Over the last few years the mantra has been consistent.

You MUST pay top of market, in order to secure "top talent".

It's a bit of a head scratcher. Compensation has climbed higher, while work ethic, morale and quota attainment are all in the dumps.

I get that the selling environment is harder, and that there's more competition than ever before, but that's why people shelled out the big bucks... it was to hire the very best right?

Now you have people whinging that they can't get a top income, a reduction in quota, work remote and still have a few hours a day to work on their side hustle.

But enough complaining: let's talk about what's happening at the coal face.

A Successful First Sales Hire:

I recently completed a first sales hire search. On it's face, this was an Enterprise AE role. It will likely evolve into some sort of player-coach / managerial role down the line. The first few candidates I spoke with would only make a move to such an early stage company for a compensation package in the $350-$400k range. The key thing for these reps, was that any move needed to be lateral. Really, they'd see a compensation jump as part of the move. "I need to de-risk" is the message here.

From the hiring managers viewpoint, we find ourselves in trouble. Getting a rep to make financial sense at a $350-400k OTE, means giving them a quota of $1.4- $1.6m. If you're not a company that sells $500k+ deals regularly, that's is a problem. And most early stage companies are not selling $500k+ deals regularly.

That is roughly double the revenue that company has done so far. It's too much. It's too much pressure.

The two best candidates I spoke with, were closer to the $250k range (OTE), which was in line with the client's budget. If we match that to a reasonable quota (~$1m or so), we're setting everyone up for a lot more success.

SMB Account Executives:

I've recently been working on an Account Executive role that sits somewhere between SMB and the low end of Mid-Market. 2 years ago, you'd need to offer an OTE of $200k+ to be competitive. This role had a top range of $180k, and the candidates we were seeing were exceptional. (Important note: this company does have insane demand, so reps will overachieve easily).

Now, every hiring situation is a bit different, but I thought I would share where I think the market is at today (and where it was 2 years ago)

My goal here is to give an accurate sense of what is attractive to candidates in the US market, without breaking the bank for clients. It's sort of like real estate comps. There's no deal to make if one side (or both sides) are being unrealistic.

As you can see, it's not universal. SDR comp hasn't really changed. But SDR comp went up a lot 2017-2019 (or so). The same is true for Enterprise reps, who you could hire in San Francisco at a $200k OTE back in 2018.

Tech incomes vs. the general economy

With the exception of the SDR role, I don't think there is much correlation between incomes in tech sales, and the incomes across the rest of the economy. An SDR role needs to be enough for a college grad to live on in a high cost of living city. When I started in 2016 that was $40k in San Francisco. That jumped pretty quickly to a $60k base, and has more less stood at around that level to this day.

Because the average Account Executive OTE makes 3-6x the median American, there's a degree of insulation between what they make and the general public make. Going from $240k a year to $220k a year is a problem most people would love to have. It's a bit like Investment bankers having a bad year for bonuses. The guys selling Rolex watches and Porsche 911s notice it. The average joe doesn't.

Base compensation increases mask the real issue

Back in 2017 I spent a lot of time hiring for Samsara (NYSE: IOT). They had raised a $25m Series A from A16Z and were growing their sales team at a rapid clip.

They only wanted to talk to candidates who'd overachieved their quota. And they paid on the low end. The pitch was, you were a rep with a $140k OTE. Come to Samsara on a $120k OTE, and you'd clear $180k with ease in your first year. And people did.

Now Samsara had a lot going for them. The founders had previously started Meraki, which they sold to Cisco for $1.2b. Marc Andreessen joined the Samsara board as part of their Series A. The sales team knew what they were up to. It was a good pitch.

About a year or so down the line, the pitch stopped working. The market had changed, and comp had gone up. Why move to Samsara for a $120k OTE, hit 2x your quota, when you can join another startup at a $200k OTE?

Yeah, maybe you won't hit quota. You might get 80% of the way there. And you'd more or less make the same.

That's the thing about OTE. It's the easiest lever to pull if you've got a weak value proposition. To this day, the #1 response I get from candidates is "what's the OTE"

The reason candidates are demanding big base salaries is because they don't have faith in their ability to hit the comp plan.

In most cases, they're right to be skeptical.

Companies hired too quickly and in many cases, too early.

It's a balancing act. You want salespeople who care about compensation. Base salary matters.

But past a point, the people who worry too much, are the ones who can't close a barn door.

You can prevent most of this:

1. Don't hire for your sales team until you've got ARR approaching $500k
2. Be very intentional about growing your team after you've raised funding
3. Ensure you have enough candidates in your interview pipeline, that you're not making a choice out of desperation or exhaustion

Next week I'm going to talk more about that second point, and why a big Series B is often followed by sales team layoffs.

If you'd like help with point #3, book time to speak with me here​

‍

‍