blackroad-os-sales-playbook/06-operations/COMPENSATION_PLAN.md

💰 Sales Compensation Plan

PROPRIETARY & CONFIDENTIAL

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Philosophy

Great comp plans align incentives between company and reps.

Good compensation:

• ✅ Rewards the right behaviors
• ✅ Motivates top performance
• ✅ Attracts A-player talent
• ✅ Scales with company growth

Bad compensation:

• ❌ Caps earnings (demotivates high performers)
• ❌ Rewards activity, not results
• ❌ Too complex (reps don't understand it)
• ❌ Misaligned with business goals

BlackRoad OS Principle: Pay for performance, not tenure.

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Compensation Structure Overview

Model: Base + Variable (Commission/Bonus)

Role	Base Salary	Variable (OTE)	Total OTE	Split
SDR/BDR	$50K	$20K	$70K	70/30
SMB AE	$75K	$75K	$150K	50/50
Mid-Market AE	$90K	$110K	$200K	45/55
Enterprise AE	$120K	$130K	$250K	48/52
Solutions Engineer (SE)	$110K	$40K	$150K	73/27
Sales Manager	$130K	$70K	$200K	65/35
VP Sales	$180K	$120K	$300K	60/40

OTE = On-Target Earnings (what you make if you hit 100% of quota)

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Quota Setting

Formula

Individual Quota = (Company ARR Goal ÷ # of Quota-Carrying Reps) × Coverage Factor

Example:

• Company ARR Goal: $10M
• Quota-Carrying Reps: 10 AEs
• Base Quota per Rep: $1M
• Coverage Factor: 1.2 (expect 80-85% average attainment)
• Adjusted Quota: $1.2M per rep

Why Coverage Factor? Not all reps hit 100%. Historically, average attainment is 80-85%. Coverage factor ensures company still hits revenue goal even if average attainment is <100%.

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Quota by Role

Role	Annual Quota	Monthly Quota	What Counts
SDR/BDR	240 SQLs	20 SQLs	Qualified meetings scheduled (BANT++ >63)
SMB AE	$250K ACV	$21K ACV	New ARR + Expansion ARR
Mid-Market AE	$400K ACV	$33K ACV	New ARR + Expansion ARR
Enterprise AE	$750K ACV	$62.5K ACV	New ARR + Expansion ARR

Notes:

• New ARR: First-year contract value from new customers
• Expansion ARR: Upsells and cross-sells from existing customers
• Renewals: NOT counted toward quota (but incentivized separately)

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Commission Structure

Tiered Commission (Recommended)

Why Tiers? Accelerators reward overperformance and create urgency to close deals.

SMB/Mid-Market AE Commission Tiers

Quota Attainment	Commission Rate	Example (on $400K quota)
0-60%	5%	$240K × 5% = $12K
60-80%	8%	$80K × 8% = $6.4K
80-100%	10%	$80K × 10% = $8K
100-120%	15%	$80K × 15% = $12K
120%+	20% (accelerator)	$80K × 20% = $16K

Total Commission at 140% Attainment: $12K + $6.4K + $8K + $12K + $16K = $54.4K

Total Comp: $90K base + $54.4K commission = $144.4K (72% of OTE)

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Enterprise AE Commission Tiers

Quota Attainment	Commission Rate	Example (on $750K quota)
0-70%	5%	$525K × 5% = $26.25K
70-90%	8%	$150K × 8% = $12K
90-100%	12%	$75K × 12% = $9K
100-120%	18%	$150K × 18% = $27K
120%+	25% (accelerator)	Variable

Total Commission at 120% Attainment: $26.25K + $12K + $9K + $27K = $74.25K

Total Comp: $120K base + $74.25K commission = $194.25K

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Flat Commission (Alternative)

Simple Model: 10% of all revenue, no tiers

Pros:

• ✅ Easy to understand
• ✅ Predictable
• ✅ No quota pressure

Cons:

• ❌ No accelerators (less urgency)
• ❌ Doesn't reward top performers as much

BlackRoad OS Recommendation: Use tiered commission (better for growth)

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New ARR vs. Expansion ARR

Should They Be Weighted Differently?

