The Best Revenue-Driving Sales Incentives For Your Startup

Creating incentives for your Marketing and Sales team is crucial to the growth of your company. It needs to be a fail-safe process that focuses on the right goals. Here I build on my last article about setting up a lean Sales and Marketing account-based team and explain the best methods to create competitive yet collaborative incentives that will drive your company’s yearly revenue and growth.

Team structure foundation

There are three types of roles you need within your team that have proved to get Startups off the ground and drive growth:

• Performance Marketing Manager
• Business Development Representative
• Account Executive

This triple-threat team will work hand-in-hand as a synced lead-to-deal-closing machine. All three should receive their own type of bonus seeing as their tasks and goals differ. Though the incentives should be the same for each person in the same role, it could vary for employees that work in another demographic with a different market value. Incentives must also be easy to understand for all members of the team.

Performance Marketing Manager Incentives

The Marketing Manager of the trio will work towards creating lists of Sales Qualified Leads (SQL). Their incentives are based on the amount of SQLs, the quality of the data, and for good tracking and clean reporting. The focus of the incentives must be on the SQL because it will ensure your Marketing team works towards actionable and valuable leads (as opposed to Marketing Qualified Leads).

A quick reminder: A Marketing Qualified Lead (MQL) is a lead that is more likely to become a client compared to other leads when they are scored based on some pre-decided criteria (demographic, age, job title, etc.) in Marketing campaigns. A Sales Qualified Lead is when a prospective qualified client is deemed ready to be contacted by the Sales team of your company in order to close a sale.

Data quality should be a priority right from the beginningー it brings immense value to your sales and marketing teams. I have found that companies who add this later to the mix have a harder time fixing it as the company expands.

Good data quality means creating a complete profile of your prospects. It should be filled with information such as identity, titles, content interests, email (for newsletter marketing), etc. This can be achieved by using a powerful marketing automation and CRM platform to seamlessly automate your Marketing operations, which in turn will help minimize human error and create transparent processes.

The team needs to also stay disciplined and not skip any steps along the way. High-level data also requires continuous clean up and monitoring to ensure that the customer profiles are complete and consistent throughout. You can base the incentive on a certain percentage of completed profiles.

The Marketing Manager also needs to focus on tracking ー if what the team is doing is not measured, it becomes impossible for you to manage and keep sight of progress. Make it a priority upfront to build robust reports and business intelligence, which can be extended as the business grows. As company head, you decide what information is crucial and expect your Marketing Team to report on these points in a consistent manner.

With these three factors in mind, I recommend a 70/30 bonus in the beginning. The 70% is allotted to the quantitative part of amassing Sales Qualified Leads. The remaining 30% goes towards data quality and solid reporting.

Business Development Representative (BDR) Incentives

The BDR within the Sales portion of your team are given bonuses in a way that spurs rivalry and collaboration simultaneously. BDRs nowadays tend to be younger and more competitive by nature than ever before, so weekly sales competitions and other activities can further light that inner-fire. One company went as far as to mesh fantasy sport to the selling process in order to add a level of gamification.

How to set up commissions can depend on your company size ー if you are just starting out, try to keep them simple. I recommend basing them on:

• Activities
• Meetings booked
• Meetings held
• Opportunities created
• Closed deals won

In a scenario where an account-based sales and marketing approach is not applied, setting commissions based on the quantity of booked meetings could lead to lower quality. However, the account-based approach focuses solely on SQLs, which means that they would only be booked with relevant prospects that were provided to them before by the sales management system.

How to set the quota

The quota can differ per industry, but having talked to countless Sales Heads, there’s definitely a rule of thumb that applies in most cases: 20 meetings scheduled per month or 1 per business day is a healthy and realistic goal. Your target quota should also be set up to ensure that at least 70% of your BDRs would meet it in any given month. This keeps your team motivated thanks to a fairly achievable goal. What’s more, the BDRs who overperform will make up for those who underperform.

From my years in the business, I’m resolute about the fact that the BDR needs to have factors that they can fully control themselves and one indirect “kicker”, meaning the work they did ultimately leads to a closed deal by the Account Executive in the next round of the Sales funnel. By doing so, you continuously drive motivation, communication and a productive urgency within the team. The BDR will be more inclined to follow up with the Account Executive on the status of the deal.

I recommend paying your BDR a fixed amount between 60 and 120 euros for every meeting booked. In addition, reward them with 1% of the total contract value (TCV) if the Account Executive closes the deal based on their work building up to that point.

Account Executives Incentives

Next in the Sales funnel is the Account Executive, whose role it is to take the meetings set up by the BDR and close the deals.

