What a SaaS founder should pay their first sales rep

Post by What a SaaS founder should pay their first sales rep

Unless you were once a salesperson, hiring your first sales rep is going to be daunting. 

You probably have a million questions: Who should I hire? Where will I find them? How do I know if they are any good? Will they ruin our culture? Will they treat our customers with respect and care? Can they even sell? What should I pay them? How should I pay them? 

I’ve helped dozens of startups and small businesses hire their first sales rep and those questions are just the tip of the iceberg. 

Here is the ultimate guide on what to pay your first sales rep at a SaaS company. 

Can you afford to hire a sales rep?

The biggest difference between a bootstrapped SaaS company and a venture backed SaaS company is that venture backed firms don’t have to pay for sales staff with current revenues. But that doesn’t mean they can go and hire all willy nilly. The payback period for a successful SaaS company can be anywhere from 6 to 18 months. Yeah, that’s right. Imagine having to wait for 12+ months before your investment in a sales rep pays off. 

You can’t afford to hire too many sales reps

The single biggest mistake that I’ve seen startups make is that they raise a big round and go out and hire a bunch of sales reps. Now they have compounded the burn problem. Yes, they have big goals they need to hit quickly, but you don’t even know if you have enough leads to support 1, 3, 5, or 10 reps. Nor do you have a hiring profile that is guaranteed to produce results. And your onboarding process for new reps hasn’t even been developed yet. If you want to hire 10 sales reps, start with 2 in Q1, 2 in Q2, 3 in Q3 and 3 in Q4. This will give you the best chance to limit your burn rate and onboard 10 successful selling reps. 

What should you pay a rep?

Keep it simple. I’d suggest a compensation package that is 50% base and a 50% commission. This is stock standard SaaS compensation. If you’re worried about the sales rep being unsuccessful due to issues outside their control, then a stock plan can help with retention and a positive selling approach through tough times. As for the on target earnings (OTE) here is a quick guide to median OTEs by annual contract value (ACV). Source: Bridge Group, Inc. 

Hire the best rep you can afford

Great sales organizations create systems and processes that improve the output of their average rep. If you’re hiring your first few reps, you have a long way to go to optimize your selling process. You won’t even know if the profile of the first few reps you hire is what is right for your organization. You can’t do anything about this. Just hire the best rep you can and learn.

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Dave Shepherd

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