The Complete Guide to SDR Compensation Plans & Sales Incentive Programs

SDR Compensation Plans & Sales Incentive Programs

Not long ago, we showed you an example of a great compensation plan for your outbound sales development reps (SDRs). But what about inbound SDRs? Inbound SDRs, sometimes called marketing qualification reps (MQRs) or lead response reps, are a vital part of any inside sales team. They’re tasked with following up with leads that come in from a variety of marketing channels including content downloads, web forms, webinars and more.

In this post, I’ll detail some best practices for rolling out a comp plan for inbound SDRs that keeps them focused on sourcing high-quality opportunities for your account executives (AEs).

How to Structure a Comp Plan

Just like your outbound SDRs, inbound reps are likely to be millennials with less than three years of experience. That being the case, we recommend keeping your comp plans simple. In fact, comp plans for outbound and inbound SDRs should look basically the same:

• Base– This is the amount that you pay a rep each month no matter what
• Bonus– This amount depends on meeting specified goals

Sales is a precarious occupation by nature. But since your inbound SDRs are likely early-career, they’re looking for some amount of security. That being said, their base should be enough so that if they miss their goals while they’re ramping up, they won’t be out on the street. We recommend that an inbound rep’s on-target earnings (OTE) should be at least 65% base salary.

I have heard of companies that only pay inbound SDRs an hourly wage without bonuses. However, I think this is a bad practice. A bonus is the best way to motivate reps to peak potential, no matter the sales role.

Calculating a Bonus

So what factors determine an inbound SDR’s bonus? There can be many. But there are three main factors to look at when structuring inbound SDRs’ bonuses.

Accepted Opportunities

An inbound rep’s primary job is to qualify leads. Therefore, I think that reps should be compensated primarily based on accepted opportunities.

Opportunity Revenue

You might choose to tie bonuses to revenue that actually closes from opportunities they source. This rewards reps for kicking awesome opportunities to sales.

Activity SLAs

Another factor I recommend including in sales compensation plans is an activity quotas. At many companies these are called service-level agreements (SLAs). For an inbound rep, this could include responding to all inbound leads within 5 minutes, following up with leads a certain amount of times and other activity goals. Younger reps do well with structure. So if you’re going to require SLAs, why not reward reps for meeting those goals?

Inbound SDR Comp Plan Example

So let’s walk through a sample compensation plan for an inbound SDR.

OTE: The Bridge Group reports that an average SDRs salary is $72k.

Base Salary: According to the Bridge Group, The average base salary for SDRs is $46K. Let’s use that as a benchmark. That leaves $26K for a bonus.

Opportunity Quota: Let’s tie 65% of the bonus to opportunities accepted by sales. So $16,900 (or $1,408 per month) should be earned from hitting an opportunity quota. I can’t tell you what that opportunity quota should be since it will vary greatly based on what you’re selling, overall lead quality, how much you’re spending on marketing and a host of other factors. I will caution to never put a cap on the bonus. More accepted opportunities should virtually always mean a bigger bonus.

Revenue from Opportunities: I like to reward inbound reps for revenue that actually closes. I think somewhere around 25% of their bonus could be tied to opportunity revenue. As an example scenario, say that you expect that reps will source 20 accepted opportunities per month and that 20% of those opportunities will close. That’s 4 opportunities per month. Now let’s say that your average annual contract value is $15K (standard for a B2B tech company). That means that in one year, an inbound rep should source $720,000 in revenue. So if you reward your inbound SDR 1% of total revenue closed, that’s $7,200 a year (about 27% of their bonus and exactly 10% of their OTE). The hotter opps they source, the more they take home. This keeps your reps motivated to source quality opportunities for your AEs.

Activity Goals: That leads activity goals. I believe about 10% of an inbound SDR’s bonus should be tied to hitting the goals in their SLA. In this example scenario, 2,600 (around $216 a month) should be paid off when all these goals are met. For an early career rep, an extra 216 a month is going to matter! If possible, pay out activity-based bonuses weekly or biweekly. It offers a good opportunity to keep tabs on whether reps are meeting their goals. If not, it allows you ample time to coach reps to ensure that these goals are being met. And of course, Revenue.io’s call analytics dashboards can help you gain a real-time view of how reps are stacking up against their goals.

For tips on how to build the perfect comp plan for outbound reps and account executives, check out our ultimate guide to sales compensation.

One Amazing Example of an Inside Sales Compensation Plan for SDRs

Inside sales compensation plans might not—at first—seem like the sexiest topic. But I have news for you: awesome sales comp plans can actually be the secret sauce to not only hiring great reps, but motivating them to peak performance. We recently participated in a webinar covering how to create and implement inside sales compensation plans that drive powerful results. The webinar is packed with tips that can help you create more effective sales comp plans.

Here are some key takeaways from the webinar that will help you create powerful inside sales compensation plans:

Keep it Simple for SDRs

The webinar kicked off with a fantastic presentation from OpenView Partners’ Sales Strategist CeCe Bazar on how to structure comp plans for sales development reps (SDRs). CeCe routinely helps OpenView’s portfolio companies optimize their compensation plans to drive killer results. When it comes to comp plans for SDRs CeCe advises keeping it simple. SDRs are usually millennials who are taking their first or second job after college. If compensation plans are too complex, it might easily seem confusing or overwhelming.

For simplicity’s sake, CeCe recommends separating comp plans into three sections:

Base: The regular amount that reps see in their paychecks that is unaffected by performance

Bonus: The additional amount reps receive based on meeting various goals.

Kicker: Any additional bonus that is tied to closed won deals or competition

Offer Structure

In addition to simplicity, CeCe emphasized the importance of structure. According to CeCe, for many millennials, “downtime is scary.” She recommends offering more structure by measuring both activities (e.g. calls and emaills) and outcomes (e.g. appointments, opportunities and wins). Strong activity goals are something that can keep your sales team active and focused. Later in the webinar, our CEO Howard Brown offered some awesome ways to measure reps’ activities against goals in Salesforce dashboards.

The 40/60 Rule for Bonuses

Several of OpenView’s portfolio companies are using a 40/60 rule when it comes to SDRs’ bonuses. 40% of their bonus is tied to appointments, while 60% is tied to opportunities. I like this rule because it prevents reps from setting appointments with unqualified prospects just to hit an appointment quota. Rewarding SDRs with a kicker for opps that close is another great way to motivate SDRs to source quality opportunities.

OTE Breakdown: Base Vs. Bonus

So what’s the best way to set on-target earnings in comp plans? Many reps (especially younger, unseasoned ones) need to be able to rely on a regular salary in order to pay their bills. CeCe Bazar therefore recommends a plan that is weighted toward the base: 70% base and 30% bonus. More seasoned inside sales reps and managers, on the other hand, may prefer a salary with less of a base and a bigger bonus. When hiring account executives, this is always an important conversation to have.

SDR Comp Plan Example

So tying it all together, for a newly hired SDR, a comp plan may break down like this monthly:

Base Monthly Salary: $2K

Potential Bonus: $1K Monthly Payout

Goals: 16 Appointments, 8 Opportunities

Payout: $25 per appointment and $75 per opportunity

For a LOT more insight into structuring sales compensation plans, check out our sales compensation eBook!

How to provide short-term sales incentives and long-term results

Today’s sales environment is vastly different from what it was just a few years ago. Buyers, enabled by the internet, now do far more research prior to speaking with a salesperson and are more educated as a result. Buying committees are also larger, and now include an average of 6.8 or more stakeholders. This leaves reps to struggle with more individuals to influence. Furthermore, oftentimes both the product being sold and the solution needed are far more complex. These factors all contribute to longer buying cycles. To top it off, traditional sales compensation models often aren’t as effective at driving desired results in the modern sales world.

The challenge is to simultaneously motivate diverse sales teams to meet short term goals and drive increasing amounts of revenue to the bottom line for sustainable organizational growth. Companies also need to ensure their employees remain at their peak performance, happy, and satisfied to retain top players. This can all be done by reinforcing the right short term sales behaviors while building programs that promote long-term results.

Identify activities that support business goals

To start, determine what sales activities will support the specific goals of your business. This will depend on where your organization is in its lifecycle. Obviously, the needs of a startup are very different from those of an established enterprise. So, where a startup may be focused on building up their customer base, an established enterprise may be more focused on preventing customer churn or increasing profitability.

For the startup, the compensation plan will most heavily reward adding new customers where the enterprise might compensate better for customers who pay subscriptions annually versus month by month. Or, for a profitability focus, higher rewards would be paid for the most lucrative deals and compensation would scale back based on discounts leveraged to close a deal.

Add gamification to reinforce activities

Rewarding sales reps for activities helps build positive behaviors while having fun. For example, you can gamify onboarding activities for new hires. Once you hire a new rep, give them assignments to complete prior to their first day on the job. These might include gaining a specified amount of product knowledge, learning the basics of the company’s CRM platform and reviewing sales collateral. When the new hire starts, reward them for their pre-onboarding accomplishments.

Existing reps may be rewarded for various activities to drive the behaviors needed to hit their long-term goals such as accomplishing a specified number of cold call attempts, discovery calls, demos, proposals, or referrals. Plus, this sort of program can be customized for each individual on a team to reinforce activities needed to reach their overall goals.

Rewards

What you reward for these types of activities will vary based on your budget, the value of the activity to your business and what you determine most motivates your sales reps. Some examples of rewards to use include cash, gift certificates or cards, extra vacation days and event tickets.

Build teamwork

You can increase teamwork to reinforce long-term sales performance. Hold team meals where you treat the entire team to lunch or dinner together whenever an individual on the team hits their goal.

At the same time, because everybody benefits by being treated to the meal, everyone on the team will want to help each other improve their performances. Of course, the reward doesn’t have to be a meal – it could be some other type of event as a result of a percentage of people hitting a particular goal. Whatever it is, it needs to encourage reps to support one another, perhaps through peer-to-peer coaching. Team competitions – one team against another sales team – is another option to build teamwork. And, don’t forget to keep everyone posted on all individual and team numbers so they can cheer each other on.

These are a few ways to include short-term sales incentives that will help you gain long-term results. Give these a try. They are a win-win for individuals, teams and the entire company. Plus, the bonus is fun along the way, resulting in increased employee satisfaction and reduced sales rep turnover as well as the costs associated with rep churn!

Why you shouldn’t advertise uncapped sales commissions

When it’s time to hire additional salespeople, it’s critical to include sufficient details to ensure you attract the best candidates. According to Gallup, today’s work environment means that you need to complete for employees as you do for customers. That’s why it’s important to focus on what potential new sales reps want from their work.

The image you create with your job posting makes all the difference. A big no-no is simply stating that you pay “uncapped commissions.” It will leave candidates asking, “So what!” Unless accompanied by additional details, just don’t put this in your ad.

Uncapped commissions alone do not attract top reps. In fact, Including this in your job postings may actually repel the best candidates, sound spammy or portray your company as an MLM. Uncapped commissions have become somewhat expected, especially since capping them often carries negative connotations while potentially limiting rep productivity.

If you’re really interested in recruiting the best candidates, you need to paint a clear picture of the position, what you’re looking for and why someone would want to work in this job over another. So, what should you include in your job postings when advertising for hiring sales roles?

The basics: Talk about the job itself

Create a clear concise description of the job and its responsibilities. Be sure to state whether it’s an entry-level business development rep, account manager or a vice president of sales. Is it a hunter or farmer type of role? Describe some key qualities you’re looking for. Basing this loosely on the shared characteristics of your top sales reps is a good way to go here.

The job title you use on your job posting needs to stand out from the crowd to ensure the best candidates see your ad. This means not using a generic title like “inside sales rep,” “account executive,” or “sales manager” They’ll blend in with the rest. Instead, use something more descriptive like “SaaS business development rep” or “advertising sales executive.” And be sure not to use any buzzwords like “unicorn,” “ninja,” or similar terms. They won’t produce the desired results.

Keep it positive while honestly describing important aspects of the role. Using bullet points, provide candidates with a firm understanding or what they’ll experience in the role such as:

• Day-to-day responsibilities
• How they’d get their leads – cold-calling, inbound marketing, or…
• The kinds of customers they’ll be selling to
• Territory location, if applicable
• Support they’ll receive in reaching their goals
• Technologies and software they’ll be using

Provide realistic qualifications for the role while being careful not to list unrealistic ideal criteria. Being too selective will only drive away perfectly good candidates. Things to list for qualifications might include things such as:

• Degree requirements
• Minimum number of years’ sales experience
• Specific industry and product or service type experience
• Experience selling to a particular audience
• Required certifications
• Experience using particular technologies

The value: talk about the growth opportunity

Younger workers look for more than just a paycheck. A Gallup study found that 87% of millennials (more than any other generation) say that career growth and development is very important in a job. They also expect to have learning experiences in the workplace and want them to be valuable. Therefore, your job description should speak to the advancement applications will see in their careers, as well as the types of learning they will be exposed to.