Some founders tend to give incentives based only on revenue, when in fact, what really counts is winning market share and signing new clients. When a purely revenue-based commission is given to your Sales team, they will grasp for low-hanging fruit or try to upsell to existing clients. Though you may encounter some short-term wins, it effectively slows your growth.

Read this next paragraph twice as this is one of the most common mistakes I see in startup sales teams.

Your Marketing and Sales team are the driving factor that ensure your profit doesn’t just climb incrementally all while growing from existing clients. What really works for SaaS organizations is to have a net-negative churn rate. This means that the revenue grows organically every year out of the existing customer base. It’s spurred by you providing a reliable product, regular feature updates, security patches, attentive customer service and a solid sales automation system. Some successful SaaS companies can see up to 20% in organic growth per year. But for most companies, the reality is your profit won’t accrue unless you keep building your customer base in numbers. This is why you should create the right type of incentives for your Sales team based on new signed clients.

Build a dedicated team later to take care of upselling and cross-selling. They’ll make sure clients don’t churn and continue their subscription or even go premium. The task of selling should never go to your customer care team, who need to uphold a high level of trust from your clients ー they should feel taken care of and not taken advantage of.

Stay away from overselling

Overselling will lead to a higher churn rate because the customer is not getting what they were promised. If sold right, your company will enjoy all the benefits:

1. A new client has been secured.
2. They end up staying and use your product long-term.
3. Your churn-rate stays low because your client is happy with the product and services they were promised. If they churn after a few weeks, chances are your Sales Manager oversold and could not fulfill their expectations.
4. When you keep signing new clients and keep your existing clients happy, you maintain a positive cashflow. This is achieved when your client has paid a subscription in full for one year upfront.

Let’s say your Account Executive has sold a $1,000 dollar MRR (monthly recurring revenue) deal, which would be $12,000 upfront. Now, multiply this by the vast amount of clients that your Marketing and Sales Team are able to land. If you manage to uphold a good year-over-year (YOY) growth rate, it will allow you to invest a lot of money into your business all while having a positive cashflow.

Account Executive commission percentile suggestion

By rewarding your Account Executive with higher commissions on longer contracts, this will help you drive both a long client retention and a lower churn rate. I suggest the following percentage of the Total Contract Value (TCV) for the lengthy of subscription sold.

• 12 months contract — 10% on TCV
• 24 months contract — 14% on TCV
• 36 months contract — 16% on TCV

Example:

Your Account Executive has closed a 36 month deal with a MRR of $3.000.

The commission is calculated as follows: ($3.000 x 36) x 16%

Your account executive would therefore come out with $17,280 of the Total Contract Value of $108,000.

A side note on data quality: the Sales teams should work towards high data quality standards, just as I had mentioned when outlining the incentives for Performance Marketing Manager. This means that their opportunities are filled out to the max; the contact and account profiles of each prospect are complete and the numbers formatted in a way to facilitate reporting. You may also consider making data quality a part of their bonus, depending on the current discipline of the Sales team.

SPIFFs

Some companies are able to give an additional bonus for a subscription prepayment on top of the main commission, either in the form of an additional percentage or a SPIFF. The latter is an acronym that stands for Sales Performance Incentive Fund. It’s a bonus either in the form of money or a tangible gift given directly to the Sales Manager. The gift could be a weekend getaway, a restaurant voucher, or any luxury item, like a watch or a new phone.

Productsup CSO once told me of a Sales Manager who received a flat screen TV for good performance. It then became a constant reminder in that individual’s home of their success and hard-work. The person and their spouse often mentioned it and felt a sense of pride when guests came over. A physical gift stays present, while a cash bonus is an invisible, one-time perk that is all-too-soon forgotten.

This is where we touch on the human side of the job; it’s not always easy, requires a lot of travel and late hours, and a SPIFF is something that can go a long way. There are varying opinions when it comes to awarding SPIFFS. Though some may see it as outdated, from my experience it has a positive effect.

Build your team and reward it. What’s next?

Now you know how to set up a team and create bonuses. With these two important stepping stones, you can launch your startup in a lean yet powerful structure that will drive your yearly revenue. Once you have built your Marketing and Sales Account-Based Team, using the incentives I’ve discussed will create collaborative and competitive teams and focus on quality new clients that are in it for the long run.

Stay tuned for my next article where I will discuss the next steps in creating a successful startup.

About the author

Marcel Hollerbach is the CMO at Productsup and a Co-Founder of Cavalry Ventures. In his 15 years of founding and investing, he’s helped companies go from micro-enterprises to successful institutions.