Why You Should Overcompensate Your Sales Team

At Palette, we believe that when it comes to sales compensation plans, companies should reward high performers handsomely while under-compensating poor performance. This approach helps build a sales culture of high performance with the goal of revenue growth. 

Data on SaaS compensation seems to corroborate this viewpoint. According to a report on Go-to-Market Compensation and Incentives from Iconiq, “Best in Class companies typically compensate GTM teams by 20% more than average companies.” Here, “Best in Class” was defined as companies with over $10M in ARR, YoY revenue growth of 30% or more, strong retention, and strong sales team performance. Companies with strong performance also had differentiated compensation structures. While compensation often varies depending on seniority, region, and company performance, top companies go further in tailoring their compensation plans to maximize performance for each role and situation. Reps earn different commissions based on a number of factors, such as customer segment, sales motion, team (i.e. inside vs. field sales), and more.

There is no one size fits all solution here; the best way to figure out what works for your company is to conduct an analysis of your sales pipeline and determine what works well and what areas can be optimized. Replicate and expand on areas of success while experimenting with new approaches for areas of subpar performance. Of course, clear and easy to access analytics for your sales compensation plan are key here, and come standard with any strong sales compensation software.

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