{"id":1593,"date":"2022-08-04T10:21:16","date_gmt":"2022-08-04T10:21:16","guid":{"rendered":"https:\/\/www.rainmakers.co\/blog\/?p=1593"},"modified":"2023-11-27T18:42:06","modified_gmt":"2023-11-27T18:42:06","slug":"sdr-compensation-plans","status":"publish","type":"post","link":"https:\/\/rainmakers.co\/blog\/sdr-compensation-plans\/","title":{"rendered":"How to Set SDR Compensation Plans"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\" id=\"h-sales-development-representative-compensation-guide\"><strong>Sales Development Representative Compensation Guide<\/strong><\/h2>\n\n\n\n<p>On-target earnings (OTE) are a great way to motivate <a href=\"https:\/\/www.rainmakers.co\/blog\/the-progression-between-sdr-to-account-executive\/\">Sales Development Reps (SDRs)<\/a>. This policy will help them perform better and generate more sales-qualified leads. If their base salary and variable pay depend on performance, they\u2019ll work hard to meet their goals.<\/p>\n\n\n\n<p>You must consider several factors for a sales compensation plan to be effective. Failing to do so risks demotivating or depressing your SDRs\u2014which could hurt profits and employee retention.<\/p>\n\n\n\n<p>However, when done right, SDRs can become productive and motivated and create more sales opportunities.<\/p>\n\n\n\n<p>But what goes into effective commission plans? What should you consider when developing yours? In this post, we\u2019ll look at these questions in more detail and give you the steps you\u2019ll need to follow to build your company\u2019s sales development compensation plan.<\/p>\n\n\n\n<p>What makes commission plans effective? What should yours include?<\/p>\n\n\n\n<p>Here are some ideas.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1030\" height=\"258\" data-src=\"https:\/\/www.rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/Employment-agency-1030x258.png\" alt=\"SDR Compensation plan\" class=\"wp-image-2103 lazyload\" data-srcset=\"https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/Employment-agency-1030x258.png 1030w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/Employment-agency-300x75.png 300w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/Employment-agency-768x192.png 768w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/Employment-agency-1536x384.png 1536w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/Employment-agency-1500x375.png 1500w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/Employment-agency-705x176.png 705w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/Employment-agency.png 1584w\" data-sizes=\"(max-width: 1030px) 100vw, 1030px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1030px; --smush-placeholder-aspect-ratio: 1030\/258;\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-why-have-a-sales-development-compensation-plan\"><strong>Why Have a Sales Development Compensation Plan?<\/strong><\/h3>\n\n\n\n<p>Before discussing how to create a sales development compensation plan, let\u2019s review why you would want one to begin with. These are the main benefits of having a well-thought-out sales compensation plan.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Incentivizes SDRs<\/li><li>Increased transparency<\/li><li>More structure<\/li><li>Easier planning and budgeting<\/li><\/ul>\n\n\n\n<p>Now that we understand why let\u2019s look at the how.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-building-an-effective-sdr-compensation-plan\"><strong>Building an Effective SDR Compensation Plan<\/strong><\/h3>\n\n\n\n<p>Some of the following steps may vary based on your specific needs. Some businesses may not need all the steps, while others may need more.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-determine-on-target-earnings\"><strong>Determine On-Target Earnings<\/strong><\/h3>\n\n\n\n<p>On-target earnings (OTE) are an SDR\u2019s annual base salary plus on-target commissions (OTC). Consider national, local, and regional average SDR OTE. Glassdoor and PayScale can help you calculate an accurate price estimate.<\/p>\n\n\n\n<p>From there, you can adjust the OTE based on the following factors:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Experience<\/li><li>Job complexity<\/li><li>Product<\/li><li>Benefits gained<\/li><li>Employee Attrition rate<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image size-large\"><a href=\"https:\/\/www.rainmakers.co\/employer-signup\/\"><img decoding=\"async\" width=\"1030\" height=\"258\" data-src=\"https:\/\/www.rainmakers.co\/blog\/wp-content\/uploads\/2023\/08\/expert-sales-recruiters-1030x258.png\" alt=\"sales recruiting agency\" class=\"wp-image-2160 lazyload\" data-srcset=\"https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/08\/expert-sales-recruiters-1030x258.png 1030w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/08\/expert-sales-recruiters-300x75.png 300w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/08\/expert-sales-recruiters-768x192.png 768w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/08\/expert-sales-recruiters-1536x384.png 1536w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/08\/expert-sales-recruiters-1500x375.png 1500w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/08\/expert-sales-recruiters-705x176.png 705w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/08\/expert-sales-recruiters.png 1584w\" data-sizes=\"(max-width: 1030px) 100vw, 1030px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1030px; --smush-placeholder-aspect-ratio: 1030\/258;\" \/><\/a><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-decide-upon-pay-mix\"><strong>Decide Upon Pay Mix<\/strong><\/h3>\n\n\n\n<p>Pay mix is an SDR\u2019s base salary to variable pay ratio. This reflects the risk of earning the OTE. For instance, some SDRs could perceive a 40\/60 base salary\/commission pay mix as too risky.<\/p>\n\n\n\n<p><strong>If your <a href=\"https:\/\/www.rainmakers.co\/blog\/sdr-salary-guide\/\">base salary<\/a> is too low, SDR motivation and company performance will suffer.<\/strong> If your base salary is too high, your SDRs won\u2019t gain if they hit their goals. Keeping SDRs productive requires the right pay mix. Like OTE, you can check national, regional, and local averages to compare prices. In the Tech and SaaS world, we find that 65 \u2013 75% base is fairly common.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-measuring-sdr-performance\"><strong>Measuring SDR Performance<\/strong><\/h3>\n\n\n\n<p>After determining OTE and pay mix, decide how to measure SDRs\u2019 performance. On what metric will your quotas be based? Finally, focus on revenue-generating activities for these metrics.<\/p>\n\n\n\n<p>Focusing on a metric like call volume emphasizes quantity over quality. For example, an SDR can make 50 calls per day without generating a single sales opportunity. Therefore, it\u2019s better to use a metric tied to quality, such as sales qualified prospects (SQO) and sales qualified leads (SQL).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-setting-quotas\"><strong>Setting Quotas<\/strong><\/h3>\n\n\n\n<p>As an example of setting quotes, we\u2019ll look at the SQO metric.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.rainmakers.co\/blog\/qualities-of-a-great-sdr\/\">SDRs<\/a>, on average, usually generate seven SQOs per month or about one every three working days. You can set quotas and adjust as necessary from this average, depending on your company.<\/p>\n\n\n\n<p>When setting quotas, ensure they\u2019re realistic. According to research, 68% of SDRs meet their quotas. With that in mind, you should aim for an achievable quota between 60 and 70% of your SDRs.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1030\" height=\"258\" data-src=\"https:\/\/www.rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/San-Fran-SDR-tech-sales-recruiting-1030x258.png\" alt=\"Sales Development Representative Compensation\" class=\"wp-image-2122 lazyload\" data-srcset=\"https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/San-Fran-SDR-tech-sales-recruiting-1030x258.png 1030w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/San-Fran-SDR-tech-sales-recruiting-300x75.png 300w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/San-Fran-SDR-tech-sales-recruiting-768x192.png 768w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/San-Fran-SDR-tech-sales-recruiting-1536x384.png 1536w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/San-Fran-SDR-tech-sales-recruiting-1500x375.png 1500w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/San-Fran-SDR-tech-sales-recruiting-705x176.png 705w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2023\/07\/San-Fran-SDR-tech-sales-recruiting.png 1584w\" data-sizes=\"(max-width: 1030px) 100vw, 1030px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1030px; --smush-placeholder-aspect-ratio: 1030\/258;\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-thresholds-and-accelerators\"><strong>Thresholds and Accelerators<\/strong><\/h3>\n\n\n\n<p>Using thresholds and accelerators can improve SDR performance. They can recognize high-achievers and motivate low-performers.<\/p>\n\n\n\n<p><strong>Thresholds are minimum performance levels below which an SDR does not earn any commission. <\/strong>Typically, this threshold would fall between 40 and 50%.<\/p>\n\n\n\n<p><strong>On the other hand, Accelerators motivate SDRs by increasing commission rates once they meet their quota.<\/strong> Say an SDR\u2019s quota is nine SQLs per month, and they\u2019re paid 70\/30. With accelerators, you can increase the commission for high performers.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-establishing-a-performance-period\"><strong>Establishing a Performance Period<\/strong><\/h3>\n\n\n\n<p>After tackling the above tasks, determine the period over which you\u2019ll measure SDR performance. SDRs can achieve results faster than sales reps whose commissions depend on closed sales. Usually, this will be monthly, with commissions calculated at the end of the month.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-testing-your-compensation-plan\"><strong>Testing Your Compensation Plan<\/strong><\/h3>\n\n\n\n<p>After planning, you can execute. But it\u2019s a good idea to test your plan before implementing it on SDRs. This will show you how well it works and if you missed any issues when developing the compensation plan.<\/p>\n\n\n\n<p>Use historical data to test your plan\u2019s parameters. If historical data is not available, try using hypothetical SDRs. After getting the results, you should be able to determine if your pay is competitive and sustainable.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"820\" height=\"312\" data-src=\"https:\/\/www.rainmakers.co\/blog\/wp-content\/uploads\/2019\/03\/IIf-youre-ready-to-have-top-tech-companies-compete-to-hire-you-create-your-rainmaker-profile-now-___-2.png\" alt=\"tech sales jobs\" class=\"wp-image-772 lazyload\" data-srcset=\"https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2019\/03\/IIf-youre-ready-to-have-top-tech-companies-compete-to-hire-you-create-your-rainmaker-profile-now-___-2.png 820w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2019\/03\/IIf-youre-ready-to-have-top-tech-companies-compete-to-hire-you-create-your-rainmaker-profile-now-___-2-300x114.png 300w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2019\/03\/IIf-youre-ready-to-have-top-tech-companies-compete-to-hire-you-create-your-rainmaker-profile-now-___-2-768x292.png 768w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2019\/03\/IIf-youre-ready-to-have-top-tech-companies-compete-to-hire-you-create-your-rainmaker-profile-now-___-2-705x268.png 705w, https:\/\/rainmakers.co\/blog\/wp-content\/uploads\/2019\/03\/IIf-youre-ready-to-have-top-tech-companies-compete-to-hire-you-create-your-rainmaker-profile-now-___-2-450x171.png 450w\" data-sizes=\"(max-width: 820px) 100vw, 820px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 820px; --smush-placeholder-aspect-ratio: 820\/312;\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-the-one-size-fits-all-problem\"><strong>The One-Size-Fits-All Problem<\/strong><\/h3>\n\n\n\n<p>In short, one size does <em>not<\/em> fit all.<\/p>\n\n\n\n<p>As good an idea is to research what other companies are doing and paying, copying them may not work well. Instead, it would help to consider individual factors such as your business\u2019s size, market maturity, product maturity, and customer segmentation.<\/p>\n\n\n\n<p>More importantly, as your sales teams and company mature, you should be prepared to tweak your SDR compensation plan to keep ahead of the game.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-a-plan-in-action\"><strong>A Plan In Action<\/strong><\/h2>\n\n\n\n<p>Depending on the scale of your business and the number of SDRs you have, you may find it challenging to keep up on all the calculations at first. That\u2019s why it\u2019s essential to have your plan laid out in advance, tested, and adjusted where necessary.<\/p>\n\n\n\n<p>The result should be a satisfied SDR crew who are motivated to work on developing your sales and who feel encouraged by upper management.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>If you need help assembling a sales team that fits with your compensation plan, let Rainmakers help! <a href=\"https:\/\/www.rainmakers.co\/employers\"><strong>Start browsing<\/strong><\/a> for applicants now!<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Sales Development Representative Compensation Guide On-target earnings (OTE) are a great way to motivate Sales Development Reps (SDRs). This policy will help them perform better and generate more sales-qualified leads. If their base salary and variable pay depend on performance, they\u2019ll work hard to meet their goals. You must consider several factors for a sales [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":2219,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[752],"tags":[144],"class_list":["post-1593","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-hiring","tag-employers"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v26.9) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>How To Create an SDR Compensation Plan for Your Sales Team | Rainmakers<\/title>\n<meta name=\"description\" content=\"To create a SDR compensation plan, outline a balanced mix of base salary and performance-based incentives, considering factors like experience, job complexity, and include clear metrics for performance evaluation and goal setting.\" \/>\n<meta name=\"robots\" content=\"index, follow, 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