Describe your company

It’s important to talk about what your company is and what it does. Keep it short and sweet while answering the all-important question: “Why should I want to work for your company?” Things to include are information about company culture, growth, awards/recognition and other exciting details about your organization. This generates the interest of prospective applicants.

Perks, Benefits and Money

When it comes to attracting, engaging and retaining top sales talent, the perks, benefits and money are of utmost importance. Be sure to include the following in your job posting:

• Insurance types provided
• 401(k) and company match if applicable
• Paid time off
• Flexible work options
• Time off allowed to volunteer
• Tuition reimbursement
• Details relating to on-the-job training
• Commuting discounts
• Maternity and paternity leave
• Child care facilities

Sales Role Commissions Plans

When it comes to talking about money, as mentioned above, don’t simply state “uncapped commissions.” This is not a benefit that will make you stand out from the crowd. Providing information about the sales compensation plan such as whether the position is base plus commissions and an estimated annual income range. This will increases trust and ensures your company is seriously considered by the right candidates.

Keep these tips in mind next time you’re creating an advertisement for a sales role. Taking the time to include as much detail as possible, in a concise manner, will make everyone’s life easier. It increases the odds that your applicants will include an excellent match for the position. It will prevent the need to weed through so many candidates it’s like finding a needle in a haystack. Plus, it prevents the chances of receiving no applicants and wasting valuable advertising dollars. Most of all, including sufficient detail around why they should want to work for your organization, especially around the money subject, will differentiate your company from all the other potential employers. And isn’t that what you really want to do?

Why Your Incentive Programs Fail and the Secret to Incentive Success

During a leadership program I was facilitating in Milan, Italy, we were talking about how managers try to motivate people through the use of bonuses or incentives. The frustration quickly rose to a head in the room, as the managers shared how much they struggle with finding a way to continually motivate each person on their team to perform, and perform consistently, especially in the face of change or difficult times.

I asked this team of managers, who all admitted at one time or another to designing an incentive program for their team, “Have these programs or bonuses you’ve offered achieved the results you want?” There was a general consensus that the bonus programs they’ve put in place don’t work. And then there’s the key idea of sales incentives and commissions, which go hand in hand in understanding the basis of this problem.

“Why?” I inquired.

One manager stepped in by explaining, “Well, Keith, in the past, when I’ve designed a bonus program for the team, I would typically position it so that the top salesperson for the quarter or for the month would get some sort of additional monetary compensation.”

My follow up question, “And how has that been working for you?”

“You can probably guess what happens. The top performer always wins.”

I reaffirmed, “So basically, managers, with good intentions, put together some type of bonus structure in place where the top person wins something, typically some amount of money.”

How Sales Managers Set Their Team Up for Failure

“Now, envision this. You have your top performer or A player lined up at the starting line next to your average or B player. And next to them is your underperformer or your C player.

Then the starting gun goes off. What happens to the C player? What do they do?”

One manager jumped in and said, “The C player looks at the A player and the B player next to them and thinks, I’m not going to even try because I don’t have a chance. So, they check out immediately.”

The very incentive or bonus you put together with the intention to motivate the entire team has now become a dis-incentive for your lower performers!

Now, the B player looks at the A player and thinks, “Okay, I have a chance here. I’m going to give this a shot and do my best.”

However, at some point during the race, they see the vast lead the A player has, so just like the C player, the B player now checks out and gives up. So who wins?

“The A player. The one who always wins.” The managers nodded in consensus.

It’s evident to these managers that even with their good intentions, they very bonuses they set up are usually positioned for the A player to win, while the rest of the team looks at them feeling doomed to fail from the start.

The overarching question was apparent. One manager rose up and asked, “So what do we do to get everyone engaged and motivated? And to add to this, given our company policy and resources, we don’t always have the ability to keep offering our team additional money to perform.”

It was during this conversation when I was reminded of a story where in one particular company, the manager was going to give out a $5,000.00 (USD) bonus to the person who outperforms the rest of the team for that quarter.