Option 1: Equal Weight (Recommended)

• New ARR = 100% credit
• Expansion ARR = 100% credit

Why: Expansion is critical to NRR (Net Revenue Retention). Reward it equally.

Option 2: Weighted

• New ARR = 100% credit
• Expansion ARR = 50% credit

Why: New logos are harder to land. Reward them more.

BlackRoad OS Recommendation: Equal weight to encourage land-and-expand strategy.

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Renewal Incentives

Problem: If reps don't care about renewals, they'll land deals that churn.

Solution: Separate renewal incentive (not tied to quota)

Renewal Commission

Model: Kicker for high retention

Net Revenue Retention (NRR)	Bonus
<90% NRR	$0 (red flag, investigate)
90-100% NRR	$5K/year
100-110% NRR	$10K/year
110-120% NRR	$15K/year
120%+ NRR	$20K/year

Paid annually, based on book of business.

Why: Aligns long-term customer success with short-term sales incentives.

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SPIFs (Sales Performance Incentive Funds)

What: Short-term bonuses for specific behaviors

Examples:

End-of-Quarter SPIF

Goal: Close deals before quarter end Incentive: $5K bonus for any deal closed in last week of quarter

Product SPIF

Goal: Sell a new product (e.g., AI Platform tier) Incentive: $2K bonus per AI Platform deal

Multi-Year SPIF

Goal: Increase cash flow with longer contracts Incentive: 5% additional commission for 2-year contracts, 10% for 3-year

Case Study SPIF

Goal: Get referenceable customers Incentive: $3K bonus if customer agrees to case study

Best Practices:

• ✅ Run SPIFs for 1-3 months max (urgency)
• ✅ Align with business priorities
• ✅ Communicate clearly (no confusion)
• ❌ Don't run too many at once (dilutes focus)

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Clawbacks

Problem: Rep closes deal, gets commission, customer churns in 60 days.

Solution: Clawback provision

Clawback Policy

Trigger: Customer churns or requests refund within 90 days

Action: Rep must repay commission for that deal

Example:

• Rep closes $100K deal, earns $10K commission
• Customer churns after 2 months
• Rep repays $10K

Exceptions:

• If churn is due to product failure (not rep's fault), no clawback
• If customer was acquired by another company (M&A), no clawback

Why: Prevents reps from overselling or misrepresenting product.

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Draws vs. Pure Commission

What's a Draw?

Definition: Advance payment against future commissions

Recoverable Draw: Rep must pay back if they don't earn enough commission Non-Recoverable Draw: Rep keeps it even if commissions are low

When to Use Draws

Scenario 1: New Reps (Ramp Period)

New reps need 3-6 months to ramp before closing deals.

Solution: Non-recoverable draw for first 3 months

Example:

• Base: $75K/year = $6,250/month
• Draw: $3,000/month for first 3 months
• Total: $9,250/month during ramp

After 3 months, draw ends and commissions kick in.

Scenario 2: High-Risk Reps

Solution: Recoverable draw (pay it back once deals close)

BlackRoad OS Recommendation: Non-recoverable draw for first 90 days (reduce ramp risk)

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Payment Timing

When Do Reps Get Paid?

Option 1: When Deal Closes (Booked)

• Pro: Immediate gratification
• Con: Risk of churn/non-payment

Option 2: When Customer Pays (Cash Collected)

• Pro: Aligns with company cash flow
• Con: Delays payout (demotivating)

Option 3: Hybrid (Recommended)

• 50% on close (contract signed)
• 50% on first payment (cash collected)

Why Hybrid? Balances motivation with financial prudence.

BlackRoad OS Recommendation: 50/50 split (close + payment)

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Multi-Year Deals

Problem: 3-year deal worth $900K. Does rep get $90K commission upfront?

Solution: Commission on Year 1 ACV only

Example:

• 3-year deal: $300K/year × 3 years = $900K TCV
• Commission paid on: $300K (Year 1 ACV)
• Commission: $300K × 10% = $30K

Why: Reduces cash flow risk and aligns with revenue recognition.

Exception: Multi-year SPIF can reward 2-3 year contracts with bonus.

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Territory-Based Adjustments

Territories are not equal. Adjust quotas and comp accordingly.

