SDR Commission Plan

By: JB Daguené

In Account-based Sales (ABS), an efficient commission plan can be the key to unlocking the potential of Sales Development Representatives (SDRs) and driving exceptional results. Recognizing this, companies are reimagining their compensation structures to motivate, reward, and sustain the performance of their SDR teams. In this article, we delve into some of the intricacies of an SDR Commission Plan, as well as provide a SDR Commission template that your can use.

Aligning Incentives with Goals

For companies aiming to bolster their sales efforts, a well-structured commission plan can act as a powerful tool. At its core, this plan serves as a direct incentive mechanism that resonates with the objectives of the organization. When crafting an SDR Commission Plan, it's crucial to ensure that the goals set forth align closely with the overall corporate vision.

At its core, a Commission Plan's objectives should be:

  • Incentive to drive results
  • Extra bonus is meeting converts to deal
  • Encourage and reward over performance
  • Incentive consistency with quarterly bonuses

Quality and Quantity: The Dual Dimensions

The SDR Commission Plan operates on a dual axis, recognizing both the quantity and quality of meetings booked. Quantity reflects the sheer volume of outbound and inbound meetings, showcasing the SDR's diligence in driving opportunities. Simultaneously, the quality of these meetings is gauged by their conversion into deals. This setup not only encourages the SDRs to secure a higher number of meetings but also emphasizes the importance of nurturing these meetings towards successful closures.

Performance Thresholds and Payouts

To imbue the plan with a sense of achievement and progression, it is structured around performance thresholds. These thresholds delineate three distinct tiers of performance:

  • Below 70%: No commission
  • 70% to 90%: 50% commission
  • 90% and above: 100% commission

This tiered structure incentivizes consistent performance improvement. As performance escalates, the commission payout scales proportionally, reinforcing a culture of excellence.

Bonuses: Amplifying the Impact

In addition to the core commission structure, bonuses further amplify the impact of the plan. A cash bonus is awarded when an SDR reaches 100% of their quarterly target, fostering consistency in meeting generation. Furthermore, an extra bonus is conferred when an SDR exceeds their monthly and quarterly targets by 150%. This bonus serves as a beacon of recognition for exceptional performance.

Case + Examples

For the following examples, commissions were determined using the following benchmarks:

  • Outbound vs inbound meeting ratio: 50%
  • Monthly 150% bonus: 40€
  • Minimum performance for 50% payout: 70%
  • Minimum performance for 100% payout: 90%

Example 1:

This example is showing an SDR in their third month of a three month ramp-up before they should be hitting all targets. After the ramp-up the SDRs monthly meeting target is 16 meetings. This means for this month, the SDR's target monthly meetings is 70% of what their total will be after the ramp-up, 11 meetings.

This SDR booked 8 outbound meetings which puts their the performance percentage 73%.

As a result, the commission payout amounts to 50% of the total commission, totaling 40€.

Total meetings: 8

Total commission (outbound+ inbound): 80€Bonus: 0€Perfromance (8/11100%): 73%Total payout ((80€50%)€): 40€

Example 2:

This scenario is also showing an SDR in the third month of a three month ramp-up. Again, in this third month, the SDRs target monthly meetings is 70% (11 monthly meetings) of what their total will be after the ramp-up has ended.

In this example, the SDR books 11 meetings—9 outbound and 2 inbound—hitting their monthly target. Achieving a performance percentage of 100%, the SDR secures a full commission payout of 100€.

Total meetings: 11

Total commission (outbound+ inbound: 100€Perfromance (11/11100%): 100%Total payout ((100€100%)€): 100€

Example 3:

This is a more complex situation, the SDR books 24 meetings across various brackets, including both inbound and outbound. This exceptional performance leads to a performance percentage of 150%. In addition to the commission, the SDR's meetings also convert to a closed deal, contributing to the overall revenue. This triggers a bonus based on the closed deal's Annual Contract Value (ACV), adding another layer of reward.

Monthly meetings target: 16

Total inbound meetings booked (1-20): 2

Total inbound meetings booked (21-30): 2

Total outbound meetings booked (1-20): 18

Total outbound meetings booked (21-30): 2

Total meetings: 24

Total commission (outbound+ inbound: 238€Bonus (closed deals): 30€Perfromance (24/16100%): 150%Bonus (performance): 40€Total payout ((502€100%)€): 308€

Commission Totals:

Total meetings: 24

Total commission (outbound+ inbound: 238€Bonus (closed deals): 30€Perfromance (24/16100%): 150%Bonus (performance): 40€Total payout ((502€100%)€): 308€

Navigating Challenges and Best PracticesWhen implementing the SDR Commission Plan, certain challenges may arise. These include addressing the ramp-up period for new SDRs, devising performance improvement plans for low performers, and considering hiring multiple sales reps for redundancy and coverage.

To simplify the implementation process, an SDR Commission Template is recommended. This template streamlines the commission calculation process and facilitates tracking of individual SDR performances.

Instructions:

Only edit green cellsonly add performance data on the monthly sheets

Article by

JB Daguené

I eat SaaS for breakfast, B2B Sales for lunch, and Data for dinner. I like my food spicy! Since 2014, I've helped 100+ companies to build and scale specialized sales teams with 6 main playbooks.

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