Well, at the end of the quarter, to no surprise, this manager’s top performer won.

When the quarter ended and all the sales for that quarter were confirmed, the manager called the salesperson who won into her office. She handed a $5,000.00 check to this high performer and said, “Congratulations on winning. Here’s a check for $,5000,00. Well done! You deserve it.”

“Thanks,” the salesperson replied, but with a lack of enthusiasm or excitement around the substantial amount of money she just received. The manager was surprised by such a passive and unenthusiastic reaction.

Puzzled, she responded to this salesperson by saying, “I just handed you a check for $5,000.00 dollars. I would think you would be more excited! What did I miss here?”

And that’s when she heard the unexpected comment which shocked this manager into a new way of thinking. The salesperson looked at her manager and said, “To be completely honest, I’d hand this check back to you right now and would feel more rewarded and motivated if you announced to everyone on our sales team that I am the best salesperson on the team.”

What a surprise! Her reaction totally blindsided this manager.

Now, for those managers listening to this story, some of you may be thinking, “Are you kidding me? I would take the money!” However, there are always people in the room who feel differently and would rather receive that kind of acknowledgment from their manager.

The reality is, most managers truly don’t know what inspires and motivates each individual person on their team to perform. Instead, they make two general assumptions. The first assumption is, “Salespeople are coin operated and only motivated by money.” Clearly, this story refuted that assumption.

The second assumption that managers make falls into the manager coaching in their own image. That is, “Well, I know what motivates me. So, I bet it’s going to be the same for the people on my team.”

Then, managers wonder why people aren’t responding positively to what you perceived would motivate them to push harder and perform better.

How to Inspire Each Individual on Your Sales Team

Managers spend so much time anguishing over what the right bonus program would be to motivate their people. Well, if you’re struggling to come up with the answer, then chances are you’re asking the wrong person—you! Instead of trying to come up with what you perceive will motivate your people to better their best and go the proverbial extra mile, what if you let them design their own incentive? Keep in mind, it’s not always only about the money. And if you’re concerned that effective bonuses require some type of monetary compensation, consider these rewards that people would deeply appreciate and work harder for.

There are things people want that are not tangible. Refer back to the top performer in the story I shared. Here are just a handful of ideas of what might inspire your people to re-focus all their energy to maximize their performance.

• Time off.
• Mornings or afternoons where they can leave work early to pick up their children or drop them off at school/daycare.
• A Friday or two to go out and play a round of golf or spend time with their family or what they like to do during their down time.
• Lunch with their manager. (Yes, some of your people actually do want to spend time with you!)
• Authentic acknowledgement in private or in front of the team. (Don’t assume what they like or what makes them uncomfortable. Ask them how they like to be acknowledged!)
• Rewarding them with being able to manage a new or specific account.
• Providing them with a certain type of lead or client to manage.
• Giving them more time to craft their career trajectory and personal brand.
• Empowering them with more responsibility or making them a team lead. (Running team meetings, etc.)
• Getting additional administrative support for a certain period of time, dedicated to them and their needs.
• A gift certificate to their favorite store or restaurant.
• A company t-shirt, jacket, or hat. (Yes, people do go crazy for this stuff!)

Honor Sales Reps as Individuals Rather Than a Group

Notice that most of these incentives don’t cost you a dime. And more so, it’s what your people want most, aside from a monetary reward. But the only way you can assess what they want, rather than what you think they want, is by taking the time to sit down with each person and have a one to one conversation around what truly inspires them to come to work every day. Taking the time to uncover what makes them feel most fulfilled and satisfied, along with what would push them to go the extra mile becomes the impetus to peak performance, especially if they know that what they wanted most was waiting for them at the finish line.

A globally recognized authority on sales and leadership and the pioneer of executive sales coaching and management coach training, Keith Rosen is the CEO of Profit Builders, named one of the Best Sales Training and Coaching Company Worldwide. Over the last three decades, Keith has delivered his programs to hundreds of thousands of salespeople and managers in practically every industry; on five continents and in over 50 countries.Keith has written several best sellers on leadership, time management and sales, including, Own Your Day and the globally acclaimed Coaching Salespeople into Sales Champions, winner of Five International Best Book Awards and the #1 best-selling sales management coaching book on Amazon.com for six consecutive years. Find more resources at www.KeithRosen.com.