Territory Multipliers

Territory Type	Quota Multiplier	Why
Enterprise Named Accounts	1.5x base	Longer cycles, higher ACV, more complexity
Mid-Market Vertical	1.0x base	Baseline
SMB Inbound	0.8x base	Shorter cycles, lower ACV, higher volume

Example:

• Base Quota: $400K
• Enterprise Territory: $400K × 1.5 = $600K quota
• SMB Territory: $400K × 0.8 = $320K quota

Commission remains same % regardless of territory.

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Team-Based Incentives

Problem: Sales is a team sport. AE + SE + SDR all contribute.

Solution: Split commission

Split Commission Model

Standard Deal:

• AE: 80% of commission
• SE: 15% of commission
• SDR: 5% of commission

Example: $100K deal, 10% commission = $10K total

• AE gets: $8K
• SE gets: $1.5K
• SDR gets: $500

Why: Rewards collaboration and ensures SEs/SDRs are invested in close.

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Sales Manager Compensation

Challenge: Managers don't carry quota. How do you incentivize them?

Manager Comp Structure

Base: $130K Variable: $70K (based on team performance)

Payout Formula:

Manager Bonus = (Team Quota Attainment %) × $70K

Example:

• Team Quota: $4M (4 reps × $1M each)
• Team Closed: $3.6M (90% attainment)
• Manager Bonus: 90% × $70K = $63K

Total Comp: $130K + $63K = $193K

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Manager Overrides

Alternative Model: Manager gets % of team's revenue

Override Rate: 2-3% of team revenue

Example:

• Team closes $4M
• Manager override: 3% × $4M = $120K

BlackRoad OS Recommendation: Use quota attainment model (simpler, less conflict)

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VP Sales Compensation

Base: $180K Variable: $120K

Payout Criteria:

Company ARR Attainment	VP Bonus
<80%	$0
80-90%	$60K (50% of variable)
90-100%	$120K (100% of variable)
100-110%	$150K (125% of variable)
110-120%	$180K (150% of variable)
120%+	$200K+ (accelerators)

Why: VP is accountable for overall company ARR. Comp tied to company success.

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Comp Plan Communication

Transparency is Key

What Reps Need to Know:

1. How quota is set
2. How commission is calculated
3. When they get paid
4. What counts toward quota (and what doesn't)
5. Clawback policy
6. SPIFs and bonuses

Delivery:

• 1-page comp plan summary (simple language)
• Detailed comp plan document (this doc)
• Calculator spreadsheet (so reps can model earnings)
• Q&A session (answer questions)

Announce comp plan changes 60 days before effective date.

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Compensation Plan Calculator (Template)

Provide reps with a Google Sheet to model earnings:

Input	Value
Annual Quota	$400,000
Base Salary	$90,000
Expected Attainment %	120%

Output	Value
Revenue Closed	$480,000
Commission Earned	$54,400
Total Comp	$144,400

Link: [Comp Calculator Spreadsheet]

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Compensation Metrics to Track

Metric	Target	Why
Average Quota Attainment	80-85%	Indicates quota is fair (not too easy/hard)
% of Reps at >100%	30-40%	Healthy distribution (not everyone wins, but many do)
% of Reps at <60%	<20%	Too many underperformers = quota or hiring problem
Commission as % of ARR	10-15%	Sales efficiency (lower is better)
OTE vs. Actual Comp	90-110%	If actual is <80%, quota is too hard

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When to Adjust Comp Plan

Annual Review (Q4)

Questions to Ask:

1. Are we attracting top talent? (market comp comparison)
2. Is average attainment 80-85%? (quota calibration)
3. Are accelerators motivating behavior? (close rates in Dec vs. Jan)
4. Are we rewarding the right behaviors? (new ARR vs. expansion)

Changes Allowed:

• Quota adjustments (up or down based on company growth)
• Commission tier adjustments (more aggressive accelerators)
• SPIF introduction (for strategic priorities)

Changes Prohibited Mid-Year:

• Base salary cuts (unless performance issue)
• Commission rate reductions (breaks trust)
• Retroactive clawbacks (illegal in most states)

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Legal & Compliance

Commission Plans Must Comply with Labor Law

Key Rules:

1. Put it in writing: Comp plan must be documented
2. Pay on time: Commissions are wages (must pay per state law)
3. No retroactive changes: Can't change past comp
4. Clawbacks must be agreed upfront: Can't surprise reps

Consult legal counsel before implementing comp plan.

