDR can’t explain their comp plan in one sentence, it’s too complicated.
5. Accelerators for Overperformance: The Best Will Care
Include accelerators for exceeding quota. For example, if the quota is 20 SQLs/month, offer a higher commission rate for every SQL beyond that. This motivates top performers and rewards them for going above and beyond. It won't motivate everyone, but it will motivate the best.
6. Generally, Avoid Tying Bonuses to Closed Revenue -- Unless Sales Cycle is Short
SDRs should feel in control of their earnings. Tying bonuses to closed deals can be demotivating since they don’t control whether AEs close the deals. Instead, focus on metrics they directly influence, like SQLs or pipeline generated. But if the sales cycle is very short (< 30 days), tying to close revenue can work well.
7. Ramp Period: 2-3 Months Is Enough. It Has To Be
Give new SDRs a 2-3 month ramp period to hit full quota. During this time, they should still earn their base salary and a prorated bonus to keep them motivated while they learn the ropes.
This structure ensures SDRs are fairly compensated, motivated to perform, and aligned with your company’s growth goals. If you’re in a Tier 1 city like SF or NYC, expect to pay 5-20% higher OTEs, and adjust accordingly for remote or international teams.
And a great deep dive on how Rippling does outbound here: