Incentive compensation for exceeding quota (Sales, and SDRs)
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Quotas are highly specific to a company’s stage, objectives, and sales strategy. Providing opportunities for sales reps to overachieve and earn beyond their variable compensation is a critical lever in driving performance.
Here's a breakdown of how you can structure such incentives:
In this model, incentives scale directly with achievement. For instance, at 150% of quota attainment, a rep earns 150% of their variable compensation.
This straightforward approach ensures alignment between performance and rewards, making it easy to communicate and understand.
Sales kickers activate at specific achievement thresholds, with higher rewards at higher levels.
For example:
This model encourages reps to push beyond standard targets and unlock significant bonuses.
In this structure, a percentage of sales is tied to different achievement levels.
For example:
This system rewards incremental sales efforts and ensures every dollar beyond the quota earns a higher return.
The choice of incentive model should align with your company’s goals.
Consider the following:
Key metrics to track:
The metrics used to calculate kickers should align with your sales priorities, such as:
Rule of thumb: Cost of sales
To ensure incentives remain sustainable, keep the cost of sales at approximately 20% of the quota size. Modeling different kicker scenarios can help you evaluate the financial impact and ensure alignment with company goals.
ElevateHQ, a sales incentive compensation software, lets you design and automate any complex incentive plan. You can easily add kickers and caps once someone exceeds quota. The calculation is real-time as the software is integrated with your data source, such as CRM and spreadsheet.
Sales reps and SDRs can also use the platform's simulation feature to see how much they will earn when they close particular deals. This gives them an accurate idea of their earnings and clarity for prioritizing deals.