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Compensation Plan Versions

Version 1.0 (Startup Phase: $0-$2M ARR)

Focus: Land new customers

Structure:

• Base: Lower (cash preservation)
• Variable: Higher (commission-driven)
• Split: 40/60 (base/variable)
• SPIFs: Aggressive (new logo bonuses)

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Version 2.0 (Growth Phase: $2M-$10M ARR)

Focus: Scale and expand

Structure:

• Base: Moderate (attract experienced reps)
• Variable: Balanced
• Split: 50/50
• Expansion ARR: Equal weight to new ARR
• Renewal kickers: Introduced

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Version 3.0 (Mature Phase: $10M+ ARR)

Focus: Efficiency and retention

Structure:

• Base: Higher (competitive market rates)
• Variable: Performance-based
• Split: 55/45
• NRR bonus: Significant (retention is king)
• Territory specialization: Different comp by segment

BlackRoad OS Current Phase: Version 1.0 → 2.0 transition

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Compensation Philosophy Summary

Principles:

1. Pay for Performance: Top performers should earn 2-3x base
2. Transparency: Reps understand exactly how they're paid
3. Fairness: Quotas are achievable (80-85% average attainment)
4. Alignment: Comp drives behaviors company needs (new ARR + expansion)
5. Simplicity: Reps can calculate commission in their head
6. Urgency: Accelerators create urgency to close deals

What Success Looks Like:

• Reps are motivated (hitting quota feels achievable)
• Top performers stay (earning well above OTE)
• Company hits revenue targets (coverage factor works)
• Turnover is low (<20% annual)

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Sample Comp Plan Summary (1-Pager for Reps)

BlackRoad OS Sales Compensation Plan
Mid-Market Account Executive

BASE SALARY: $90,000/year
VARIABLE (OTE): $110,000/year
TOTAL OTE: $200,000/year

ANNUAL QUOTA: $400,000 ACV (New ARR + Expansion ARR)

COMMISSION TIERS:
- 0-60%:     5% commission
- 60-80%:    8% commission
- 80-100%:   10% commission
- 100-120%:  15% commission
- 120%+:     20% commission (accelerator)

PAYMENT TIMING:
- 50% on contract signature
- 50% on first customer payment

SPIFS:
- Q4 Close Bonus: $5K per deal closed in last week of quarter
- Multi-Year Bonus: +5% commission on 2-year deals, +10% on 3-year

RENEWAL KICKER:
- 110%+ NRR on your book: $10K annual bonus

CLAWBACK:
- Customer churn <90 days = commission repayment

Questions? Ask your sales manager or salesops@blackroad.io

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FAQs

Q: What if I close a deal on Dec 31 but customer doesn't pay until Jan 15? A: You get 50% commission in Dec, 50% in Jan (per hybrid payment model).

Q: Do I get credit for expansions from accounts I didn't land? A: If account is assigned to you, yes. If not, no.

Q: What if customer downgrades mid-year? A: No clawback (you earned commission on original deal). But NRR bonus may be affected.

Q: Can quota change mid-year? A: No, unless extraordinary circumstances (approved by VP Sales + CEO).

Q: What if I leave the company before commission is paid? A: Earned commissions must be paid per labor law (even if you leave). Unearned commissions are forfeited.

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Compensation Plan Checklist

Before Launch:

• Define quotas by role
• Set commission tiers
• Document clawback policy
• Create comp calculator spreadsheet
• Review with legal counsel
• Communicate to team (60-day notice)
• Get written acceptance from each rep

Monthly:

• Calculate commissions
• Pay on time (per state law)
• Update quota attainment dashboard

Quarterly:

• Review attainment distribution
• Adjust SPIFs if needed
• Celebrate top performers

Annually:

• Benchmark against market
• Adjust quotas for next year
• Evaluate commission structure
• Plan comp changes (effective Jan 1)

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Version: 1.0.0 Last Updated: January 4, 2026 Owner: Joaquin, Sales Master

Fair pay. Clear incentives. Winning teams.