Actions: Confirm roles in scope, selling motion, time horizon (bookings vs retention), budget constraints, and “must-not” behaviors (discounting, churny deals, channel conflict). Identify what data you do/don’t have.
Outputs: Context snapshot + assumptions/unknowns + decision on time horizon.
Checks: Success is measurable (who/what/by when) and the plan scope is explicit.
2) Define role responsibilities + “what gets paid on”
Inputs: Role definitions; pipeline stages; revenue recognition basics; retention model.
Actions: Choose 1 primary performance metric per role (e.g., ARR bookings, qualified meetings, expansion ARR, gross profit). Define “crediting” rules (when a deal counts, splits, renewals).
Outputs: Role → metric mapping + crediting rules draft.
Checks: The metric is (a) measurable, (b) attributable, and (c) reasonably controllable by the rep.
3) Set OTE + base/variable mix (pay risk where it belongs)
Inputs: Talent market bands (if known), role seniority, sales cycle, role risk, stage.
Actions: Set OTE targets and the base/variable mix per role. Choose a default mix (often ~50/50 for many AE roles) and adjust based on cycle length, product maturity, and expected rep autonomy.
Outputs: OTE + pay mix table with rationale and guardrails.
Checks: OTE is economically viable for the business and believable to candidates; pay mix matches controllability and sales cycle length.
4) Build quota + ramp model (make “on target” realistic)
Actions: Create a quota model (top-down + bottom-up cross-check). Define ramp schedule, draw/guarantee (if used), and what happens if the plan changes mid-year.
Actions: Set rates, accelerators/decelerators, and payout timing. Add guardrails: discount approval thresholds, deal qualification minimums, splits/overlays, clawbacks/chargebacks, and edge-case rules.
Outputs: Commission mechanics spec + 2–3 worked payout examples.
Checks: A Sales Ops/admin can calculate payouts from CRM data without manual interpretation.
6) Add retention/quality alignment (avoid paying for churn)
Inputs: Retention/NRR goals; churn timing; implementation/onboarding reality; data availability.
Actions: Choose one retention-alignment approach (e.g., partial holdback until 90 days, commission adjustment on early churn, pay on collected revenue, or NRR multipliers). Define measurement windows and how disputes are handled.
Actions: Run references/CHECKLISTS.md and score using references/RUBRIC.md. Produce the rep-facing one-pager + FAQ. Always include Risks / Open questions / Next steps and a 30–90 day validation plan.
Outputs: Final Sales Comp Plan Pack.
Checks: The plan can be explained in one page, computed from CRM fields, and aligns incentives with business + customer outcomes.
Always include: Risks, Open questions, Next steps.
Anti-patterns
Avoid these common failure modes when designing sales compensation:
Formula soup. Creating a comp plan with 4+ metrics, nested multipliers, and conditional accelerators that no rep can mentally model. If a rep cannot estimate their payout from memory after closing a deal, the plan is too complex. Stick to 1 primary metric per role and at most 1-2 secondary adjustments.
Paying for bookings while ignoring churn. Rewarding reps purely on closed-won ARR with no retention alignment. This incentivizes closing bad-fit customers, aggressive discounting to pull deals forward, and over-promising during the sales process. Always include at least one retention-alignment mechanism.
Unrealistic quotas that kill morale. Setting quotas top-down from the board plan without a bottom-up cross-check (pipeline coverage, conversion rates, ramp time). When fewer than 50-60% of reps hit quota, the plan is broken, not the reps. Always stress-test quotas under low/base/high scenarios.
Copy-pasting comp plans across stages. Using a Series C comp structure (territories, overlays, SPIFs, multi-tier accelerators) for a seed-stage team with 2 reps and no pipeline history. Early-stage plans should be simple: base + variable on one metric, with a clear ramp and draw.
No ramp protection for new hires. Putting new reps on full quota from day one without a draw, guarantee, or reduced ramp quota. Reps who feel underwater from week one either leave or cut corners. Ramp plans must reflect realistic time-to-productivity.
Examples
Example 1 (first AE comp plan, seed-stage SaaS):
“Use sales-compensation. We’re seed-stage B2B SaaS, $12k ACV, 45-day cycle. Hiring first 2 AEs. Goal: $600k ARR this year. Output: a Sales Comp Plan Pack with OTE/pay mix, quotas+ramp, commission mechanics, and a rep-facing FAQ.”
Example 2 (retention-aligned comp, churn problem):
“Use sales-compensation. Reps optimize for bookings and we churn in the first 90 days. We want comp to reflect retention/NRR without being overly complex. Output: a Sales Comp Plan Pack with a retention-alignment addendum and clear admin rules.”
Boundary example (redirect to legal counsel):
“Write a legally binding compensation agreement for California employees and tell me what’s compliant.”
Response: explain this skill produces a comp-plan spec and rep-facing materials, but legal/compliance review must be done by qualified counsel.
Boundary example (redirect to building-sales-team):
“We need to figure out what roles to hire, how to interview them, and how much to pay them.”
Response: the org design, scorecards, and hiring process belong to building-sales-team. Use this skill specifically for the comp plan (OTE, quotas, commission mechanics) once you know which roles you are hiring.